Calculations

[firehawkocean]

Hi y'all,

I'm trying to run some numbers but need help understanding the following and crunching the number:

How is the VTSMX tied to the DOW. For example,

I bought $5,000.00 shares of VTSMX on Friday afternoon @
40.91

So, lets say the DOW closes at the number 15,057 (right now's number). Is there any way to tell how it will affect my VTSMX holdings?

[bjl584]

It doesn't mirror the DOW, so it won't rise and fall with the DOW exactly. It looks like it invests in a lot of small caps which have done well the past few years.

[disneysteve]

If you go to Vanguard's site and go to the page for that fund, click on the Price and Performance tab. Scroll down slightly and there is a graph showing the fund's performance over the past 10 years. You can adjust the time period to be 1, 3, 5, or 10 years. To the right, you can select a benchmark to add to the graph.

If you add the Dow Jones Industrial Average, you'll see that the fund tracks it very closely with the returns being virtually identical over time.

So if the Dow goes up 1%, you can probably use as a rough estimate that your fund will also go up about 1%. Obviously, it isn't exact because the DJIA holds 30 stocks and your fund holds 3,434 stocks, but over time they track pretty closely.

[bUU]

VTSMX is not tied to the Dow Jones Industrials Average, nor is it even tied to the S&P 500 Index. It is a much more broadly-based index. I think it tracks the Russell 3000 Index.

The relative measurement between a fund and its benchmark is called its tracking error. The metric is referred to generally as the R-Squared (root-mean-squared) metric, and VTSMX runs an R-Squared of roughly 99.99 against the Russell 3000 Index - in other words, it tracks the index just about as closely as you can imagine anything would, which isn't actually the index itself.

[Petunia 100]

Vanguard's Total Stock Market Index tracks the CRSP US Total Market Index.

http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=VTSMX

[bUU]

Thanks. I had a feeling it wasn't the Russell 3000, but couldn't readily find the reference.

[Petunia 100]

Thanks. I had a feeling it wasn't the Russell 3000, but couldn't readily find the reference.

I thought it tracked the Wilshire 5000! But I looked it up, and found I was mistaken.

[kv968]

I thought it tracked the Wilshire 5000! But I looked it up, and found I was mistaken.

It used to track the Wilshire, then it tracked the MSCI US Broad Market Index but with their recent switch of many of their Indexes they're now using CRSP's Indexes.