Gallery:Step 5|Step 5: Manager Pickers

Editors' Picks - US Total Market

Gallery:Step 5|Step 5: Manager Pickers

We believe it is self-evident that portfolios should start with the domestic total market fund for that portion of the portfolio that is intended to mirror, for the long-term, the total market on a capitalization-weighted basis. We discourage slicing and dicing where the slices will always add up to the whole. In our view, the indexer without an advisor or broker can do no wrong by starting with these few foundation-building funds:

Fund Name
Ticker
Expense Ratio
Comment
VTSMX
0.20%
Wilshire 5000
IWV
0.20%
R3K: fewer small caps
VTI
0.15%
Wilshire 5K: wow!

*exchange-traded funds, which involve brokerage fees

As usual, Vanguard figures prominently. Do-it-yourself mutual fund investors will find its plain vanilla Wilshire 5000 fund hard to beat. On the ETF site, it's Barclays against Vanguard. Here is it probably more of a contest between indexes than between funds. Investors should probably decide whether they like Russell 3000 more than Wilshire 5000.

Some Reasonable Alternatives

There plenty of acceptable funds with higher loads sold through brokers and mutual funds with excellent service and personal service. We have mixed feelings about them but note generally that if your advisor diligently rebalances your portfolio for you or you are otherwise getting excellent service, advice and handholding, then it seems reasonable that you should want to pay a bit for it. These are a few of the reasonable alternatives we have found, all of which track the Wilshire 5000:

Fund Name
Ticker
Expense Ratio
Comment
FSTMX
0.25%
Trojan horse index fund
POMIX
0.40%
Not that much pricier
SWTIX
0.40%
Broker with classy site
VPBMX
0.27%
Smaller fund group

Fidelity, the bastion of active trading, has plenty of cheap index funds, and customers swear by their reponsive customer service. Clearly they are hoping some investors will cross over to their lucrative (for them) active funds. T. Rowe Price is another huge and well-established firm but it's fund is a bit pricey with nothing else to recommend it. Schwab, primarily known as a brokerage firm, at least has one of the strongest Internet brokerage sites. Vantagepoint is to be credited with very reasonable fees.