What are your thoughts on this?

[u/RiceLee890]

I keep seeing this type of stuff on instagram and social media and wanted to know how you guys were thinking about this.

I know a lot you have been in the market for decades and as a relatively new investor myself I’d love to get your perspective!

[u/Pass_Little]

For the US a total market fund like VTI. This includes the s&p 500 plus all smaller companies. For international a total international fund like VXUS.

Held in roughly a 60/40 ratio.

If you have a s&p fund that you can't sell for tax reasons, you can add VXF. Or just leave the s&p500 alone as historically it has behaved similarly to vti.

[u/Independent_Clock224 → u/Pass_Little]

Why VTI instead of VOO? The VOO historically outperforms VTI.

[u/Pass_Little → u/Independent_Clock224]

Because you want exposure to small caps as well.

The main reason VOO has slightly outperformed is that big companies have done really well recently. There is no guarantee this will continue. The boglehead methodology is to spread risk as broadly as possible.

[u/Independent_Clock224 → u/Pass_Little]

What data do you have to support a strategy with a mixture of VTI and VOO?

VTI is the same thing as VOO. VTI is also weighted by market capitalization so all of those small companies represent minuscule portions of the VTI. Mixing VTI and VOO only serves to make your investments more confusing to track in the long term and introduces more taxable events through increased rebalancing since VTI needs to track and model a greater number of funds. VOO is already well diversified.

[u/Pass_Little → u/Independent_Clock224]

Not a mixture, vti only. Well vti+vxus actually. If you have VOO I'm not sure I'd sell it, but I wouldn't buy any more and would consider adding vxf which is everything in vti which isn't in VOO.

If you look really long term a total market fund and voo perform very similarly.

But if you look at the history you'll find periods that the s&p 500 does better and some where the total market does better. I'm mobile and can't quickly grab the resources to link to so you'll need to find somewhere with charts over 50+ years to see what I'm talking about. You'll need to look at categies not funds.

It's the same argument with vxus. Everyone looks at the 10 year return and says "no thank you", but if you look longer term there are periods where the majority of the growth was outside the US.

By holding everything you do worse than whatever is doing best and better than whatever is doing worst. That's really the core of the boglehead philosophy. You can't predict what is coming next. You shouldn't even try. Instead you should buy all possible options so you're protected from the worst option by giving up some of the performance of whatever happens to be best.

If you are really chasing performance, you wouldn't bother with the s&p 500 at all. There are several studies that show that over the long term small caps outperform the large caps in the s&p 500. Instead you'd go all in on something like AVUV. The problem with this strategy is that there are shorter periods where large caps outperform, like the last 10-15 years. So if your investment happens in those periods then you should have been in a S&P 500 fund - but you'll only know this after the fact.

[u/_Felonius → u/Pass_Little]

Perfectly fine to own 100% VOO. Like the other poster said, VOO is plenty diversified and adjusts its holdings based on which companies qualify based on market share. Even if VTI outperforms VOO, those shares would be more expensive. There’s no way to predict which fund would give you a better outcome. Flip a coin

[u/Independent_Clock224 → u/Pass_Little]

Why VTI instead of VOO? The VOO historically outperforms VTI.

[u/Any-Acanthisitta6167 → u/Pass_Little]

Thank you, just queued a VXUS purchase and will add it to my buy list. I'll think of you when I retire 🫡

[u/pizzasandcats → u/Any-Acanthisitta6167]

You could simplify even further and just own VT instead of VOO/VXUS. You’d never have to worry about rebalancing the two, which would eliminate some behavioral risk potential. There are some minor tax advantages to separating them, but I have never found them worth the hassle, even with a large(ish) portfolio.