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Try the ETF with the symbol "RSP". It's an S&P 500 fund, but each of the 500 is equally weighted. In other words 0.2% of the fund. The theory is that the lar

Try the ETF with the symbol "RSP". It's an S&P 500 fund, but each of the 500 is equally weighted. In other words 0.2% of the fund. The theory is that the larger companies in the S&P 500 have less growth potential, or are already overvalued, compared to the smaller companies.

Aunche 6y ago
That theory doesn't make much sense. For example, surely Amazon has a lot more room to grow than Coca Cola.
- Cthulhu_ 6y ago
  I'm not sure; Coca Cola could start investing money and start buying up other food & drink brands. I mean could you have imagined 10, 20 years ago that Disney would start to gobble up other companies like some weird Shoggoth monstrosity and multiply its stock value by 5-6 times?
  - unreal37 6y ago
    Coca-cola revenues have fallen 5% per year on average, for the past 5 years. Of course, they're panicking over that. Of course they're trying to find growth. But they can't find it yet. The fact is, they own so many brands in other beverage categories already. They own 500 beverage brands.
refurb 6y ago
How often does the fund get rebalanced? That’s the nice thing with the market cap weighted SP500 funds, no tax consequences from rebalancing. But you could plug “RSP” into a tax-advantaged account. Edit: You can owe taxes even if you don’t personally buy/sell. As a fund shareholder, you could be on the hook for taxes on gains even if you haven't sold any of your shares. https://investor.vanguard.com/investing/taxes/mutual-funds-etfs https://investor.vanguard.com/investing/taxes/mutual-funds-e...
- jzwinck 6y ago
  What personal tax consequences arise from rebalancing within an index fund?
  - brtkdotse 6y ago
    None, that's the point of a fund.
    - lotsofpulp 6y ago
      An index ETF won’t have tax consequences until you sell the ETF. An index mutual fund can cause you to have to pay taxes: https://money.usnews.com/investing/investing-101/articles/etf-vs-index-fund-the-difference-and-which-to-use https://money.usnews.com/investing/investing-101/articles/et... > Since mutual funds trade directly through the fund manager, the manager may need to sell shares of the fund's investments to generate cash needed to cover redemptions. This causes mutual funds to buy and sell within the fund more frequently than ETFs. And every time the trades generate net capital gains within the fund, it creates a taxable event for investors. "Mutual funds are legally required to pay out capital gains to their shareholders each year," Jessee says. Even if you don't sell your shares, you may get a tax bill for gains incurred within the fund. This could happen even in a fund that's losing value.
      - throw0101a 6y ago
        Assuming that it is held in a taxable account. For most people, for most of their portfolio, it will probably held in a tax-sheltered account (e.g., 401(k) retirement in US). If you've maxed out all your sheltered accounts, and are worried about dealing tax events in non-sheltered ones, that's a pretty good position to be in—financially speaking.
        bluedevil2k 6y ago
        This is a silly statement - there’s plenty of middle class people who hold mutual funds who are hit with capital gains taxes every year from distributions from the fund.
JumpCrisscross 6y ago
> Try the ETF with the symbol "RSP". It's an S&P 500 fund, but each of the 500 is equally weighted. Note that an equal-weighted index will tend be more volatile, have higher turnover (i.e. more trading costs and short-term tax effects) and be sensitive to value over momentum in comparison with a market-cap weighted index like the S&P 500. The former have outperformed the latter over the last decade (EDIT: no, it hasn’t. I was looking at a biased source.)
- lotsofpulp 6y ago
  Have equal weighted indexes outperformed market cap weighted indexes in the last decade? Morningstar shows VOO with a greater total return than RSP for past 5 years and since inception. I didn’t see past 10 years at a quick glance, but I imagine it’s the same.
  - bryanlarsen 6y ago
    The argument is that the top five are overvalued. If so they would have outperformed during the period they became overvalued.
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    - lotsofpulp 6y ago
      I was replying to JumpCrisscross’s comment.
      - bryanlarsen 6y ago
        And I was responding to the thread, not to you specifically.
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Aunche 6y ago

That theory doesn't make much sense. For example, surely Amazon has a lot more room to grow than Coca Cola.

Cthulhu_ 6y ago
I'm not sure; Coca Cola could start investing money and start buying up other food & drink brands. I mean could you have imagined 10, 20 years ago that Disney would start to gobble up other companies like some weird Shoggoth monstrosity and multiply its stock value by 5-6 times?
- unreal37 6y ago
  Coca-cola revenues have fallen 5% per year on average, for the past 5 years. Of course, they're panicking over that. Of course they're trying to find growth. But they can't find it yet. The fact is, they own so many brands in other beverage categories already. They own 500 beverage brands.

refurb 6y ago

How often does the fund get rebalanced? That’s the nice thing with the market cap weighted SP500 funds, no tax consequences from rebalancing. But you could plug “RSP” into a tax-advantaged account. Edit: You can owe taxes even if you don’t personally buy/sell. As a fund shareholder, you could be on the hook for taxes on gains even if you haven't sold any of your shares. https://investor.vanguard.com/investing/taxes/mutual-funds-etfs https://investor.vanguard.com/investing/taxes/mutual-funds-e...

jzwinck 6y ago
What personal tax consequences arise from rebalancing within an index fund?
- brtkdotse 6y ago
  None, that's the point of a fund.
  - lotsofpulp 6y ago
    An index ETF won’t have tax consequences until you sell the ETF. An index mutual fund can cause you to have to pay taxes: https://money.usnews.com/investing/investing-101/articles/etf-vs-index-fund-the-difference-and-which-to-use https://money.usnews.com/investing/investing-101/articles/et... > Since mutual funds trade directly through the fund manager, the manager may need to sell shares of the fund's investments to generate cash needed to cover redemptions. This causes mutual funds to buy and sell within the fund more frequently than ETFs. And every time the trades generate net capital gains within the fund, it creates a taxable event for investors. "Mutual funds are legally required to pay out capital gains to their shareholders each year," Jessee says. Even if you don't sell your shares, you may get a tax bill for gains incurred within the fund. This could happen even in a fund that's losing value.
    - throw0101a 6y ago
      Assuming that it is held in a taxable account. For most people, for most of their portfolio, it will probably held in a tax-sheltered account (e.g., 401(k) retirement in US). If you've maxed out all your sheltered accounts, and are worried about dealing tax events in non-sheltered ones, that's a pretty good position to be in—financially speaking.
      - bluedevil2k 6y ago
        This is a silly statement - there’s plenty of middle class people who hold mutual funds who are hit with capital gains taxes every year from distributions from the fund.

JumpCrisscross 6y ago

> Try the ETF with the symbol "RSP". It's an S&P 500 fund, but each of the 500 is equally weighted. Note that an equal-weighted index will tend be more volatile, have higher turnover (i.e. more trading costs and short-term tax effects) and be sensitive to value over momentum in comparison with a market-cap weighted index like the S&P 500. The former have outperformed the latter over the last decade (EDIT: no, it hasn’t. I was looking at a biased source.)

lotsofpulp 6y ago
Have equal weighted indexes outperformed market cap weighted indexes in the last decade? Morningstar shows VOO with a greater total return than RSP for past 5 years and since inception. I didn’t see past 10 years at a quick glance, but I imagine it’s the same.
- bryanlarsen 6y ago
  The argument is that the top five are overvalued. If so they would have outperformed during the period they became overvalued.
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  - lotsofpulp 6y ago
    I was replying to JumpCrisscross’s comment.
    - bryanlarsen 6y ago
      And I was responding to the thread, not to you specifically.
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