Stocks represent ownership shares of companies and are the foundation of almost every portfolio recommendation.  While there are many different types of stock index funds depending on your preferences, Portfolio Charts tracks stocks across the two most popular factors — size and value.  So there are a wide variety of stock index funds filtered by different combinations of market cap, book-to-market ratios, and region.

Asset color

To help visually communicate portfolio construction, the calculators and portfolios differentiate between domestic and international stocks by color.  Domestic and international index definitions depend on the home country selected.





How they work

When small companies are just getting started they often get funding through personal savings or angel investors.  But once they become successful and look to raise more capital, many choose to go public and offer stocks for purchase on the open market.  In exchange for your investment you receive partial ownership in the company.  So the stock market is really a convenient system for buying and selling company ownership.

Stocks make money in two ways — dividends and price appreciation.

Stocks trade on the open market and go up and down with investor sentiment.  When a company is successful the price may rise, and when it announces bad news the price may fall.  The profit you personally make depends on the share price when you buy versus when you sell.

Dividends are regular payments made to all shareholders and are paid as a fixed amount per share.  Note that not all companies pay dividends, as many prefer to invest that money back into the business.  One should also realize that dividends are not free money.  When a company pays a dividend, the company value drops accordingly and that drop is reflected in the stock price.  So dividends can also be thought of scheduled payouts of company value.

Rather than investing in a handful of individual stocks, stock index funds buy hundreds or even thousands of companies at a time.  This makes it far easier for individual investors to manage broad market exposure with very little effort required.  But the money in a fund is not spread evenly, and one nuance to how stock index funds work is that the vast majority are capitalization based and purchase stocks in proportion to the company size.  For example, here’s a chart showing how the US S&P500 breaks down by company (the yellow slice is Facebook).



While individual index funds may vary, the definitions are reasonably standard in the financial industry.  Think of the percentages as dividing up the pie chart shown above.

Large Cap : The largest 70% of the market sorted by company size

Mid Cap : The next 15% sorted by company size

Small Cap : The smallest 15% sorted by company size

Value : The cheap half of the market sorted by book-to-market

Growth : The expensive half of the market sorted by book-to-market

Blend : The total market segment with no value or growth filter applied

Mix and match the size and valuation filters and you’ll get ten different types of stock index funds.  I often shorten the asset types to acronyms to save space, but here are the detailed definitions:

TSM : Total Stock Market

LCB : Large Cap Blend

LCV : Large Cap Value

LCG : Large Cap Growth

MCB : Mid Cap Blend

MCV : Mid Cap Value

MCG : Mid Cap Growth

SCB : Small Cap Blend

SCV : Small Cap Value

SCG : Small Cap Growth

Country coverage

Portfolio Charts currently collects stock data for six individual countries and three international regions:

AUS : Australia

CAN : Canada

GER : Germany

JPN : Japan

UK : United Kingdom

USA : United States

WLD : World — All global developed countries weighted by market cap

WLDx : World ex-US — All developed countries excluding the United States

EM : Emerging Markets

What the asset codes mean

Putting these two things together, you may find references to stock asset codes that combine country and type acronyms.  For example, USA-SCV represents small cap value stocks in the United States and WLD-TSM represents the World total stock market.  While that may seem a little more complicated than you’re used to from other investing resources, Portfolio Charts is multinational so it’s important to be clear on definitions.  Too often investing experts speak generally about the stock market when they’re really only talking about the United States.  Every country is different!

Purchasing a stock fund

Real-world index funds simply track the above index definitions.  So to add a particular asset to your portfolio you just need to find an index fund tracking your desired index. 

– In the United States, LCB most closely models an S&P500 fund such as VOO.  The total stock market is closest to a total market fund such as VTI.

– If you look at the fine print, some large cap funds actually cover mid caps as well.  Practically speaking, the performance should be very similar because of how the funds are market weighted so I wouldn’t stress about the details.  But if you’re really picky, you might try adjusting the calculators to add a dash of mid caps to most accurately model your favorite fund.

– Many US investors are very passionate about certain fund providers such as Vanguard.  However, each fund provider may have very different coverage in various home countries and there are several good providers that don’t even offer options in the US.  So be sure to fairly evaluate each available option rather than simply fall back on recommendations that may not necessarily apply to you.

– The calculators track the underlying international fund performance and adjust the results for domestic exchange rates and inflation.  They best represent unhedged funds.

– If you can’t find a good total stock market international fund, try browsing the large cap blend versions.  Many international funds exclude small cap companies to keep costs down, but the returns should be pretty similar.

– Note that most total stock market international stock assets on the site only include developed markets.  In index fund terms, this means they track the World index and not the All Country World Index (ACWI).  Emerging markets are separate and can be sprinkled into other asset data as desired.

– Keep an eye on expense ratios.  The lower the better.

– Funds from different providers may have different trading fees at your individual broker.  When possible, be sure to look for funds with low trading fees.