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Vanguard Total Stock Mkt Idx Message Board

  • ps56k ps56k Apr 16, 2011 6:52 PM Flag

    small, medium or large

    Can't decide where to put our IRS refund:

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    • What is in your current portfolio? If you are just starting out, I would put it in VTSMX. If you are getting a refund large enough to make an initial investment into a Vanguard fund ($3,000) stop giving the government free use of your money and adjust your fed. tax withholding so that you owe (less than $1,000) and get free use of their money for a change.

    • "Some mutual funds will have a strict charter to invest only in the large cap stocks, or the small cap stocks, or something else which is very specific. We don’t think it’s a smart idea to have such a rigid charter.

      How would you feel paying 2 million dollars for a one bedroom condo, if two bedroom condos in same complex, having double the square footage, and with similar features, are available at 1 million dollars? Is it good idea to established a company with a restricted charter to invest only in one bedroom condos?

      Now, consider a market scenario where all large cap stocks are selling at a discount and all small cap stocks are very costly. I am sure that you will agree with us, that it will not be such a good idea to buy the small caps when you have the option to buy the large cap stocks which are selling at a discount. But mutual funds with a strict charter to invest only in small cap stocks will keep buying costly stocks even though it’s not a good investment.

      Some people might think that by allocating 50% in small cap and 50% in large cap, they mitigated this problem; but it’s even worse. If you combine two inefficient strategies, then taken together they won’t become better, rather it magnifies the problem." ( 2nd point in the checklist)

      I am copying the text from another site which answers your reply very well. I have been using the checklist to find good place to park money. You can check the some of the big problems related with mutual funds there.

    • put it into VWINX

53.95+0.31(+0.58%)Sep 27 6:45 PMEDT