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Right now, the bulk of my US stock holdings are in my Rollover IRA, split unequally between VFIAX (Vanguard 500 Index Fund Admiral Shares) and VEXAX (Vanguard Extended Market Index Fund Admiral Shares). The split has become more unequal than I originally intended. I am taking the whole of my RMD from the 500 fund (and investing it in other funds in taxable), but I’ll still need to move money to VEXAX to rebalance. I am wondering whether it wouldn’t be better (it would obviously be simpler) to combine both funds into VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares). Thoughts?
Though you didnt ask it, you could consider selling both and buy VT, the Vanguard Total World Stock ETF, which owns all stocks globally, cap weighted. This obviates the need to rebalance, gives international stock diversification, and simplicity.
I do hold international, but I don’t think I’m ready to give up control of the split between international and US, plus I like to hold at least some international in taxable. Another few years, though…
VFIAX has 38% of its value in ten stocks. VTSAX has 33% of its value in 10 stocks. They are the same stocks. Not really a big difference. What percentage do you allocate to VEXAX? Those big 5 stocks really drive performance in the big cap world. Are you comfortable with that?
My original allocation was two thirds to the 500 fund and one third to extended market. I would be OK with 50-50, but right now I’m overweighted in the 500. My overall allocation is 50% stocks, so if switched to VTSAX I would only have about 15% in the top ten stocks – actually, less than that, as I also hold international.
Sounds like you favor a tilt to smaller stocks. If you want to continue this, you can keep your 500 and extended funds and rebalance. Right now I believe VTSAX is about 80/20 500/extended. The way I do the small tilt is with a total market fund and a small allocation to the extended market.