Talk:Vanguard Total International Stock Index Fund
From Bogleheads
Suggested Chronology of Fund Data Updates
Given the demands placed on editors for keeping wiki data current and updated, please use the following timelines for updating data. In most instances we can provide annual data once it becomes available, with links to the sites which can provide subsequent monthly data updates. This should help reduce the burden of editorial upkeep. Here is a suggested chronology for data updates.
- Fund returns and standard deviations should be reported on an annual basis, with links to the Vanguard web pages for current year-to-date updates.
- Fund accounting and tax distribution data should be reported on the fiscal year basis. A link to the Vanguard webpage can provide for the current status of these attributes.
- Fund expense ratio updates should be reported on the semiannual and annual report dates. We have usually made an internal note of the semiannual report er and then update all references of the er upon the annual report. The issuance of the annual report also allows one to estimate the foreign tax credit for international funds and estimate the return of capital distribution for REIT funds.
- Qualified dividend percentages are released after the end of the calendar year. Updates must wait for the data release. Late in the year, Vanguard provides estimates for qualified dividends, we can provide these links as they become available. These can be placed in the fund distribution pages.
- Fund brokerage commission expense is made available when the fund prospectus and statement of additional information (which is where brokerage commission expense is reported) is updated and released. Data for 2008 will become available by mid year 2009.
These directives should limit most data updates to the completion of the calendar year for updating returns, tracking error, and standard deviation; to the issuance of the annual reports for tax data; the issuance of semiannual and annual reports for expense ratios; and. when issued, the timely posting of final qualified dividend and brokerage commission data. Blbarnitz 09:19, 3 January 2009 (UTC)
David, thanks for working on the tax efficiency section. Do you think the fund could realize large capital gains if some of the larger emerging markets morph into developed markets? Under this scenario, the Emerging Markets Stock Index Fund would have to sell successful companies. Do you believe its ETF share class would protect it from capital gains distributions? Ken Schwartz 22:45, 23 May 2008 (EDT)
The gains would not be very large. If South Korea were moved from emerging to developed, that would be about a 10% capital gain for Emerging Markets Index (it is 15% of the index and I would guess its basis is 5% of the index), which would be only a 2% capital gain for Total International. Such a comment would be appropriate for Emerging Markets Index when we give it a page; the gain would be more significant, and Emerging Markets, unlike Total International, is a natural holding for a taxable account. Grabiner 23:17, 23 May 2008 (EDT)
Ken, I agree that both the tax efficiency and expenses sections should be moved to a separate section, since neither is in particular. an advantage or criticism of the fund, but rather a refined consideration of its attributes. I will make a test edit, see if it works. Blbarnitz
| Because VGTSX is a fund of funds, it is not eligible for the foreign tax credit (which would be worth about 0.15% annually had it been available), and thus it is preferable for taxable investors to hold an alternative index fund or combination of indexes. |
Is this actually true? I mean, the fund-of-funds not being eligible for the foreign tax credit is true, but is it truly preferable for a taxable investor to not hold this fund because of that? As Ken mentions in the Foreign tax credit article: Note that taxable shareholders of these funds do receive an implicit deduction for foreign taxes paid. Form 1099-DIV Box 6 is $0, but the lost foreign taxes are not included in Box 1a. So if someone is in the 28% tax bracket, don't they then pay 28% taxes on the extra dividends listed in box 1a on their 1099-DIV? So for the 0.15% that the Total International Stock Index fund loses by not being able to take the foreign tax credit, it really looks more like 0.108% to a 28% tax bracket investor. But, if you look at expense ratios, Total International Stock Index Fund is 0.27%, while the oft-mentioned FTSE ex-U.S. fund is 0.40%; a 0.13% difference, and one that seems to more than offset the 0.108% foreign tax credit effect. And, that's not even including the purchase fee of the FTSE fund. Am I missing something here, or is the Total International Stock Index Fund's foreign tax credit issue just way overstated and overemphasized? --CyberBob 14:35, 16 June 2008 (EDT)
Cyberbob,
I don't think you are missing anything huge. Just to expand a bit:
Assumptions
- QDI percentage: 80%
- Dividend yield: 2.0%
- ER for VGTSX: 0.27%
- ER for VFWIX: 0.40%
- Fedral income tax bracket: 28%
- State income tax bracket: 0%
- FTC for Total International, if it were eligible: 0.15%
I did not take the purchase fee into account. I don't know how to factor that in as you get a tiny slice of the purchase fee from other investors joining after you.
Total International held in a taxable account: Its after-tax dividend yield is:
(0.02-0.0015)*(0.80*(1-0.15)+0.20*(1-0.28)) = .01524400 = 1.52%
FTSE All-World ex-US held in a taxable account: Its after-tax dividend yield is:
0.02*(0.80*(1-0.15)+0.20*(1-0.28)) = .016480 = 1.65%.
So, FTSE All-World ex-US would be ahead by 0.13%.
Right now, 0.13% is incidentally the same as the difference in the expense ratio between two funds. If FTSE All-World ex-US becomes cheaper as it grows, I think it becomes more attractive.PiperWarrior 15:16, 16 June 2008 (EDT)
- Nice expansion, as I didn't take into account qualified dividends. I guess the reason I even brought up this question is that the forum had another "which international fund" post recently and people jumped all over the foreign tax credit like it was some kind of investing holy grail. I don't think most people really have a firm understanding of the foreign tax credit or how much impact it has. And that impact is usually minimal, or, as your calculations show, that impact may even be zero (or less) if it's canceled out by a higher expense ratio. I just though I'd bring it up, as maybe we could somehow explain the foreign tax credit, and its impact, in greater detail somehow. Even things on the wiki, such as the quote "The foreign tax credit is a consideration which clearly favors FTSE All-World ex-US Index over Total International Stock Index for taxable investors." from the FTSE article seems to imply that the game is over once the foreign tax credit comes into play. But it isn't that cut and dried. I think people may be undeservedly putting too much emphasis on the foreign tax credit. --CyberBob 16:27, 17 June 2008 (EDT)
Bob, the wiki does have a Foreign tax credit article. Regarding the sentence you quoted, which I may have written (I don't remember): It's a perfectly true statement. The FTC is a consideration favoring the FTSE fund. Whether it's a big consideration is a different question. - Ken Schwartz 16:50, 17 June 2008 (EDT)
