Better Buy: S&P 500 vs. Total Market ETF
In this clip from "Financial Planning Q&A 60" on Motley Fool Live, recorded on Jan. 26, Motley Fool contributor Robert Brokamp discusses the differences between an S&P 500 ETF and a Total Market ETF and which might be better for your portfolio.
Robert Brokamp: The RYR model portfolios, of which I'm in charge, are very granular. S&P 500 ETF, as you can imagine, is all large-cap stocks, but then I have separate allocation to small-cap stocks, mid-cap stocks, micro-cap stocks. Very granular. The TMF model, I assume you're talking about the outputs of our allocator tool, which I think could be very handy, it does recommend an allocation to index funds. It's not as granular so it uses the Total Market Fund because, in one fund, you have large-caps, mid-caps, small-caps. Since, historically, small-caps have outperformed large caps, I like having a slightly bigger allocation to small caps than what you'll find in the Total Market Fund. But, over the last several years, large caps have done better. The S&P 500 has outperformed the Total Market Fund. But, either way, I think you're going to do fine. They're index funds. They invest in the U.S., very heavy allocation to the biggest companies. I think it makes sense to have either one as part of your portfolio.
Source Fool.com
