FYI: For investors who want everything wrapped into a single package, Vanguard’s Total Stock Market Index fund seems a reasonable way to access U.S. large-cap blend stocks.
And there's plenty to like about Vanguard Total Stock Market Index VTSMX, +0.64% : Low expenses, massive diversification, low turnover and of course — no sales load.
But this fund falls far short of its "total market" title. In fact, the fund gives investors only a small part of what it takes to diversify a portfolio into the best asset classes. This is no small matter, since that diversification accounts for more than 90% of an investor's likely return.
Regards,
Ted
http://www.marketwatch.com/story/why-vanguard-total-stock-market-isnt-the-best-fund-in-the-fleet-2014-12-03/print
Comments
Indeed "Best" is a relative and elusive term. It depends.
It depends on the comparison standard; in this instance a simplistic 60/40 equity/bond mix with only 2 holdings. More importantly, it depends on the selected timeframe.
I did a quick analysis using Portfolio Visualizer for three other starting times: 1985, 1990, and 2000, each ending in December 31, 2013.
The referenced. "Best" portfolio did deliver superior returns for the 1985 and 2000 starting periods. However, the simple 2 holding portfolio generated a better outcome for the 1990 starting time. Study timeframe always matters.
Also, the simple portfolio produced its outcomes with slightly less volatility (standard deviation) for all periods examined. The "Best" portfolio achieved its enhanced rewards with more risk at the margin. Nothing new here.
Best Wishes.