Vanguard’s three tax-managed funds are specifically designed for taxable accounts. The funds attempt to avoid capital gains distributions and to provide tax advantaged income distributions. We shall examine the capital gains environment of the funds; the dividend income distributions; fund …

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Vanguard issues annual reports for the firm’s US stock index funds on December 31 of each year.[1] The reports provide information that can highlight some of the underlying conditions affecting a fund’s future capital gains distribution outlook; an indication of …

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Vanguard issues annual reports for the firm’s US CRSP Mega Cap index funds on October 31 of each year.[1] These funds are available in exchange-traded and institutional shares, and are primarily targeted to the financial planner, brokerage, and institutional market.The …

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When looking at a specific investment (e.g. asset class or an entire portfolio), we tend to analyze historical returns with the help of the Compound Annualized Growth Rate (CAGR). Although useful, the CAGR only captures the growth of an initial investment left alone for a long period of time. In practice, most investors regularly add to their savings (accumulation phase) or withdraw from their savings (e.g. retirement).

One might think that the CAGR associated with an investment remains a valuable metric for such accumulation/retirement phases, but fact is this metric doesn’t capture the powerful side-effects of the sequences of annual returns, which do become significant when money is added or withdrawn on a regular basis. This article discusses a metric more suitable to the accumulation phase, then compares to metrics used for retirement.

Vanguard issues annual reports for the firm’s US S&P and Russell index funds on October 31 of each year.[1] The reports provide information that can highlight some of the underlying conditions affecting a fund’s future capital gains distribution outlook; an …

Under the hood – Vanguard US S&P and Russell index funds in 2019 Read More »

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James M. Dahle, M.D., FACEP, is a full-time emergency room doctor, entrepreneur, writer, speaker, father, and is an inspiration to thousands of young doctors, dentists, lawyers, and other professionals who are seeking straight answers to personal finance questions. He started …

Episode 019 Bogleheads on Investing, guest Dr. Jim Dahle, host Rick Ferri Read More »

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Vanguard bond index funds and Vanguard’s tax-exempt bond funds engage in cross trading of bond securities, and in the case of bond index funds, in-kind purchases and redemptions. Both of these trading mechanisms serve to reduce trading costs. [1] Bond …

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This article is the third part of a study looking at global and domestic investing from the perspective of local investors.
In Part 1 and Part 2, we took the position of a local investor in one of 16 countries of interest and we explored opposite positions of either investing 100% global or 100% domestic. In Part 2, it became clear that global bonds tend to hurt local investors, while global stocks definitely helped for most scenarios. It is now time to try a middle ground and study portfolios mixing global and domestic stock investments. We will notably look at the mitigation this could bring to the countries having fared the worst, but also consequences for countries having fared better. Of course, it is easy to look at such numbers in hindsight and draw hasty conclusions, so let’s keep in mind that nobody could have predicted winners and losers ahead of time.

Many North American investors tend to look carefully at historical returns in the US and in Canada and draw various conclusions. Occasionally, some references are made to Japan and the UK, but few people look any further. The world changes though. The UK was undoubtedly the world economic leader at the end of the 19th century, while the US clearly dominates nowadays. Japan was on a roll in the 80s, with a bigger market capitalization than the US at some point, and yet badly faltered since then. The world changes in ways we cannot predict and it would be naive to assume that a few decades in the future, the situation will be similar to today’s environment. One thing we can do to get some perspective is to analyze what happened in a larger sample of economies.

This article focuses on the historical returns from 16 developed countries over the past 50 years, looking from the perspective of a local investor and assuming a strong home country bias to begin with (i.e. solely using domestic stocks and domestic bonds). We will look at more diversified portfolios mixing domestic and global investments in Part 3.

Bogleheads know the power of diversification. And yet many such investors (including John Bogle himself!) are reluctant to diversify beyond domestic investments.

This raises an interesting question. Could one simply invest in the world, using global stocks and global bonds? And if this proves unsatisfying, is there a proper middle ground between domestic and global allocations?

This article is the first part of a study looking at global and domestic investing from the perspective of local investors.