2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

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bigskydream
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2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by bigskydream » Fri Apr 26, 2019 9:35 am

I am preparing to lump sum into the market a large seven figure sum and have already decided that I would like to have roughly 2/3 US and 1/3 International exposure (so this is not a “to international or not to international” question). I love simplicity so I am tempted to just put it all in VTWAX and never have to worry about re-balancing, fiddling with my US vs. Int allocation, etc. Am I missing anything in terms of why the two fund approach would be better than just VTWAX? Thank you.

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Mountain Doc
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by Mountain Doc » Fri Apr 26, 2019 9:44 am

I like Total World for the reasons you stated.

If this is in a taxable account, the benefit of splitting into two funds is you can independently tax-loss harvest the different asset classes. The same could be said for further splitting the two funds into their components (developed/emerging, large/mid/small) for even more TLH opportunities, so everyone has to decide for themselves where to draw the line between simplicity and tax optimization.

Personally, I would just use VTWAX.

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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by Artsdoctor » Fri Apr 26, 2019 9:53 am

Yes, you are missing two things.

If your goal is to have 67% domestic, then VTWAX will not be consistent with that goal since it contains less than 54% domestic.

Additionally, if you're going to be investing a 7-digit sum and making future contributions, then I'm going to guess that you're going to want to be mindful of tax efficiency. If you invest in VTSAX and VTIAX individually, you may be able to tax-loss harvest when appropriate and capture those losses as needed. I understand the desire for simplicity and tax-loss harvesting may not be something that you're interested in. I also understand that tax-loss harvesting requires finding "similar" funds when necessary. But if taxes are an issue for you, you may want to consider which option would work out better for you from that vantage point.

(The above post beat me to the punch.)

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mhc
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by mhc » Fri Apr 26, 2019 9:54 am

The 2 fund approach allows you to have the ratio you are saying you want.

Do you know the ratio for the world fund?

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TierArtz
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by TierArtz » Fri Apr 26, 2019 10:00 am

Splitting the seven figure sum into VTSAX (2/3) and VTIAX (1/3) would result in slightly lower expenses due to the much lower ER for VTSAX. Total stock is 0.04%, Total International is 0.11%, and Total world is 0.10%. The difference on each $1M per year is $367.30 in favor of splitting. That's in addition to any tax savings generated through TLH. I'm the sort who bends over to pick up dropped pennies, so I'd split if it were me.

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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by carmonkie » Fri Apr 26, 2019 10:01 am

VTWAX would give you about 58% US / 42% Int, which would be off the target you are looking for (66/33). If you really want to stick to your target allocation then 2/3 Total US 1/3 Total international is the way to go. In my opinion being that far off would be a reason to re-rebalance. Since you are not slicing, 2 funds is really not a big deal to manage, new money goes to the fund that needs it.

**EDIT**
I just realized 58% is North America, which I assume includes Canada, so US Exposure is even less..
Last edited by carmonkie on Fri Apr 26, 2019 10:04 am, edited 1 time in total.

stan1
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by stan1 » Fri Apr 26, 2019 10:03 am

bigskydream wrote:
Fri Apr 26, 2019 9:35 am
I am preparing to lump sum into the market a large seven figure sum and have already decided that I would like to have roughly 2/3 US and 1/3 International exposure (so this is not a “to international or not to international” question).
Do you want 2/3 Domestic and 1/3 international [fixed] OR do you want world market weight which today is about 55% domestic to 45% international [varies with time] OR are they close enough that you don't think it will matter? Any of the three is valid. Just pick one. You won't know which was the optimal choice except in hindsight.

Personally with such a large amount in taxable I would choose to keep them separate for 1) lower expense ratios and 2) ability to tax loss harvest although that means you'll likely end up with more holdings that are not substantially identical. If simplicity is more important than either then Total World seems like a fine choice. I suppose you could tax loss harvest between Total World and Total Stock Market/Total International at the ratio of total world, too, so since you are buying near a market high there's a reasonable chance you'll end up with something other than what you start out with.

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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by mbasherp » Fri Apr 26, 2019 10:13 am

I utilize the same split of domestic to international. I like having the opportunity to TLH. I like that doing this separately rather than VTWAX + some VTSAX offers a lower overall expense ratio. I also find a 2:1 US:Intl ratio to be an elegant middle ground amongst all of the chatter on the subject.

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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by Wiggums » Fri Apr 26, 2019 10:17 am

I like having the funds separated too.

pdavi21
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by pdavi21 » Fri Apr 26, 2019 10:37 am

I like the weightings in VTWAX, but I like separating US/INTL for tax efficiency across multiple accounts (may not apply to you).

Take note, that the ETF ERs have not been updated, and VTI is 0.02% while VTSAX is 0.04%, for example.
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bigskydream
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by bigskydream » Fri Apr 26, 2019 10:54 am

Thanks all for the great feedback. I'm now inclined to go with the two fund approach for the tax reasons and also to get closer to my desired 2:1 ratio.

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nisiprius
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by nisiprius » Fri Apr 26, 2019 11:29 am

In Considerations for Investing in Non-US Equities, Christopher B. Philips of Vanguard writes--sensibly, I think--
  • Non-U.S. equities should be considered for inclusion in a domestic portfolio.
  • Although there is no right answer for all investors, empirical and practical considerations suggest a reasonable starting allocation to non-U.S. stocks of 20%, with an upper limit based on global market capitalization.
  • The exact allocation to non-U.S. equities will depend on the investor’s view regarding the short- and long-term trade-offs.
So, there's no shortcut to deciding what your own views are.

Here is the difference between the results of a $10,000 investment in Vanguard Total World at inception (portfolio 1), and an investment of 67% in Total [US] Stock Index, 33% Total International Stock index, rebalanced annually. What this tells me is not that more US "is" better, but that the difference between "33% international" and "Cap-weighted, roughly equal US/international" is meaningful, it would have made a noticeable difference. 2000-2009, of course, the difference would have been the other way around. If, to use Vanguard's terminology, your "views" are that you want 33% international, then I don't think you should settle for Total World, it is not a close substitute.

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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by renegade06 » Thu Oct 24, 2019 9:38 am

I am 70% VTSAX and 30% VTIAX. Would it make sense to add VTWAX as a third fund for a lump sum of $$ that I plan to invest or just continue to split it between VTSAX and VTIAX?

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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by Stinky » Thu Oct 24, 2019 9:59 am

bigskydream wrote:
Fri Apr 26, 2019 10:54 am
Thanks all for the great feedback. I'm now inclined to go with the two fund approach for the tax reasons and also to get closer to my desired 2:1 ratio.
This is a good decision.

While 2/3 - 1/3 has the effect of overweighting US relative to other countries, many Bogleheads do that.
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by 1789 » Thu Oct 24, 2019 10:49 am

Wiggums wrote:
Fri Apr 26, 2019 10:17 am
I like having the funds separated too.
Me too if I would have international.
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Re: 2/3 VTSAX and 1/3 VTIAX OR simply VTWAX?

Post by UpperNwGuy » Thu Oct 24, 2019 1:22 pm

renegade06 wrote:
Thu Oct 24, 2019 9:38 am
I am 70% VTSAX and 30% VTIAX. Would it make sense to add VTWAX as a third fund for a lump sum of $$ that I plan to invest or just continue to split it between VTSAX and VTIAX?
Continue to split it between the two.

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