International Index Fund Choice

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Mr. Potter
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International Index Fund Choice

Post by Mr. Potter »

I'm looking to add to my international allocation in my taxable account Currently I hold VTIAX (total international stock index) but was thinking about adding VFWAX (all world ex-US index) Both funds look and preform very similar but VTIAX holds 6,100 funds while VFWAX holds 2,600. Am I splitting hairs or does anyone here feel strongly about one over the other? My thinking is if I ever need to sell it may be easier to just sell all of one holding. The funds are coming from my EM fund which is way too big and I would rather put some of this money in the market.
DSInvestor
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Re: International Index Fund Choice

Post by DSInvestor »

IMO, Total International Stock VTIAX and FTSE All World ex-US VFWAX are both fine to hold as your core international stock fund. In fact, I use them as tax loss harvest pairs in my taxable account. As you noted, VTIAX has significantly more stocks and as such, it would not be substantially identical to VFWAX for wash sale purposes. You can start with either fund and if you get an opportunity to harvest tax losses, exchange to the other.

Both funds have an allocation to emerging markets.
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ruralavalon
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Re: International Index Fund Choice

Post by ruralavalon »

1stWorldproblems wrote:I'm looking to add to my international allocation in my taxable account Currently I hold VTIAX (total international stock index) but was thinking about adding VFWAX (all world ex-US index) Both funds look and preform very similar but VTIAX holds 6,100 funds while VFWAX holds 2,600. Am I splitting hairs or does anyone here feel strongly about one over the other? My thinking is if I ever need to sell it may be easier to just sell all of one holding. The funds are coming from my EM fund which is way too big and I would rather put some of this money in the market.
Either fund will be fine.

What is missing in Vanguard All-World Ex-US Fund Admiral Shares (VFWAX) is stocks of international small-cap companies, a fairly minor omission in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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arcticpineapplecorp.
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Re: International Index Fund Choice

Post by arcticpineapplecorp. »

They look pretty similar in many ways (and probably are)...the returns ytd are the same, expense ratios the same, percent invested in emerging markets, etc. But the number of stocks as you mentioned are different. One other difference is in the "holdings style" and "ownership zone". I captured these images from morningstar. To some (or many) it might not seem like a big deal and may not make a big difference over time, but I thought it was worth mentioning so you can make an informed decision:

First VFWAX (FTSE All world ex-us), from:
http://portfolios.morningstar.com/fund/ ... ture=en-US

Image


Next, VTIAX (Total international stock market), from:
http://portfolios.morningstar.com/fund/ ... ture=en-US

Image


So, what's the difference? The FTSE has no small and less mid cap than total international stock market. Again, not a huge difference, but it's something. If I had a choice given the expense ratios are identical, I'd want VTIAX (total international) because it's more "total". And because I prefer simplicity...that is I prefer one fund to two of the same (essentially).
Last edited by arcticpineapplecorp. on Sun Jun 25, 2017 6:52 pm, edited 1 time in total.
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retiredjg
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Re: International Index Fund Choice

Post by retiredjg »

If you are already holding Total Stock, adding on the FTSE fund does not add anything. In fact, it is less complete so you'd be headed in the wrong direction.

There are a couple of pages in the Wiki that discuss Vanguard's international funds.
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iceport
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Re: International Index Fund Choice

Post by iceport »

1stWorldproblems wrote:I'm looking to add to my international allocation in my taxable account Currently I hold VTIAX (total international stock index) but was thinking about adding VFWAX (all world ex-US index) Both funds look and preform very similar but VTIAX holds 6,100 funds while VFWAX holds 2,600. Am I splitting hairs or does anyone here feel strongly about one over the other? My thinking is if I ever need to sell it may be easier to just sell all of one holding. The funds are coming from my EM fund which is way too big and I would rather put some of this money in the market.
This post is confusing. What is your asset allocation?

If you are simply looking to reduce the size of your emergency fund, I recommend you simply invest the funds according to your asset allocation. Maybe the best way would be to add to whatever positions are below their target allocations. If you need to top up your broad international index fund position, I recommend just adding to your existing (and slightly more diversified) international fund. There seems to be no good reason to add another index fund to the taxable account that serves an identical function in your portfolio as the existing index fund.

Or are you looking to change your asset allocation, and boost your international allocation (now that it has had a good six-month run)? You should be very cautious about this, and have a clear understanding of exactly why you want to change your asset allocation at this point in time.

Even if this is your intention, there is absolutely no need to introduce a new fund that provides essentially the same market exposure as the existing fund.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Mr. Potter
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Re: International Index Fund Choice

Post by Mr. Potter »

My AA is:
45% US Stocks
15% International Stocks
36% Bonds (mostly US bonds)
4% cash
The 4% winds up being about 18 months of expenses so it's time to cut back. I was just thinking it may be easier to just sell all of one position in the event I needed more cash. This move will still keep me within 1% +/- of my AA
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iceport
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Re: International Index Fund Choice

Post by iceport »

Great, that all sounds good! I still don't see an advantage to using a new fund. Is your cost basis set to specific identification? If so, you should be all set.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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