Which is better for taxable account: VXUS or VEU?

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Houston101
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Which is better for taxable account: VXUS or VEU?

Post by Houston101 » Mon Mar 14, 2011 7:41 am

I have seen the threads here:

http://www.bogleheads.org/forum/viewtopic.php?t=67790

http://www.bogleheads.org/forum/viewtopic.php?t=70171

I want to buy and hold an etf for the long run in an taxable account. Would you guys suggest that VXUS has a higher probability of being kept open and being improved (lower expenses etc)?

What etf (VXUS or VEU) would you guys recommend?

Please advise.

P.S. I called Vanguard too but she just read me the details of the ETF and wouldn't recommend either.

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kenyan
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Post by kenyan » Mon Mar 14, 2011 1:26 pm

VXUS has (ever so slightly) lower expenses, and now includes small-cap stocks, which VEU omits.

I don't have any idea how the funds will change in the future.

texas_archer
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Post by texas_archer » Mon Mar 14, 2011 1:34 pm

I was going to do the same as you and purchase VXUS for a longterm buy and hold (adding to it monthly). Ive since decided to just open a Vanguard account and purchase the Fund Version of VXUS (VTIAX). This way I don't have to worry about a discount/premium value when buying.

livesoft
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Post by livesoft » Mon Mar 14, 2011 1:39 pm

There is no way to know "which is better" at this point in time.

VXUS:
Pros- total int'l ex-US includes developed, emerging, large and some small caps. Expense ratio is reported to be 0.20%.
Cons - not much daily trading volume, so average bid/ask spread is 0.07. Novices will probably get poor prices.

VEU - Same as VXUS, but no small caps. Get small caps with VSS. 15-times the trading volume, so average bid/ask spread is 0.01. Expense ratio reported to be 0.22%.

Average bid/ask spread from Vanguard: https://advisors.vanguard.com/VGApp/iip ... daskspread

If you want to overweight small-cap, then VEU is better because you will be buying VSS anyways.

If you don't want to be bothered with bid/ask spread, limit orders, and other nuances of ETFs, then buy the mutual fund: VGTSX or VTIAX is clearly better than VFWIX.
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kenyan
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Post by kenyan » Mon Mar 14, 2011 2:45 pm

livesoft wrote: If you don't want to be bothered with bid/ask spread, limit orders, and other nuances of ETFs, then buy the mutual fund: VGTSX or VTIAX is clearly better than VFWIX.
Heh...this can be a bother. I'm learning (by fire) about ETFs using my Roth account currently; just a small portion of our portfolio overall. I've already made a few blunders that could've been costly with a large portfolio, but thankfully have only been costing me $10-20 each since the account is small. I consider it the price of learning.

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Houston101
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Post by Houston101 » Mon Mar 14, 2011 6:41 pm

texas_archer wrote:purchase the Fund Version of VXUS (VTIAX). This way I don't have to worry about a discount/premium value when buying.
Yeah but you have to deal with capital gains/distributions with VITAX even you are only accumulating and didn't sell anything. If it wasn't for this drawback I would want to do the same.

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Post by grabiner » Mon Mar 14, 2011 6:44 pm

Houston101 wrote:
texas_archer wrote:purchase the Fund Version of VXUS (VTIAX). This way I don't have to worry about a discount/premium value when buying.
Yeah but you have to deal with capital gains/distributions with VITAX even you are only accumulating and didn't sell anything. If it wasn't for this drawback I would want to do the same.
You do that with an ETF as well, and it is less convenient. With a mutual fund, you can automatically reinvest dividends in the fund if you want; with an ETF, the dividend has to go to your money-market fund, and you will need another transaction when you are ready to reinvest dividends.
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livesoft
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Post by livesoft » Mon Mar 14, 2011 7:05 pm

^ Almost all brokers will automatically re-invest distributions from ETFs back into the ETF for no cost.
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Houston101
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Post by Houston101 » Tue Mar 15, 2011 7:58 am

grabiner wrote:
Houston101 wrote:
texas_archer wrote:purchase the Fund Version of VXUS (VTIAX). This way I don't have to worry about a discount/premium value when buying.
Yeah but you have to deal with capital gains/distributions with VITAX even you are only accumulating and didn't sell anything. If it wasn't for this drawback I would want to do the same.
You do that with an ETF as well, and it is less convenient. With a mutual fund, you can automatically reinvest dividends in the fund if you want; with an ETF, the dividend has to go to your money-market fund, and you will need another transaction when you are ready to reinvest dividends.
I am sorry, I should have been more clear. I was referring to the the tax gains one has to report if you are holding a mutual fund even if there are no dividends just because of the redemptions or shraes being sold by the mutual fund it self but this headache is avoided by the ETF because of the unique structure of the ETF's.

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Post by hsv_climber » Tue Mar 15, 2011 9:28 am

Houston101 wrote: I am sorry, I should have been more clear. I was referring to the the tax gains one has to report if you are holding a mutual fund even if there are no dividends just because of the redemptions or shraes being sold by the mutual fund it self but this headache is avoided by the ETF because of the unique structure of the ETF's.

At Vanguard there is no difference between ETF & Mutual Fund, since ETF shares are just different share classes of the same funds.
So, if your mutual funds would have capital gains then ETF would have them too. VSS had capital gains over the last 2 years.

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Re:

Post by mojorisin » Thu Dec 06, 2012 9:50 pm

kenyan wrote:
livesoft wrote: If you don't want to be bothered with bid/ask spread, limit orders, and other nuances of ETFs, then buy the mutual fund: VGTSX or VTIAX is clearly better than VFWIX.
Heh...this can be a bother. I'm learning (by fire) about ETFs using my Roth account currently; just a small portion of our portfolio overall. I've already made a few blunders that could've been costly with a large portfolio, but thankfully have only been costing me $10-20 each since the account is small. I consider it the price of learning.
What "blunders" did you make when using ETF's in a Roth account?

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kenyan
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Re: Which is better for taxable account: VXUS or VEU?

Post by kenyan » Fri Dec 07, 2012 1:26 am

Wow, blast from the past. You're asking about a post I made nearly 2 years ago. In any case, I was simply getting a little caught up by the emotions of real-time trading and limit orders, rather than just telling my mutual fund to buy/sell and letting it execute at the end of the day. For example, setting a limit order, seeing the price rise over the next couple of days, capitulating at the new price, only to see the price drop to the level of my original limit order over the next few days.
Retirement investing is a marathon.

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