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Old 07-21-2014, 06:33 PM   #41
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The small cap index fund is a little piece of a couple thousand companies in every business segment there is. It has very low expenses and great diversification, but always does a lot better than the S&P 500 because smaller businesses grow faster than bigger ones.
Sort of. I have personally never seen any small cap index fund outperform blue chips in seesaw market action like we have seen a lot this year, and people do tend to cycle out of them pretty quick when they get scared. Small caps tend to be more volatile than large caps. That's not necessarily due to any inherent characteristics in the small caps (in fact I think it's 90% investor mentality-driven) but that's how it goes.

Take a look at VTWO vs VOO as an example. I have a small bit of VTWO and its been a dog all year. VOO has done about what you would expect, and with really low expense ratios. They don't have the liquidity of some of the other index ETFs, but I'm not running some HFT program so I don't care.

VTWO Fund Quote - Vanguard Russell 2000 ETF Fund Price Today (VTWO:NASDAQ) - MarketWatch

VOO Fund Quote - Vanguard S&P500 ETF Fund Price Today (VOO:NAR) - MarketWatch

Long term, yeah Small Cap funds can be pretty awesome, as they get some 'risk' exposure in a pretty controlled way with pretty low fees so make good returns without the receding hairline. But intermediate term, in the environment U.S. stocks have had in the last 15 years, a bit more tricky. Personally I will hold my current VTWO, and have fun trying to pick a bottom before adding more at some point in the next 5 years.

*Don't read the comments on MW unless you like losing faith in humanity and 10th grade level paranoid ranting. Those people are like Youtubers. Seriously don't. Clubroadster seems like a roundtable discussion on trends in bio-mechanical engineering in comparison.
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Old 07-21-2014, 06:37 PM   #42
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5 - Don't fight the market (if it is going up then you should be in)


Good luck!

Trooth. I was one of the idiot bearish types waiting for a crash and a good entry, and missed on some really big gains over the past year. I should have just been cautious and gotten in with a few index things and put a trailing stop to satisfy my paranoia.


Lesson learned.
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Old 07-21-2014, 07:43 PM   #43
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Sort of. I have personally never seen any small cap index fund outperform blue chips in seesaw market action like we have seen a lot this year, and people do tend to cycle out of them pretty quick when they get scared. Small caps tend to be more volatile than large caps. That's not necessarily due to any inherent characteristics in the small caps (in fact I think it's 90% investor mentality-driven) but that's how it goes.

Long term, yeah Small Cap funds can be pretty awesome, as they get some 'risk' exposure in a pretty controlled way with pretty low fees so make good returns without the receding hairline. But intermediate term, in the environment U.S. stocks have had in the last 15 years, a bit more tricky. Personally I will hold my current VTWO, and have fun trying to pick a bottom before adding more at some point in the next 5 years.
Yeah, long term is what I'm doing with them. I don't want to have to worry about keeping up with things every day or week.

A theoretical investment of $10k ten years ago in the S&P 500 would net you $21k today. The same $10k in the Small Cap Index Fund would be at $26k. For reference, the NASDAQ Composite Index would be ~$23.5k, and the S&P Total Market Index would be $20k. Couple that with the low expense ratios and it is a great (and safe) place to park money long term to let it work for you without a hassle.
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Old 07-21-2014, 08:31 PM   #44
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Am I the only one here who has a preference for actively-managed funds which target double-digit annual growth as opposed to index funds?
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Old 07-21-2014, 08:43 PM   #45
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Am I the only one here who has a preference for actively-managed funds which target double-digit annual growth as opposed to index funds?
Most of my non-401K, non-HSA money is in RYTNX. I lost my good chart website but I see that it is up 35% over the past year compared to 15% for the S&P. Of course, fees on this beast are completely unbelievable. I don't mind paying them if the managers keep making me money.
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Old 07-23-2014, 06:08 PM   #46
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The 10 yr value of $10k of RYTNX is $21.8k and the expense ratio is 1.74%, so it underperformed the small cap index fund by $4.2k and cost over 19 times as much in expenses.
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Old 07-23-2014, 06:36 PM   #47
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The 10 yr value of $10k of RYTNX is $21.8k and the expense ratio is 1.74%, so it underperformed the small cap index fund by $4.2k and cost over 19 times as much in expenses.
What is the trading symbol of your small cap fund? I'm going to assume NAESX (Vanguard Small Cap Index Inv).

Since no one invests money like your example (putting $10k in and leaving it for 10 years) I did a quick comparison on the two funds. Putting in $10K a year at the beginning of each of the past 10 years is worth today:

RYTNX = $235,192
NAESX = $202,440

Not a huge difference but it is still $33,000.

For fun I punched in $100,000 lump invested 5 years ago instead of the 10 years you used:

RYTNX = $387,230
NAESX = $232,490

$155,000 difference. Disclaimer - RYTNX is a dangerous beast and you have to have your wits about you when you invest in it. When it goes down it goes down fast.

Last edited by rmcelwee; 07-23-2014 at 07:30 PM.
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