Poll of the Day > Anybody understand stocks? Why choose S&P 500 over Russell 2000?

(+) Yeah! (+)

I see a lot of people talk about the S&P 500. The index grows about 8% a year on avg? With the exception of last year I suppose

But doesnt the Russell 2000 grow 20% a year?

any reason to invest in one and not the other?

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Just because

S&P 500 is large cap stocks, tracking the 500 largest companies with a median market cap of $21 billion. The Russell 2000 is a small cap index, covering 2000 small companies with a median market cap of $922 million.

The Russell 2000 is more volatile, so you can win or lose much faster. The S&P 500 is more stable so it's a safer investment.

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Ok thanks @captpackrat

so whats the difference between VUSA and VUAG when it comes to the Vanguard S&P 500? Which one is better?

I know one is accumulating and the other is distributing but how do you assess the relative benefits of each

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FatalAccident posted...

Ok thanks @captpackrat

so whats the difference between VUSA and VUAG when it comes to the Vanguard S&P 500? Which one is better?

I know one is accumulating and the other is distributing but how do you assess the relative benefits of each

The distributing version you have to keep buying new shares every time there is a distribution if you want to reinvest that money, and you may have to pay whatever fees your broker charges each time you buy more shares. With the accumulating version you keep the same number of shares but they just increase in value so it's basically a one-time purchase.

So with VUAG if you bought 1 share at $100 and the value doubles, you'd end up with 1 share worth $200. With VUSA if you bought 1 share at $100 and the value doubled, you'd have 1 share worth $100 and $100 cash. If the value doubled again (and you failed to reinvest any dividends), VUAG would end up with 1 share worth $400, and VUSA would have 1 share worth $100 and $200 cash. If you did reinvest in VUAG you'd have 2 shares worth $200 and $200 cash, minus your broker's fee for purchasing the additional share.

There may also be tax considerations. With the accumulating version you'll have to pay capital gains tax only when you sell your shares, with the distributing version you'll owe dividend tax for every distribution.

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