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

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Day9
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Would you buy Total World index if it had Admiral Shares?

Post by Day9 » Wed Jun 19, 2013 3:23 pm

VTWSX and the ETF version VT are Vanguard's Total World stock index funds.

They are about 53% North America, 47% Rest of World

The only thing stopping me from making this my core stock holding, and maybe even my ONLY stock holding is that the expense ratio is 0.35% for the fund and 0.19% for the ETF. On the other hand Total-US VTSAX and VTI have 0.05% expense ratio and Total International is 0.16%.

So not only can you control your domestic-international allocation but no matter what allocation you choose you will pay lower fees.

My question for you is: How low would the expense ratio for Total World index fund have to be to get you to buy it? Is anyone else really tempted to own a 2-fund portfolio but those extra 30 basis points of expense ratios is stopping them? Does anyone already own some Vanguard Total World?

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

Post by Frengo » Wed Jun 19, 2013 4:06 pm

But Total World is automatically rebalanced in real time.
With an expense ratio of 0.19% the cost advantage for the 2-fund solution is peanuts.

I would keep it in mind as a way to harvest losses going around the wash sale rule

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

Post by dumbmoney » Wed Jun 19, 2013 4:08 pm

I don't know why anyone would want Total World (though some people clearly do). Since stocks rarely move between the U.S. index and international index, you aren't reducing turnover.
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Re: Would you buy Total World index if it had Admiral Shares

Post by nisiprius » Wed Jun 19, 2013 4:21 pm

And since it is cap-weighted, it shouldn't need rebalancing.

And neither should any portfolio holding Total Stock Market and Total International in proportion to their global cap-weighting.

That's one of the virtues of any cap-weighted index fund, apart from changes needed because of stocks entering or leaving the index.
Last edited by nisiprius on Wed Jun 19, 2013 4:43 pm, edited 1 time in total.
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Frengo
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Re: Would you buy Total World index if it had Admiral Shares

Post by Frengo » Wed Jun 19, 2013 4:28 pm

nisiprius wrote: And neither should any portfolio holding Total Stock Market and Total International in proportion to their global cap-weighting.
Sure. And when that changes VT is automatically rebalanced. With the US+INTL you have to do it yourself, assuming you know it has changed.

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

Post by InvestorNewb » Wed Jun 19, 2013 4:32 pm

Day9 wrote:My question for you is: How low would the expense ratio for Total World index fund have to be to get you to buy it?
I would be tempted to use Total World if it had an expense ratio of 0.11% - this is the average expense ratio for VTI + VXUS.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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

Post by momar » Wed Jun 19, 2013 4:36 pm

Frengo wrote:
nisiprius wrote: And neither should any portfolio holding Total Stock Market and Total International in proportion to their global cap-weighting.
Sure. And when that changes VT is automatically rebalanced. With the US+INTL you have to do it yourself, assuming you know it has changed.
No, you don't have to do anything yourself unless you are adding new contributions.
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FNK
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Re: Would you buy Total World index if it had Admiral Shares

Post by FNK » Wed Jun 19, 2013 4:39 pm

I suspect I'll go Total World by the time I retire (smaller stock side, no tilts).

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

Post by pastafarian » Wed Jun 19, 2013 4:45 pm

dumbmoney wrote:I don't know why anyone would want Total World (though some people clearly do). Since stocks rarely move between the U.S. index and international index, you aren't reducing turnover.
We own TWS as our ONLY equity fund. I've been keeping track of the number of stocks held each month. On 1/31/13 there were 4207 out of 7181 in the FTSE Global All Cap Index. 3/31/13 there were 4871 out of 7335; and on 5/31/13 it holds 4969 out of 7321. Total fund assets have grown slowly from $2.8B to $3.4B since the end of Jan. :beer

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

Post by nisiprius » Wed Jun 19, 2013 5:04 pm

Let's work through an example. All figures rough. Eyeball readings from this chart, which may not be a perfect match for the indexes Vanguard uses:

Image

In 2002, U. S. was 59% of world. Let's say you invested $5,900 into Total Stock and $4,100 into Total International.

Now by September 2007, the U. S. is only 47% of the world. So it needs to be only 47% of your holding.

Do you need to rebalance?

Image

According to Morningstar's growth charts, $10,000 invested into Total Stock and Total International at the start of 2002 would, by September 2007, have grown to $15,157.47 and $23,222.76 respectively.

So your two holdings would have grown to $8,943 and $9,521, respectively, for a total of $18,464

So, wonderful to speak, your holding of U.S. has now shrunk to $8,943/$18,464 = 48% of your holding... all by itself, no rebalancing, look, Ma, no hands.

(No, I don't know what the 1% discrepancy is. Could be inaccuracy reading off the chart, or could be some difference between the chart and the index Vanguard uses, or some subtle technical detail I don't know about).
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Re: Would you buy Total World index if it had Admiral Shares

Post by Epsilon Delta » Wed Jun 19, 2013 6:01 pm

nisiprius wrote:(No, I don't know what the 1% discrepancy is. Could be inaccuracy reading off the chart, or could be some difference between the chart and the index Vanguard uses, or some subtle technical detail I don't know about).
Over long periods of time a differences in the rates that stocks are added (e.g. IPOs) and removed (e.g. leveraged buyouts) from the different markets will change the proportions of the world market. I won't expect that to be detectable in your example but if you hold the US and International separately it's worth eyeballing every decade or so.

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

Post by gordo » Wed Jun 19, 2013 6:28 pm

Nisiprius, does that mean you're advocating allowing your US/Int'l equity ratio to float with the markets over time as opposed to re-balancing?

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

Post by IlliniDave » Wed Jun 19, 2013 6:57 pm

Day9 wrote:VTWSX and the ETF version VT are Vanguard's Total World stock index funds.

They are about 53% North America, 47% Rest of World

The only thing stopping me from making this my core stock holding, and maybe even my ONLY stock holding is that the expense ratio is 0.35% for the fund and 0.19% for the ETF. On the other hand Total-US VTSAX and VTI have 0.05% expense ratio and Total International is 0.16%.

So not only can you control your domestic-international allocation but no matter what allocation you choose you will pay lower fees.

My question for you is: How low would the expense ratio for Total World index fund have to be to get you to buy it? Is anyone else really tempted to own a 2-fund portfolio but those extra 30 basis points of expense ratios is stopping them? Does anyone already own some Vanguard Total World?

Thanks

The answer to the question in the subject line is no. The answer to the question in the body is were I inclined to own such a fund it would have to be about 1/3 the cost, other wise I'd make my own out of two funds.
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Re: Would you buy Total World index if it had Admiral Shares

Post by avalpert » Wed Jun 19, 2013 7:10 pm

gordo wrote:Nisiprius, does that mean you're advocating allowing your US/Int'l equity ratio to float with the markets over time as opposed to re-balancing?
You do realize that a Total World fund lets the US/Int'l equity ration float with the markets - that is what a total markets approach would demand. If you wanted to maintain a fixed US/International ratio the VTWSX isn't for you.

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

Post by connya » Wed Jun 19, 2013 7:59 pm

If I could fit all my equity in accounts with access to Total World, absolutely!

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

Post by Frengo » Wed Jun 19, 2013 8:05 pm

Isn't the single fund more tax efficient ?
Can compensate gains and losses, while two separate funds cannot use the other fund's losses to compensate their gains (and losses are not distributed)

I was wrong. Only new contributions need to be apportioned according to the present relative capitalization. Once the money one doesn't need to worry, as many pointed out.

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

Post by dharrythomas » Wed Jun 19, 2013 8:11 pm

It's the only fund we own in our taxable account. Expense ratio is falling as our account balance is growing. Admiral shares will be available soon enough and we won't have to pay capital gains tax to make the move.

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

Post by abuss368 » Wed Jun 19, 2013 8:31 pm

I would not.

I like the individual "Total" funds.

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

Post by Cash » Wed Jun 19, 2013 9:27 pm

It's my primary fund in taxable. I currently use the ETF (and really, at .19%, the ER argument loses any relevance) but am considering using the mutual fund for additional simplicity. The ER continues to fall, and admiral shares will likely come soon enough. To see how this will likely go, look back at the advice given several years ago. Back then, everyone thought it best to hold Europe, Pacific, etc. separately. Cheaper, more rebalancing and TLH opportunities, might want to overweight region X, etc. Now everyone touts the simplicity of Total International. Mark my words a few years hence: Total World is the next logical extension of the Boglehead philosophy. Indeed, it's perhaps even the conclusion, because taxes will prevent a one-fund solution from being the default option.

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

Post by SimpleGift » Wed Jun 19, 2013 9:53 pm

Cash wrote:Mark my words a few years hence: Total World is the next logical extension of the Boglehead philosophy.
This is an excellent point. As the cross-country correlation of stock markets around the world rises higher and higher, due to globalization and more closely integrated economies, the notion of individual country investing (including the U.S.) may seem increasingly quaint and irrelevant. At some point, we might have just one super asset class for stocks: global equities.

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

Post by pascalwager » Wed Jun 19, 2013 11:21 pm

I would really like the simplicity of TWS Admiral, but I would have reservations about sampling error–50% of the global companies are omitted. But It would be the ultimate in passive investing and adherence to financial investment theory. If VG used it in Life Strategy Moderate Growth (60/40 TWS/bonds), you could just "set it and forget it".

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

Post by nisiprius » Thu Jun 20, 2013 6:17 am

gordo wrote:Nisiprius, does that mean you're advocating allowing your US/Int'l equity ratio to float with the markets over time as opposed to re-balancing?
You're missing the point. My point is that "automatic rebalancing between U.S. and international" is not an advantage of using a Total World mutual fund, it's an advantage of choosing to cap-weight U.S. and international.

My point is that if your choice is to apportion your U.S. and international according to their relative capitalization in the total global market, then you do not need to rebalance. That particular allocation will maintain itself automatically with no action on your part.

If you want to hold steady at 20% international or 30% international or some fixed percentage, you will occasionally need to rebalance--recently, I had to sell domestic and buy international, for example.

If (for some reason) you wanted to hold steady at precisely 48.4% domestic, 51.6% international, you would occasionally need to rebalance.

If you want to hold in proportion to world capitalization, you never need to rebalance.

Again, assuming that global cap-weighting is your choice, you could, today (well, 5/31/2013) either

a) buy $10,000 of Total World, or
b) buy $4,840 of Total Stock Market Index and $5,160 of Total International Stock Index.

The point is that if you elect (b) you do not need to rebalance. The relative proportions of values of the two funds will change over time, but they change in exactly the way that the capitalization of the U. S. and the rest of the world's stock market capitalizations change.

One of the advantages of a cap-weighted index fund is that the holdings within the fund itself are almost perfectly self-rebalancing, so the fund managers do not incur high trading costs in constantly trading just to track the index.

Of course, someone who's accumulating by DCA, could find it convenient to make single purchases of Total World, rather than having to make separate purchases of two funds and have to keep checking the US/international proportions to know how to allocate the two purchases.

(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).
Last edited by nisiprius on Thu Feb 27, 2014 9:29 pm, edited 2 times in total.
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Re: Would you buy Total World index if it had Admiral Shares

Post by Cash » Thu Jun 20, 2013 6:37 am

Simplegift wrote:
Cash wrote:Mark my words a few years hence: Total World is the next logical extension of the Boglehead philosophy.
This is an excellent point. As the cross-country correlation of stock markets around the world rises higher and higher, due to globalization and more closely integrated economies, the notion of individual country investing (including the U.S.) may seem increasingly quaint and irrelevant.
Although some would use that in support of a U.S.-only argument: Why buy international if there's no diversification benefit?

I think there's another reason as to why it epitomizes the Boglehead philosophy: agnosticism. You are making no predictions as to which country will outperform or which direction currency risk will go (reminder: it runs both ways). You're simply investing in the global equities market according to each company's market capitalization.* Nothing more, nothing less.

*Of course, Total World still allows you to tilt, which I do in my own portfolio.
pascalwager wrote:If VG used it in Life Strategy Moderate Growth (60/40 TWS/bonds), you could just "set it and forget it".
Agreed. The underweighting of international is the main strike against the LifeStrategy funds for me.

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

Post by IlliniDave » Thu Jun 20, 2013 7:14 am

Cash wrote:
Simplegift wrote:
Cash wrote:Mark my words a few years hence: Total World is the next logical extension of the Boglehead philosophy.
This is an excellent point. As the cross-country correlation of stock markets around the world rises higher and higher, due to globalization and more closely integrated economies, the notion of individual country investing (including the U.S.) may seem increasingly quaint and irrelevant.
Although some would use that in support of a U.S.-only argument: Why buy international if there's no diversification benefit?

I think there's another reason as to why it epitomizes the Boglehead philosophy: agnosticism. You are making no predictions as to which country will outperform or which direction currency risk will go (reminder: it runs both ways). You're simply investing in the global equities market according to each company's market capitalization.* Nothing more, nothing less.

*Of course, Total World still allows you to tilt, which I do in my own portfolio.
pascalwager wrote:If VG used it in Life Strategy Moderate Growth (60/40 TWS/bonds), you could just "set it and forget it".
Agreed. The underweighting of international is the main strike against the LifeStrategy funds for me.
"Reversion to the mean" is what makes me leery of globalization. Maybe I pay too much attention to history history rather than just recent financial history. It could be we've reached some tipping point where we're on an inevitable path to a "one-world" culture, but throughout history cultures expand for a time then splinter apart only to expand again and fracture again. With free-market capitalism, maybe this time it's different. In the last 100 years we've had 2 "world wars" and a 40+ year "cold war" that would have substantially affected a "global" investor. It's rare to see data for the "ex-US" equity category going back earlier than the 1950s. These are things guys like Bogle probably remember very clearly having lived through them.

I don't shun non-US equities, there's great businesses and people everywhere, but I certainly tilt towards the home team. Probably over time I'll slowly increase my ex-US exposure if the last 50-60 years don't prove to be just a brief exception to the historic norm. And if/when I begin to expand (I'm in the 25-30% ex US range now) I'll likely be careful where additional allocation goes.

I know this is slightly off topic, but do those who follow a policy of (at least semi-strict) global market cap weighting for stocks, do you do the same for bonds (US vs. ex-US)? Between stocks and bonds? Seems like the same logic would apply, but bonds don't seem to enter the discussion. I've never seriously considered ex-US bonds, even when VG rolled them out.

Anyway, for those reasons I don't like the all-in-one "world" funds (plus at VG the expenses are unusually high). I'm happy with the total world ex-US index and the total stock market (US) index and dialing an allocation I'm comfortable with on my own for my "core" position. Cheaper too.
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Re: Would you buy Total World index if it had Admiral Shares

Post by asset_chaos » Thu Jun 20, 2013 4:32 pm

Cash wrote:Why buy international if there's no diversification benefit?
Which diversification matters? For diversification that reduces the standard deviation of your stock portfolio fluctuations, then the effect of non-US stocks may not be all that big because the US is such a large fraction already of total global stocks and the correlations are not small enough. (Btw, this luxury is available only to US persons.) On the other hand, even the US is sector tilted compared to the global market: heavy, for instance, in health technology and light in basic materials, e.g. mining and cement. (There's a Vanguard research note with a graph showing the difference for all the MSCI industry sector classifications that I'll try to link to when I'm home again.) An all-US portfolio is making sector bets compared to the global portfolio. How much this kind of diversification matters to an individual is up to them, though I suspect it would be better to make the decision consciously rather than defaulting to unconscious home country bias. And, of course, holding any amount of non-US, up to market weight, mitigates the extra risk of sector tilts.

Just to answer the original question, I already have total world as my core stock position. When admiral shares are introduced, mine will convert.
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Re: Would you buy Total World index if it had Admiral Shares

Post by G-Money » Thu Jun 20, 2013 4:39 pm

Day9 wrote:My question for you is: How low would the expense ratio for Total World index fund have to be to get you to buy it?
I'll say 0.10. I would not even consider it until its ER matched the aggregate ER of VTSAX/VTIAX. Also, it currently holds significantly fewer stocks than the combo, so even if the cost were the same, I'd likely consider the Total World fund to be inferior.

As it is, I'm overweight US (my US/ex-US split is 60/40), so I probably wouldn't bother with Total World anyway.
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Re: Would you buy Total World index if it had Admiral Shares

Post by weltschmerz » Thu Feb 27, 2014 1:58 pm

Looks like the expense ratio for Total World Index has gone down:

VTWSX: 0.30% (down from 0.35%)
VT: 0.18% (down from 0.19%)

Still not as cheap as the combination of Total Stock Market + Total International, but it's getting closer.

This is good news for those folks who value simplicity above all else.

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

Post by leonard » Thu Feb 27, 2014 2:03 pm

Day9 wrote:VTWSX and the ETF version VT are Vanguard's Total World stock index funds.

They are about 53% North America, 47% Rest of World

The only thing stopping me from making this my core stock holding, and maybe even my ONLY stock holding is that the expense ratio is 0.35% for the fund and 0.19% for the ETF. On the other hand Total-US VTSAX and VTI have 0.05% expense ratio and Total International is 0.16%.

So not only can you control your domestic-international allocation but no matter what allocation you choose you will pay lower fees.

My question for you is: How low would the expense ratio for Total World index fund have to be to get you to buy it? Is anyone else really tempted to own a 2-fund portfolio but those extra 30 basis points of expense ratios is stopping them? Does anyone already own some Vanguard Total World?

Thanks
I wouldn't - unless I was 100% tax advantaged.

Need them separate to put Int'l in taxable - to get the Foreign Tax credit benefit.
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Re: Would you buy Total World index if it had Admiral Shares

Post by steadyeddy » Thu Feb 27, 2014 2:18 pm

I figure that by the time I roll over my final 401k in 40ish years it will probably be to this fund. Hopefully by that time it will be as cheap as it is simple. Full disclosure: I'm incredibly lazy.

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

Post by rr2 » Thu Feb 27, 2014 2:29 pm

VTWSX is our only taxable holding. It would be nice if it had Admiral Shares. We like the simplicity it provides.

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

Post by telemark » Thu Feb 27, 2014 2:40 pm

No. Once you're reasonably diversified across asset classes, I'm not convinced that faithfully mirroring the exact market weights from day to day provides any measurable benefit. Is 47/53 really that different from, say 50/50?

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

Post by Calm Man » Thu Feb 27, 2014 9:27 pm

leonard wrote:
Day9 wrote:VTWSX and the ETF version VT are Vanguard's Total World stock index funds.

They are about 53% North America, 47% Rest of World

The only thing stopping me from making this my core stock holding, and maybe even my ONLY stock holding is that the expense ratio is 0.35% for the fund and 0.19% for the ETF. On the other hand Total-US VTSAX and VTI have 0.05% expense ratio and Total International is 0.16%.

So not only can you control your domestic-international allocation but no matter what allocation you choose you will pay lower fees.

My question for you is: How low would the expense ratio for Total World index fund have to be to get you to buy it? Is anyone else really tempted to own a 2-fund portfolio but those extra 30 basis points of expense ratios is stopping them? Does anyone already own some Vanguard Total World?

Thanks
I wouldn't - unless I was 100% tax advantaged.

Need them separate to put Int'l in taxable - to get the Foreign Tax credit benefit.
Leonard, why do you say this? All of the stocks are purchased individually.

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

Post by leonard » Thu Feb 27, 2014 10:24 pm

Calm Man wrote:
leonard wrote:
Day9 wrote:VTWSX and the ETF version VT are Vanguard's Total World stock index funds.

They are about 53% North America, 47% Rest of World

The only thing stopping me from making this my core stock holding, and maybe even my ONLY stock holding is that the expense ratio is 0.35% for the fund and 0.19% for the ETF. On the other hand Total-US VTSAX and VTI have 0.05% expense ratio and Total International is 0.16%.

So not only can you control your domestic-international allocation but no matter what allocation you choose you will pay lower fees.

My question for you is: How low would the expense ratio for Total World index fund have to be to get you to buy it? Is anyone else really tempted to own a 2-fund portfolio but those extra 30 basis points of expense ratios is stopping them? Does anyone already own some Vanguard Total World?

Thanks
I wouldn't - unless I was 100% tax advantaged.

Need them separate to put Int'l in taxable - to get the Foreign Tax credit benefit.
Leonard, why do you say this? All of the stocks are purchased individually.
Let's say your AA is such that you must hold equities in both taxable and tax advantaged accounts. In that case, it is more tax efficient to hold the Int'l stocks in taxable - so that you can take advantage of the FTC. If you hold 100% of equities in taxable (or tax advantaged), this particular issue isn't a problem. But, I think most have taxable accounts - so most would benefit by splitting TSM and TISM and holding TISM in taxable to the extent needed.
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Re: Would you buy Total World index if it had Admiral Shares

Post by abuss368 » Thu Feb 27, 2014 10:27 pm

G-Money wrote:Also, it currently holds significantly fewer stocks than the combo, so even if the cost were the same, I'd likely consider the Total World fund to be inferior.
This is a good point. Does anyone know why the Total World fund holds less stocks than the Total Stock and Total International funds?
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Re: Would you buy Total World index if it had Admiral Shares

Post by natureexplorer » Fri Feb 28, 2014 11:57 am

abuss368 wrote:
G-Money wrote:Also, it currently holds significantly fewer stocks than the combo, so even if the cost were the same, I'd likely consider the Total World fund to be inferior.
This is a good point. Does anyone know why the Total World fund holds less stocks than the Total Stock and Total International funds?
Could this have to do with an index change not being complete yet?

Number of Holdings
VT: 5371
FTSE Global All Cap Index: 7219

VTSAX: 3642
CRSP US Total Market Index: 3613

VTIAX : 5500
FTSE Global All Cap ex US Index: 5316

Either way, it's a pity that there are still no Admiral Shares for Total World as it does offer a lot of convenience. Right now, the ER difference between VTSAX+VTIAX (roughly 0.1) vs VTWSX (0.3) is just too high for the convenience. 0.2 of $100k is $200 per year. Throw in the discrepancy with the number of holdings and a supposedly superior CRSP index for the US holdings, and Total World is just not an option anymore.

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

Post by G-Money » Fri Feb 28, 2014 12:20 pm

natureexplorer wrote:
abuss368 wrote:
G-Money wrote:Also, it currently holds significantly fewer stocks than the combo, so even if the cost were the same, I'd likely consider the Total World fund to be inferior.
This is a good point. Does anyone know why the Total World fund holds less stocks than the Total Stock and Total International funds?
Could this have to do with an index change not being complete yet?
No. Vanguard announced it had completed its transition to FTSE for all effected funds (which included Total World) back in June 2013: https://personal.vanguard.com/us/insigh ... hannel=MFN

I think Total World has always had fewer holdings than TSM and TISM. When it was first made available, it invested solely in large caps. It now invests in all caps, but my impression is they are investing in fewer holdings to keep costs lower. Total World doesn't have anywhere near the same level of assets as TSM and TISM, so it does not enjoy the same economies of scale.
Don't assume I know what I'm talking about.

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

Post by arcticpineapplecorp. » Fri Feb 28, 2014 11:20 pm

Is there a reason why The total world index can't be a fund of funds and hold Total US and Total International in their appropriate weightings? Then you'd have the same number of stocks as holding the two separately and holding down costs. I'm sure there's a reason for this, can't remember off hand...

I don't know if I'd hold Total World only because of the Vanguard study that showed increased volatility with no added diversification benefit holding international at levels above 40% of total portfolio. I'm at 20% international and looking to increase to 30% and hold there for the long term. Seemed to be a sweet spot (in the past anyway) for diversification and volatility. Not crazy about the additional risk (currency) except when the US dollar falls of course.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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

Post by DSInvestor » Fri Feb 28, 2014 11:35 pm

arcticpineapplecorp. wrote:Is there a reason why The total world index can't be a fund of funds and hold Total US and Total International in their appropriate weightings? Then you'd have the same number of stocks as holding the two separately and holding down costs. I'm sure there's a reason for this, can't remember off hand...
Can a mutual fund that is a fund of funds have an ETF share class? Total world started with investor shares and ETF shares.
Vanguard Total International Stock used to be a fund of funds and I think it changed to hold stocks directly before coming out with ETF share class.
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Re: Would you buy Total World index if it had Admiral Shares

Post by tj » Fri Feb 28, 2014 11:43 pm

If the global market changes and Total World invests more than 50% in US, does it lose the eligibility for foreign tax credit?

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

Post by abuss368 » Sat Mar 01, 2014 12:18 am

The book "Elements of Investing" recommended a two fund portfolio. I believe it was Total World Stock and Total Bond Index.
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Re: Would you buy Total World index if it had Admiral Shares

Post by spanky123 » Sat Mar 01, 2014 2:08 pm

abuss368 wrote:The book "Elements of Investing" recommended a two fund portfolio. I believe it was Total World Stock and Total Bond Index.
The book recommends 50% US Total Market + 50% International but also mentions a one-stop shopping method: Total World Index.

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

Post by bulldog1 » Tue Jan 13, 2015 11:37 am

Vanguard Total World Index is now at 55.3% US Equities. It keeps creeping up every few months.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

This is my only holding in my taxable account. So simple.

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

Post by nisiprius » Tue Jan 13, 2015 12:26 pm

bulldog1 wrote:Vanguard Total World Index is now at 55.3% US Equities. It keeps creeping up every few months.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

This is my only holding in my taxable account. So simple.
One point, however: a few years ago, a lot of people writing about global diversification were presenting a simplistic picture that "the U.S. share of global equity is declining." In fact I was challenged on the forum by people who simply didn't believe that in 1990 (when Burton Malkiel was recommending that about 15% of stocks be international) the U.S. share was actually larger than it was in 2010 (when he was recommending 50%).

Now, personally, it has been 74 years since Henry Luce coined the phrase "the American Century," and I wouldn't quarrel with the idea that the U.S. is probably going to become relatively less important, in many ways, over the next 50-100 years, but it isn't actionable information for investing.
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Re: Would you buy Total World index if it had Admiral Shares

Post by pascalwager » Tue Jan 13, 2015 3:13 pm

Postby bulldog1 » Tue Jan 13, 2015 11:37 am

Vanguard Total World Index is now at 55.3% US Equities. It keeps creeping up every few months.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

This is my only holding in my taxable account. So simple.
I clicked on your link and see US = 51.7% (not 55.3%) of world equities. Where did you get your figure?

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

Post by tj » Tue Jan 13, 2015 4:51 pm

pascalwager wrote:
Postby bulldog1 » Tue Jan 13, 2015 11:37 am

Vanguard Total World Index is now at 55.3% US Equities. It keeps creeping up every few months.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

This is my only holding in my taxable account. So simple.
I clicked on your link and see US = 51.7% (not 55.3%) of world equities. Where did you get your figure?
he mistakenly included the Canadian exposure in the fund as American.

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

Post by bulldog1 » Tue Jan 13, 2015 5:01 pm

tj wrote:
pascalwager wrote:
Postby bulldog1 » Tue Jan 13, 2015 11:37 am

Vanguard Total World Index is now at 55.3% US Equities. It keeps creeping up every few months.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

This is my only holding in my taxable account. So simple.
I clicked on your link and see US = 51.7% (not 55.3%) of world equities. Where did you get your figure?
he mistakenly included the Canadian exposure in the fund as American.

I did. My mistake. :?

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

Post by warner25 » Tue Jan 13, 2015 8:02 pm

IlliniDave wrote:With free-market capitalism, maybe this time it's different. In the last 100 years we've had 2 "world wars" and a 40+ year "cold war" that would have substantially affected a "global" investor. It's rare to see data for the "ex-US" equity category going back earlier than the 1950s. These are things guys like Bogle probably remember very clearly having lived through them.
I just want to say that this is the most interesting argument I've seen articulated for home-country bias after five years of reading the discussions. I think it's stronger than the typical points about currency risk, higher expense ratios, global exposure of large companies, and high correlations. This is "political risk," I guess, but that usually only comes up when talking about emerging markets. Thanks.

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

Post by columbia » Tue Jan 13, 2015 10:25 pm

I believe that it should always be a consideration.

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

Post by bonn » Wed Jan 14, 2015 2:22 am

warner25 wrote:
IlliniDave wrote:With free-market capitalism, maybe this time it's different. In the last 100 years we've had 2 "world wars" and a 40+ year "cold war" that would have substantially affected a "global" investor. It's rare to see data for the "ex-US" equity category going back earlier than the 1950s. These are things guys like Bogle probably remember very clearly having lived through them.
I just want to say that this is the most interesting argument I've seen articulated for home-country bias after five years of reading the discussions. I think it's stronger than the typical points about currency risk, higher expense ratios, global exposure of large companies, and high correlations. This is "political risk," I guess, but that usually only comes up when talking about emerging markets. Thanks.
This seems to me to be opposite - it's the single strongest argument AGAINST home country bias. If your home country gets in trouble, that's doubly bad if all your investments are now in trouble too. In this perspective, home bias is like having all your savings in the stock of the company you work for, arguing that many other companies have gone bankrupt and you are avoiding all that since your company is secure and always will be. With a world portfolio, parts of your portfolio are sure to do poorly due to political risk, but it will only be a part. With a concentrated bet on your home country, you might do very well if the risk never really shows up to ruin your day as has been the case for the US for a long time, but there's no guarantee that that will continue.

The main problem would seem to be that the best index funds are bought via US organizations, so it's hard to have part of your portfolio completely free of the US without giving something up. So probably most of us have at least a concentrated bet that the US will at least continue to support the operation of organizations like Vanguard, or that any deterioration will be slow enough, yet also detectable enough, that there is time to move international assets so that they are held without any US ties before things get too bad.

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

Post by Noobvestor » Wed Jan 14, 2015 4:14 am

warner25 wrote:
IlliniDave wrote:With free-market capitalism, maybe this time it's different. In the last 100 years we've had 2 "world wars" and a 40+ year "cold war" that would have substantially affected a "global" investor. It's rare to see data for the "ex-US" equity category going back earlier than the 1950s. These are things guys like Bogle probably remember very clearly having lived through them.
I just want to say that this is the most interesting argument I've seen articulated for home-country bias after five years of reading the discussions. I think it's stronger than the typical points about currency risk, higher expense ratios, global exposure of large companies, and high correlations. This is "political risk," I guess, but that usually only comes up when talking about emerging markets. Thanks.
I don't follow. The Cold War and World Wars impacted the US (probably positively in the long run, thanks to the lack of destruction in WWII, etc...) as well as every other major economic power around the world, often in surprising and unexpected ways. These are indeed great examples of why you should avoid home-country bias - had your home country been Germany, Italy, Russia, etc... thing would have gone a lot worse for you. Perhaps this century the US will face similar-but-different challenges and not come out as well for it.

As for Vanguard Total World - if it were the average cost of Total Stock and Total International I'd strongly consider it.

As to Nis' example: Total Stock + Total International = Total World doesn't work quite the same way if you're talking about a taxable account where you use dividends to rebalance (rather than automatically reinvesting), which is indeed the case for me. Dividends would ultimately cause quite a bit of drift for me, unfortunately.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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