Worse, since you own every stock (not really, but close enough), you now have the 500 companies representing about $27 trillion of market cap, and then thousands more representing only another $8-9 trillion. So any change in the smaller companies is dwarfed by one good (or bad) day of AAPL, AMZN, GOOG, etc (as happened yesterday).

So if you want the whole stock market, buy it in multiple pieces - a large cap, a small cap, and a mid-cap funds.

As to your bookkeeping comment about being easier, you are absolutely correct. In fact, a competent financial advisor has the tools to trade the S&P themselves for clients (literally buying all 500 stocks individually and in correct proportions to the index).

Market cap source: https://siblisresearch.com/data/us-stock-market-value/

This doesn't seem that bad to me?

Imagine that you own FOO and BAR. They're each 1% of your holdings and each 1% of the US stock market. Now they merge. How much of your holdings should be the new company FOOBAR? Seems to me like it should be 2% now that FOOBAR is ~2% of the market.

AAPL, AMZN, GOOG, etc each represent a large number of products and businesses, and I don't see why you'd want to decrease your exposure just because they trade under a single stock symbol.

Assuming diversification is the goal, your comment would only be true (that 1+1 and 2 are equivalent) if the constituent parts of hyper-scale companies operated independently. In reality, I'd say that rarely happens.

At best, you get something like Facebook (there can only be so many true chiefs). At worst, you get something like GE (cannibalizing viable businesses to feed others).

And all of this is to say nothing of that fact that, historically, Amazons don't become 2x Amazons with the frequencies that {mid-cap} become {large cap}, simply by virtue of total addressable market maximums in mature business areas.

source: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...

see the drawdowns tab.

Split the total market into 3 funds and see how much better it compares to your solution. (Drawdowns tab also)

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...

As long as we are performance chasing[0].. CAGR 27.22%! or Bitcoin before the pop, or any of the big FAANG's alone :)

Obviously I'm not suggesting you actually buy and hold UPRO 100% AA.

The problem is, we have no idea what the future holds, and can only guess. Buying the market(VTSAX/VTI) is the next best thing, you can't really do wrong, but you also won't "win" in the sense that you only get winners. Or VT if you want the global market.

0: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...

> So if you want the whole stock market, buy it in multiple pieces - a large cap, a small cap, and a mid-cap fund.

But this only makes sense because you think holding companies based on market sector (equally weighting each sector) makes more sense than just basing it on the size of the company. What evidence do you have that this is a better approach?

That’s not the point though. A one time buy is easy - rebalancing quarterly, and rebalancing when a huge new company is added is the hard part (as evidenced by the need for buying $35-40Billion worth of TSLA and selling an equivalent amount of other stocks).

For a financial advisor, the software to rebalance runs in a web browser on a laptop (heck, even an iPad!).

Rebalancing has been figured out and automated very well for a few years now, with several different vendors all competing.

At lower cost than what you’d pay via a large investment company like Vanguard/Fidelity/BlackRock?

(VTSMX is closed to new investors. VTSAX is the current fund.)

They're not going to drop it simply because there are other ways; for them it's about being conservative and cautious about any decision they make.