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.
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.
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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