Bogleheads

[Len33]

My apologies if this discussion has already occurred, but can someone please explain the differences between VGTSX and VFWIX, and why Vanguard offers them both? I'm not asking which is 'better' - I know there's really no such thing (besides VGTSX's expense ratio advantage!) - I'm more wondering about what the specific differences are, and whether one is more/less appropriate for any investor. They clearly track different indexes, but either the indexes should be very similar (in which case both funds aren't necessary) or if one is the 'accurate' index (ie, VFWIX includes Canada), why would anyone prefer the other?

Thanks.

[Trev H]

Total International is a Fund of Funds so does not qualify for the FTC.

FTSE X-US Intl Large Cap is not a Fund of Funds and does get the FTC.

If investing in taxable account location, getting the FTC is a nice bonus.

Total International only includes E/P/EM (no Canada).

FTSE X-US includes Canada.

Then there is the difference in ER's.

Think those are the main differences.

===

[DSInvestor]

I believe that Total International has completed its transition to direct secuirites. It is no longer a fund of funds and thus will qualify for FTC.

From the prospectus for Total International:

[DSInvestor]

IMO the two funds are so similar that I'd be happy with either fund for the long term. For taxable accounts, they are good replacement funds for each other if you wish to harvest tax losses. Since they track different indexes, they are not "substantially identical". I started with Total international (mostly because of lower expense ratio) but when I harvested tax losses, I switched to FTSE fund VFWIX.

[tarnation]

Total International is no longer a fund of funds.
Here is another thread.
http://www.bogleheads.org/foru....hp?t=36836
_________________

[retiredjg]

Hi aleonard, welcome to the forum! Your question has been discussed many times, but one more time won't hurt.

Total International used to be a fund of funds rather than a fund of individual stocks. At that time, you could not get the foreign tax credit with Total International, but you could get it with the FTSE International. So, back then, FTSE was recommended for taxable accounts and Total International was recommended for tax-advantaged accounts (due to lower ER for a very similar fund).

Now, Total International has switched to individual stocks. This has been completed in the last several months. There still might be some residual tax advantage to holding FTSE in taxable, but if so, that should go away with the end of the tax year if I understand correctly.

Currently, the funds are very similar other than the FTSE holds Canada (about 5% or 6% of the world market) and FTSE is just a bit higher in ER (.34% vs .40% last I checked). They are not identical (one holds about 300 more stocks than the other) funds and they do follow different indexes.

Please see FAQ on Vanguard International Funds on the Bogleheads Wiki and Compare Vanguard International Funds on the Bogleheads Wiki for more information.

Many of us are wondering why VG would have 2 such similar funds. It is nice, though, for people who want to harvest their tax losses.
_________________
Links to Investment Planning and Asking Portfolio Questions

[tarnation]

[Len33]

Thanks for all the quick responses. I'm glad (though not surprised) to see that the forum/wiki already have a wealth of information on the subject - thank you for pointing me towards it!

Andrew

[Ping Pong]

The Total International Fund excludes all developed countries in the Americas. At present time, this policy excludes the United States and Canada, but if other countries (such as Brazil) become developed economies, then they will drop out of the Total International Fund and you will be hit with capital gains. You'll also end up with a fund even less representative of foreign markets.

[retiredjg]

[mikep]

The FTSE version also has a small-cap you can pair with it. Hold it in a 1:9 ratio with the FTSE large if you want to replicate the international market by capitalization, and you can always tilt accordingly.

[Len33]

mikep - I understand why someone would own the FTSE small-cap if they wanted to tilt their international holdings towards small - but I'm surprised to hear you say it's necessary to own just to replicate the international market by capitalization. Is the FTSE not a total market index?

Thanks.

[retiredjg]

[tarnation]

[DSInvestor]

Here's a link to a fact sheet on the FTSE All World ex-US Index.
http://www.ftse.com/Indices/FT....tsheet.pdf

[retiredjg]

Thanks for the links DS. That answers the question I had - FTSE All World x US does contain mid caps.

I just keep learning something new every day! (That's a good thing since I'm an information junkie....)
_________________
Links to Investment Planning and Asking Portfolio Questions

[idahospud]

[baw703916]

Israel is another country that would get left out if it is declared Developed. FTSE already has declared Israel developed, but MSCI still considers it Emerging. When MSCI does consider it developed, it won't really have anywhere to go in Total International.

In the longer term, Mexico and South Africa are also countries which could be odd man out--as is Brazil, as Ping Pong mentioned.

Brad
_________________
I don't foresee any Black Swans appearing in the future

[learnings]

I hold the tax managed international fund and am thinking about tax harvest by switching to either of the aforementioned international funds. Any comments are welcome!

[idahospud]