Vanguard employees don’t have access to S&P 500 funds in their 401k plan anymore

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by thawowtso

www.marketwatch.com/story/vanguard-employees-wont-have-sp-500-funds-in-the-401k-plan-2018-06-06

I just became aware of this change when my employer chose to follow in Vanguard’s footsteps, so this is a bit of old news (from June). The article title is also a bit misleading. Essentially, Vanguard has chosen to replace the access to an S&P 500 Index Fund (VINIX for Vanguard, VFIAX for my employer) with the Vanguard Total Stock Market Index (VITSX) fund in their 401k plans. Both plans have similar expense ratios.

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The reason for the change was that the 500 Index fund was comprised mostly of mega-cap companies, and the Total Stock Market Index provides some exposure to both mid-cap and small-cap companies. Vanguard thought that it was important for people who were seeking broad exposure to the US stock market to have a more diversified portfolio, especially passive investors.

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I had built in a more diversified portfolio using VFIAX with my employer before the switch, and will now need to re-allocate to reach my small and mid-cap allocation goals. Thought this was a nice reminder to anyone who is passively investing for retirement, especially through Vanguard, to keep an eye on your funds to make sure you are appropriately diversified.

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