S&P 500's Dirty Little Secret (Joshua Kennon)

[Kbg]

ETF Symbol: RSP

Nice!

I personally think this one is a no-brainer. I HIGHLY recommend you compare RSP with other large cap ETFs on Morningstar. I think you will be pleasantly surprised. However, the reality is RSP is more akin to a largish mid cap fund than a by the book large cap. Beta is higher than the S&P500 TR but RSP also actually generates real alpha.

[Ad Orientem]

ETF Symbol: RSP

Interesting though I think the ER is a little on the steep side for an ETF.

[D1984]

ETF Symbol: RSP

Nice!

I personally think this one is a no-brainer. I HIGHLY recommend you compare RSP with other large cap ETFs on Morningstar. I think you will be pleasantly surprised. However, the reality is RSP is more akin to a largish mid cap fund than a by the book large cap. Beta is higher than the S&P500 TR but RSP also actually generates real alpha.

Just curious...how does it compare against a revenue-weighted S&P 500 fund? We have results for RWL from 2008 on and results for the underlying index for it from 1979 on...do you know of any equally weighted S&P 500 funds that predate both the Invesco Equal Weighted S&P 500 Fund (open ended mutual fund; started in late 1980s and thus predates RSP by over a decade; to get a fair comparison one would have to use RSp expense ratio since the abovementioned Invesco fund mentioned had a horribly high expense ratio during its early years)....I know CRSP has an equal weight index dating back to 1926 but they charge for it....I could've swore I saw an annual returns chart for equal weight S&P back to 1970 on the Motley Fool Mechanical Investing boards a while back.

[ILoveMoney]

Thanks dualstow!  I wonder about whether there is a piece of advice in here worth considering:

In nearly every case, under nearly every valuation scenario, when you stretch the performance period out to 25 years or more, a basket of a given index bought and held on the date it was acquired, with absolutely zero subsequent changes, ended up outperforming the index itself.  Activity is frequently the  mortal enemy of good returns.

Buying 500 individual stocks is not a realistic option for most of us, but one possibility is to split the stock portion between a total stock market index fund and a collection of individually held stocks chosen from the index.  Harry Browne advised holding 20 stocks because he considered that to be enough risk mitigation.

I was listening  to a random walk down wall street. They mentioned that 50 stocks provided good diversification. If you hold 50 stocks in one single industry that benefit is instantly reduced with (at least) 60%.

[Kbg]

Nice!

I personally think this one is a no-brainer. I HIGHLY recommend you compare RSP with other large cap ETFs on Morningstar. I think you will be pleasantly surprised. However, the reality is RSP is more akin to a largish mid cap fund than a by the book large cap. Beta is higher than the S&P500 TR but RSP also actually generates real alpha.

Just curious...how does it compare against a revenue-weighted S&P 500 fund? We have results for RWL from 2008 on and results for the underlying index for it from 1979 on...do you know of any equally weighted S&P 500 funds that predate both the Invesco Equal Weighted S&P 500 Fund (open ended mutual fund; started in late 1980s and thus predates RSP by over a decade; to get a fair comparison one would have to use RSp expense ratio since the abovementioned Invesco fund mentioned had a horribly high expense ratio during its early years)....I know CRSP has an equal weight index dating back to 1926 but they charge for it....I could've swore I saw an annual returns chart for equal weight S&P back to 1970 on the Motley Fool Mechanical Investing boards a while back.

I always enjoy posts from these guys. Their blog is definitely worth a read. (Alpha Architect's)

http://seekingalpha.com/article/3118616 ... etfs?ifp=0

[MachineGhost]

I personally think this one is a no-brainer. I HIGHLY recommend you compare RSP with other large cap ETFs on Morningstar. I think you will be pleasantly surprised. However, the reality is RSP is more akin to a largish mid cap fund than a by the book large cap. Beta is higher than the S&P500 TR but RSP also actually generates real alpha.

RSP is small cap/value exposure.  Read my thread on equalizing the market cap exposure of the PP.  It only takes three or four free ETF's at Schwab.

As to the article:

The original S&P had nothing to do with the "biggest, most important market capitalization-weighted firms".  It wasn't even large cap.

Float-adjusted is actually a benefit.  You want to be buying more shares as they go down in price to help offset the market cap overweighting (buying more shares as they go up in price) which drags down portfolio returns.

I'm scratching my head at the exclusion of foreign and inclusion of mortgage REITs.  But keep in mind that the S&P 500 is run by a Politiburo at S&P -- it is not a quantitative selection process.  Additions and deletions are subjective and biased.  The Dow is even worse.

[Kbg]

http://blog.alphaarchitect.com/2015/05/ ... n-premium/