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Better to invest in Vanguard 500 Stock Index Fund or Total Stock Market Index Fund?

I am a young investor interested in investing in a roth IRA and am interested in the Vanguard family. Currently my IRA is with a bank with a very low interest rate. I have researching different funds and like Vanguards no load index funds. Which is better to invest in?? 1. Vanguard 500 Stock Index Fund 2. Vanguard Total Stock Market Index Fund

Public Comments

1. "Better" is a opinion. If you mean that you're going to put all your IRA into just the one fund, consider the target-date funds. That will also give you some exposure to international stocks and fixed-income assets.
2. 2 would be the better choice for long term investing, although you might want to consider the Target Retirement Fund for your age bracket -- that will give you broad, low cost stock exposure but get more conservative as you get closer to retirement age.
3. Tance: Were it me, I would not drop a single dime into this kind of market environment. It took about four years for the market to reach a bottom after the 1929 market crash. The current decline is about one year, so in time, there is more downside, and no bottom is in sight. What about cash? The purchasing power of $10,000 in terms of 1997 dollars is about $3,000 today, so even the proverbial mattress is not safe. Both gold and silver have a proven store of value during times of economic uncertainty. Why? Because they have a world-wide recognized intrinsic value. Paper assets do not. More, the metals not only hold purchasing power value, they often appreciate, as well. Think about it. The Dow and S&P are at their lowest levels in a decade. That means everyone who bought in thelast 10 years is under water. Mutual funds are no different, and can sometimes be worse. Cheers!
4. Vanguard 500 There are a lot of crappy companies in the larger Total stock market fund.
5. Try second one for long term
6. The question is actually a very interesting question. Here is why. Both indexes are capitalization weighted. What that means to you the investor is that both on a market value basis are going to contain very nearly the same weight of stocks. What I mean by that the top 10 holdings of both will contain exactly the same stocks in almost exactly the same proportions. Even though the total market index contains many more stocks the additional stocks make up a very small portion of the total. The top 10 holding of the 500 index make up 22% of the total but only 18.5% of the Total Market index--not all that much difference. When you compare the returns over the years of the two they again are very similar. The 10 year return for the 500 index is - 3.51% and the other - 2.57%. I guess that one might conclude that the total market index does have a better long term return but the shorter term returns are much much closer together. I suspect that the difference between the two long term returns is due to the recent near demise of several very large capitalization companies--Citigroup, AIG, GM, and Bank America. Certainly there would be slightly less risk to you the investor by investing in a portfolio containing 3500 stocks than in one containing only 500, but because of the capitalization weighting not as much as one would hope.