shows how funds can be combined in order to mimic the composition of the U.S. stock market.

Investors wishing to invest in Vanguard Total Stock Market Index Fund often face a situation where they have to approximate it with the funds available in their employer sponsored plans and quite possibly some other funds available in other accounts such as aRoth IRA.

This page shows a few examples of approximating Vanguard Total Stock Market Index Fund with funds covering specific parts of the market.

Stocks may classified by the size of the corporation. This is most commonly done looking at the market capitalization.Market capitalizationis simply a measurement found by taking a stocks current share price and multiplying it by the number of stock shares outstanding.

Exact market cap ranges will vary among different financial and rating institutions, but there are three different terms commonly used to describe stocks by their general size.

Stocks may also be classified by style, either value, blend, or growth. Growth stocks are companies that are growing their profits at a very fast rate and are expected to continue to grow at an increasing rate. Value stocks are stocks that tend to trade at deep discount relative to their intrinsic value (as defined by profits, book value etc.). Common investor perceptions tend to perceive growth stocks as high flying companies and value stocks as distressed companies.

Both growth and value stocks have taken turns leading and lagging one another during different markets and economic conditions.note 1

These examples use the nine-box stock style box to show weightings that match the composition of the total US stock market.

18%Vanguard Extended Market Index Fund (VEXMX)

15%Vanguard Tax-Managed Small-Cap Fund Inv (VTMSX)

These percentages were computed on Nov 1, 2015, except where otherwise noted.

The style box numbers were computed byMorningstar Instant XRayby entering each fund ticker as a holding, and entering the dollar value based on the percentage; for example, for VFINX at 81% and VEXMX at 19%, enter $81 and $19 respectively and observe the computed Morningstar Style Box on the Instant X-Ray tab. Enter different dollar amounts (always adding up to $100) in a trial and error fashion until you replicate the same computation as Total Stock Market, or as close as you can get. A free (or paid) subscription to Morningstar is required to access Instant Xray.

Computation was done by themethod of least squares

Investors contemplating on using an S&P MidCap 400 fund, for example, may consider the example above that uses IJH. However, there may be slight implementation differences between the S&P MidCap 400 fund you have access to and IJH.

Two funds may appear to track the same portion of the market (say, mid-cap), but their holdings may differ depending on the indexes they track.

On theCallan periodic table of investment returns, that visualizes the performance of the different asset classes, one can see the alternating performance of the growth and value stocks.

Replicating total stock market with the Thrift Savings Plan

Approximating total international stock market

Re: Follow up questions – total stock market approximation

,hoppy08520.Jan 03, 2013 for more on combining these two funds to approximate total stock market.

Calculated in Morningstar X-Ray on Feb. 27, 2013. This combination is likely only of interest to investors with a 401(k) plan held atJohn Hancock Funds. As of November 1, 2015, these ticker symbols are no longer available in Morningstar Instant X-Ray.

Stock basics•Slice and dice••Mid caps•Small caps•US small cap value•Preferred stock

Vanguard US sector ETFs•Vanguard US stock ETFs

Vanguard SEC listings•Vanguard statistical data spreadsheets

Stock basics•Slice and dice••Mid caps•Small caps•US small cap value•Preferred stock

Vanguard US sector ETFs•Vanguard US stock ETFs

Vanguard SEC listings•Vanguard statistical data spreadsheets

This page was last edited on 6 April 2019, at 13:40.

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