Would you buy Total World index if it had Admiral Shares?

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warner25
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Re: Would you buy Total World index if it had Admiral Shares

Post by warner25 » Wed Jan 14, 2015 7:44 am

bonn and Newbvestor,

You are making the standard argument for a global portfolio: diversification is good, concentrated bets are bad. Got it, and I'm not saying that's wrong. But IlliniDave's point was not about expecting the US market to perform better than that of Germany, Italy, Russia, or wherever.

His point was that it's relatively recent that a person can invest globally, and this may not always continue. Today people of country X are free to invest in country Y, and vice versa. But if tensions (i.e. protectionism, breakdown of trade, economic sanctions, cold war, etc.) develop between countries X and Y, then investors from each may suffer (due to assets being frozen or confiscated) even if markets in both countries continue to deliver strong returns.

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papito23
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Re: Would you buy Total World index if it had Admiral Shares

Post by papito23 » Wed Jan 14, 2015 8:23 am

nisiprius wrote: (I'm stating this in gray, to symbolize a "gray area" and in hopes of not starting a round of a familiar and sterile debate here. As to global cap-weighting itself, for the record, my personal $0.02 is that the importance of international equities is wildly overstated, any "diversification" effect is weak, and therefore it hardly matters how much international you have because it just doesn't do anything all that different from domestic. Yes, just like active funds or dividend stocks or value tilts or anything different from a total market index fund, the periods of chance outperformance and underperformance can last long enough to get people excited and apparently "prove" things that mysteriously vanish later).
Just because it's gray doesn't mean I can't find it ;)

Since we're on the topic of diminishing returns for brain-effort invested, I went back to our discussion about the search for the oh-so-perfect blend of US+Int'l...

We showed that someone with $250K in stocks (as of 7/30/14) who had tilted 10% in the wrong direction (towards international) for 15 years ended up four tenths of 1% poorer.

Since I'm looking at upgrading the MPG of my fleet, let's consider another common financial decision as a comparison. Let's imagine that 15 year ago the investor instead said, "Nah, instead of taking a coin-flip guess as to which fund does better, I'll get serious about driving efficiency. I'll pump up my car's tires, stop going through drive-thru's, drive like grandma, learn to read traffic and coast properly, unload all the junk in the trunk, change my engine air filter, etc." Our investor permanently boosted his 20-mpg gas guzzler to a slightly less guzzling 24.5-mpg vehicle, and invested the difference in a savings account bearing 2% a year.

Ok, I crunched the numbers ($3.50/gal gas, 12,000miles/yr)... changing his driving behavior was a guaranteed savings >3x greater than having guessed the tilt 10% in the direction of the winning fund.
A thing is right when it tends to preserve the integrity, stability, and beauty of the biotic community. It is wrong when it tends otherwise. -Aldo Leopold's Golden Rule of Ecology

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Noobvestor
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Re: Would you buy Total World index if it had Admiral Shares

Post by Noobvestor » Thu Jan 15, 2015 9:23 pm

warner25 wrote:bonn and Newbvestor,

You are making the standard argument for a global portfolio: diversification is good, concentrated bets are bad. Got it, and I'm not saying that's wrong. But IlliniDave's point was not about expecting the US market to perform better than that of Germany, Italy, Russia, or wherever.

His point was that it's relatively recent that a person can invest globally, and this may not always continue. Today people of country X are free to invest in country Y, and vice versa. But if tensions (i.e. protectionism, breakdown of trade, economic sanctions, cold war, etc.) develop between countries X and Y, then investors from each may suffer (due to assets being frozen or confiscated) even if markets in both countries continue to deliver strong returns.
OK, I see the point better now and it is an interesting one - I wasn't really following and appreciate the explanation. That said, in a world where any market that is large enough in size ceases relations *entirely* with the United States, well, I can't quite picture it. I took the liberty of copy/pasting the countries in Vanguard's global index fund that represented 1% or more of the global market:

United States 51.7%
Japan 7.6%
United Kingdom 7.2%
Canada 3.6%
France 3.0%
Switzerland 3.0%
Germany 2.9%
Australia 2.5%
China 1.9%
Korea 1.5%
Taiwan 1.4%
Hong Kong 1.2%
Spain 1.2%
India 1.1%
Sweden 1.0%
Brazil 1.0%

On that list I could see one or two that could have that kind of falling out, each representing at most a few percent. If Japan, the UK, Canada, France, etc... stopped doing business with the US and froze holdings, etc..., I think that would make a case for holding more Treasuries or gold or cash or guns or something, not US stocks. There is also a country or two right now that don't quite make this list that are stirring some trouble and which have been on the wrong end of US sanctions but which hasn't cut out US investors as yet. Anyway, can't go further without getting political ;)

Either way, I return to my core philosophy (reflected in the Larry quote currently in my signature line) - I don't know the future, so I spread my bets and take what the markets give me.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

tj
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Re: Would you buy Total World index if it had Admiral Shares

Post by tj » Fri Jan 16, 2015 3:54 pm

I know when VT first came out, folks were hesitant to use it because of low volume vs VTI and VSUX and the bid/ask spread...is that still relevant?

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Re: Would you buy Total World index if it had Admiral Shares

Post by Cash » Sat Jan 17, 2015 7:59 am

tj wrote:I know when VT first came out, folks were hesitant to use it because of low volume vs VTI and VSUX and the bid/ask spread...is that still relevant?
No.

https://advisors.vanguard.com/VGApp/iip ... daskspread

bonn
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Re: Would you buy Total World index if it had Admiral Shares

Post by bonn » Mon Jan 26, 2015 4:15 am

warner25 wrote:bonn and Newbvestor,

You are making the standard argument for a global portfolio: diversification is good, concentrated bets are bad. Got it, and I'm not saying that's wrong. But IlliniDave's point was not about expecting the US market to perform better than that of Germany, Italy, Russia, or wherever.

His point was that it's relatively recent that a person can invest globally, and this may not always continue. Today people of country X are free to invest in country Y, and vice versa. But if tensions (i.e. protectionism, breakdown of trade, economic sanctions, cold war, etc.) develop between countries X and Y, then investors from each may suffer (due to assets being frozen or confiscated) even if markets in both countries continue to deliver strong returns.
This is political risk that everyone agrees is part of a world portfolio and that I even specifically mentioned in my response. It's also part of a concentrated home-country bet. It's true that political risk can be greater for non-citizens, but even political risk can be diversified, in that e.g. a US against the entire world war is unlikely to happen. Currency risk seems more systemic than foreign political risk in that way. Though it does depend on where your citizenship lies.

tj
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Re: Would you buy Total World index if it had Admiral Shares

Post by tj » Tue Jan 27, 2015 8:39 pm

Ive actually now gone to VTWSX entirely for my stock allocation of my portfolio. I expect to the expense ratio to go down as assets grow. I expect Admiral Shares to appear eventually.


To me, it just doesn't make sense to avoid companies like Shell, Nestle, Unilever etc while having 'extra' exposure to Apple, Exxon etc. I like that I'm invested in basically all currencies. As a 29 year old, this seems the way to go. Am I missing out on some foreign tax credit in my Roth IRA? Sure, but, I'm also not paying income taxes on the dividends, so it's kind of a wash.

Right now, most of my portfolio is in tax advantaged accounts, so I'm not worried about having capital gains if I want to go exclusively domestic in later years of life (though that seems unlikely).

SteveB3005
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Re: Would you buy Total World index if it had Admiral Shares

Post by SteveB3005 » Tue Jan 27, 2015 8:57 pm

After years of tilting, it's been my equity tool of choice in ETF form for three years. I'm not going to create a taxable event with my value and small funds, but all new money and tax loss harvesting moves, funnel back into VT.

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fortyofforty
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Re: Would you buy Total World index if it had Admiral Shares

Post by fortyofforty » Tue Jan 27, 2015 10:55 pm

I wish it did. It's still my favorite stock fund, because of Boglehead principles, though. Come on, Vanguard, how about an Admiral Fund?
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

Ignatious P. Daily
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Re: Would you buy Total World index if it had Admiral Shares

Post by Ignatious P. Daily » Wed Jan 28, 2015 7:15 am

If you look at the history of VT, the plan for the fund becomes self-evident. When it was first launched it held fewer than 2500 securities and was a large-cap only fund. Today it holds 6,894 securities and is all-cap. So the trend is to use increases in NAV to broaden diversification to the point that the fund lives up to its name. This leads to the question of when this trend will stop and by extension, because this is Vanguard, when further NAV increases will lead to lower expenses and Admiral shares. My SWAG: VTI (3,790 holdings) + VXUS (5,514 holdings) = 9,304 - VT (6,894 holdings) = 2,410 delta. This delta is represented almost entirely by smaller capitalization companies with little global market share. I would expect that Vanguard continue to expand holdings within VT until this gap is closed, followed by a period of reduced ER's - likely including admiral shares. My guess is that this transition is 2-5 years away.

tj
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Re: Would you buy Total World index if it had Admiral Shares

Post by tj » Wed Jan 28, 2015 10:56 am

Ignatious P. Daily wrote:If you look at the history of VT, the plan for the fund becomes self-evident. When it was first launched it held fewer than 2500 securities and was a large-cap only fund. Today it holds 6,894 securities and is all-cap. So the trend is to use increases in NAV to broaden diversification to the point that the fund lives up to its name. This leads to the question of when this trend will stop and by extension, because this is Vanguard, when further NAV increases will lead to lower expenses and Admiral shares. My SWAG: VTI (3,790 holdings) + VXUS (5,514 holdings) = 9,304 - VT (6,894 holdings) = 2,410 delta. This delta is represented almost entirely by smaller capitalization companies with little global market share. I would expect that Vanguard continue to expand holdings within VT until this gap is closed, followed by a period of reduced ER's - likely including admiral shares. My guess is that this transition is 2-5 years away.

They are already reducing the ER's. VTWSX is 30bps. It also used to have a purchase and redemeption fee.

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galeno
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Re: Would you buy Total World index if it had Admiral Shares

Post by galeno » Wed Jan 28, 2015 11:04 am

The cheapest way to make VT = 50% SCHB + 40% SCHF + 10% SCHE. ER = 0.07%.

Second cheapest VT = 50% VTI + 50% VXUS. ER = 0.11%.

We decided that paying 8-11 BPS more for VT is worth the simplicity of letting the FTSE all-world equity index choose our USA / non-USA / EM allocations.

Our current port looks like this: 60% VT + 35% (offshore) PIGIX + 5% CASH. TER = 0.7%

Our future port will look like this: 60% VWLD (=VT) + 20% IUAG (=AGG) + 15% CORP (=PIGIX) + 5% CASH. TER = 0.3%.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.13%. Term = 34 yr. FI Duration = 6.2 yr. Portfolio survival probability = 95%.

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fortyofforty
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Re: Would you buy Total World index if it had Admiral Shares

Post by fortyofforty » Thu Jan 29, 2015 10:57 am

From Vanguard:
Your suggestion to offer an Admiral Shares class for Vanguard Total World Stock Index Fund Investor Shares (VTWSX) has been forwarded to the Vanguard Brokerage management team for review and consideration. We welcome your feedback and hope you'll continue to share your thoughts on how we can further enhance our products and services and serve you better.
We will see.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

tj
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Re: Would you buy Total World index if it had Admiral Shares

Post by tj » Sun Feb 01, 2015 10:26 pm

My 401(k) does not have Total World, but it does have DFA Global Equity. It's clearly diversified with over 11,000 stocks, though obviously not allocated the same as Total World:

http://us.dimensional.com/media/documen ... gs_232.pdf

I may consider this, though not sure if Nationwide will allow the purchase to go through.

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Re: Would you buy Total World index if it had Admiral Shares

Post by FredL » Tue Feb 03, 2015 3:32 pm

Is there anyone know how to calculate the difference of return of 0.14% er? I think it is very small, probable $20 a year for $10,000. I think convenience is more important than the small difference.

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fortyofforty
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Re: Would you buy Total World index if it had Admiral Shares

Post by fortyofforty » Tue Feb 03, 2015 4:19 pm

FredL wrote:Is there anyone know how to calculate the difference of return of 0.14% er? I think it is very small, probable $20 a year for $10,000. I think convenience is more important than the small difference.
It's partly the principle of the issue, to me. But you're probably right. I get the whole world, without worrying if foreign stocks should be 50%, 45%, 55%, or somewhere around there. It's just done. I am a bit confused as to why we're missing thousands of stocks compared with the Total Stock and Total International, though. Strange.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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Toons
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Re: Would you buy Total World index if it had Admiral Shares

Post by Toons » Tue Feb 03, 2015 4:19 pm

Yes :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

tj
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Re: Would you buy Total World index if it had Admiral Shares

Post by tj » Tue Feb 03, 2015 10:56 pm

fortyofforty wrote:
FredL wrote:Is there anyone know how to calculate the difference of return of 0.14% er? I think it is very small, probable $20 a year for $10,000. I think convenience is more important than the small difference.
It's partly the principle of the issue, to me. But you're probably right. I get the whole world, without worrying if foreign stocks should be 50%, 45%, 55%, or somewhere around there. It's just done. I am a bit confused as to why we're missing thousands of stocks compared with the Total Stock and Total International, though. Strange.

Not enough assets to justify it. As previously mentioned, I expect that to change as the fund grows. But, if you click the link I posted to the DFA Global Equity holdings...those extra few thousands of stocks hardly have any allocation towards them. You wonder if the added cost to hold such tiny holdings are worth it.

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fortyofforty
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Re: Would you buy Total World index if it had Admiral Shares

Post by fortyofforty » Tue Feb 03, 2015 11:06 pm

tj wrote:But, if you click the link I posted to the DFA Global Equity holdings...those extra few thousands of stocks hardly have any allocation towards them. You wonder if the added cost to hold such tiny holdings are worth it.
Ah, the eternal S&P 500 versus the Total Stock Market question, writ global. I don't have the answer to that one.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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