S&P 500 vs Wilshire 5000

[Dazarath]

So a lot of my friends have just graduated college, and I've been suggesting to them to open up a Roth and put the money in an index fund. They don't know what they're doing when it comes to investing, but they know to save for retirement. I'm wondering what the posters here think is a better choice, an S&P 500 index fund, or a Wilshire 5000 index fund. And why? Thanks for any help anyone can give me.

[SlowHabit]

The most common (and popular) index funds are from Vanguard because of its low management fees. Vanguard's performance isn't bad either. Since your friend just start creating a Roth account, he won't have too much to work with (Vanguard has higher minimum purchase than other brokerage firms). The simplest options are too buy a Vanguard Target Retirement fund or the Vanguard Total Market (similar to Wilshire 500 index fund).

I think as of now, the most important thing is not figuring out what index funds to buy but try your best to max out his IRAs and 401ks. And of course, read a lot. I recommend "All About Index Funds" by Richard A. Ferri. And I highly recommend clicking on the search link and search for the usuer "DesertCat" and read whatever he writes.

Edit: I would buy the Vanguard Total Market instead of the S&P 500; it's more "diversified."

[buffett]

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I would buy the Vanguard Total Market instead of the S&P 500; it's more "diversified."

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[lala]

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I would buy the Vanguard Total Market instead of the S&P 500; it's more "diversified."

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well top 10 holdings comprise 15% of the index, and there are 3772 stocks, so .27% of the stocks in this index are 15% of the index. So not very diverisifed. If you want a more diversified index buy the SP equally weighted index or midcap.

[mwgr5]

I would buy a Target Retirement fund. This fund is much more diversified and should have lower volitility because of the small bond allocation. This will allow the inexperienced investors you are giving advice to to have an aggressive completly diversified portfolio that won't be so volitile that it will cause them to make the beginner mistake of buying high and selling low based on emotion.

If you want a 100% US stock portfolio the better index is the willshire 5000. The index holds every US stock instead of just the 500 largest from the S&P index, providing greater diversification. The long term correlation and performance of these funds is very similar though as the wilshire 5000 is cap weighted and thus dominated by the large cap stocks.

[SlowHabit]

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If you want a 100% US stock portfolio the better index is the willshire 5000.

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How is this better than Vanguard's Total Market?

[mwgr5]

Vanguard's total stock market fund is an index of the willshire 5000, so they are the same.