2nd year of cap gains distribution for VSS (int small cap)

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MnD
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2nd year of cap gains distribution for VSS (int small cap)

Post by MnD »

I guess ETF's do spin off cap gains.
Combination of a newish ETF and high positive returns since the launch?

Vanguard FTSE All-World ex-US Small-Cap ETF (VSS)

Dividend $2.18200 12/27/2010 12/22/2010 12/29/2010 — —
ST Cap Gain $0.34600 12/27/2010 12/22/2010 12/29/2010 — —
LT Cap Gain $0.41700 12/27/2010 12/22/2010 12/29/2010 — —

Dividend $0.91700 12/29/2009 12/24/2009 12/31/2009 — —
ST Cap Gain $0.54700 12/29/2009 12/24/2009 12/31/2009
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cinghiale
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Post by cinghiale »

All the more reason to hold a fund like this in a tax-deferred account.

"Asset location" is one of the most important lessons that I have learned in this forum.
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natureexplorer
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Post by natureexplorer »

ETFs and Vanguard ETFs are two different things.
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Post by Sidney »

cinghiale wrote:All the more reason to hold a fund like this in a tax-deferred account.

"Asset location" is one of the most important lessons that I have learned in this forum.
Unless your tax-deferred accounts are full of bonds and you are sitting on a mountain of loss carry-forwards.
I always wanted to be a procrastinator.
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tarnation
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Post by tarnation »

cinghiale wrote:All the more reason to hold a fund like this in a tax-deferred account.

"Asset location" is one of the most important lessons that I have learned in this forum.
We have it in taxable and a single 0.79% cap gain distribution seems pretty good to me.
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White Coat Investor
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Post by White Coat Investor »

The only thing worse than having to pay capital gains taxes is not having to pay capital gains taxes. While this isn't the first fund I'd put in taxable, cut the fund some slack. I bought it when it first came out and I had a 58% return in 2009 and a 25% return in 2010. You don't think there's going to be some capital gains with returns like that? You can only be so tax-efficient. Remember, some funds pay out fewer capital gains because their ERs are higher! Be glad you have the gains.
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ScottW
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Post by ScottW »

natureexplorer wrote:ETFs and Vanguard ETFs are two different things.
There's debate over whether the dual-class structure helps or hurts tax efficiency. Also, the ETF class accounts for 80% of the total assets, so it's unlikely the mutual fund portion can have that adverse of an effect.

In a recent interview, Vanguard argued that one reason this had a short-term capital gain was that it began operations right before the market took off, so even with the arbitration mechanism in place, the fund didn't have many high-price shares available for redemption.
natureexplorer
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Post by natureexplorer »

ScottW wrote:... the ETF class accounts for 80% of the total assets, so it's unlikely the mutual fund portion can have that adverse of an effect.

In a recent interview, Vanguard argued that one reason this had a short-term capital gain was that it began operations right before the market took off, so even with the arbitration mechanism in place, the fund didn't have many high-price shares available for redemption.
I believe VSS had no or very little in-kind redemption, so the tax-efficiency would have been similar if everything had been in mutual fund shares. The question is why there were so few in-kind redemptions.
livesoft
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Post by livesoft »

I will venture a guess that the folks who bought VSS were not traders, but more typically mutual fund investors of the buy-and-hold type. The trading volume on VSS has not been that high relative to some other small-cap foreign ETFs even accounting for the share price.

I also think that a substantial number of VSS owners bought it to avoid the purchase & redemption fees of VFSVX. Those fees drove investors away from VFSVX and into VSS.
cajj
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Post by cajj »

According to http://www.bogleheads.org/wiki/Principl ... _Placement, taxable account is a good choice for VSS
Does anyone know if VSS would qualify for foreign tax credit?
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grabiner
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Post by grabiner »

livesoft wrote:I will venture a guess that the folks who bought VSS were not traders, but more typically mutual fund investors of the buy-and-hold type. The trading volume on VSS has not been that high relative to some other small-cap foreign ETFs even accounting for the share price.
This appeared to be the case previously, but it does not appear to be an issue now. I just corrected the International Small-Cap page on the wiki, and it now shows that VSS daily volume is 0.5% of net assets, which is the same fraction as for DLS, IFSM, and SCZ. GWX trades 1% daily, and SCHC (which is tiny) also trades 1%. (The previous data, showing 0.3% daily turnover, was based on adding the M* numbers for VSS and VFSVX, but M* includes all share classes including VFSVX in the VSS total.)

But according to the annual report, it is true that there was very little redemption; 30,206,000 shares of VSS were issued in the fiscal year ended 10/31/10, and 600,000 were redeemed. With new assets pouring into the fund, most of the dealing with Creation Units was apparently creation rather than redemption.

EWX had similar problems; I believe no shares of EWX were redeemed last year, which explains the large gain distribution.
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grabiner
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Post by grabiner »

cajj wrote:According to http://www.bogleheads.org/wiki/Principl ... _Placement, taxable account is a good choice for VSS
Does anyone know if VSS would qualify for foreign tax credit?
It is eligible for the credit, because it holds foreign securities on which foreign countries have withheld tax.

VSS is OK in a taxable account, but if you have tax-deferred room, it's probably better to put VSS in a tax-deferred account and keep large-cap international in a taxable account, to avoid the distributions and non-qualified dividends.

(Edited to correct transposed instructions; thanks livesoft)
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