Lowest cost Vanguard international fund for taxable account?

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Norton750
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Lowest cost Vanguard international fund for taxable account?

Post by Norton750 » Thu Dec 17, 2015 8:07 am

I am looking to open a fairly broad-based Vanguard international fund in a taxable account. Not interested in ETFs. Normally I would just go with the Total International Index fund, but I do have a concern about expenses when including tax considerations. I know that there was a Tax-Managed International fund that merged with a Developed Market fund a while back. I'm not sure if the dust has settled enough on that merger to answer my main question, below.

I understand that the Total International Admiral shares have a 14-basis point ER vs. the Developed Market Admiral shares ER of 9 basis points.

My question is: When considering a taxable account large enough to qualify for Admiral shares and when including expense ratios, qualified vs. non-qualified dividends, foreign tax credits, etc. - how much larger does the ER spread get between these two funds for someone in the 25% Federal tax bracket?

I know that Total International is more diversified, but I have low expense sliced-and-diced international index funds in tax-advantaged accounts that I can adjust to make sure that I have the exposure I want to Emerging Markets, etc. So this is pretty much just an after-tax expense comparison question.

Thanks.

livesoft
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Re: Lowest cost Vanguard international fund for taxable account?

Post by livesoft » Thu Dec 17, 2015 8:13 am

It is a moving target that changes from year to year. I will give two data points that I have handy (sorry with ETFs, but the same will apply to the Admiral share class).

A. The tax-efficiency in 2014 that takes into account distributions, qualified, non-qualified, foreign-tax-credit for an investor in the 25% marginal income tax bracket for VEA and VXUS was
0.46% and 0.41%,
respectively.

B. In 2013, the tax efficiency for these was reversed at 0.24% and 0.30%.

In 2014, one paid about $46 in US income taxes on a $10,000 investment in VEA made on 12/31/2013.

You can do your own calculations which I have explained in this thread: viewtopic.php?t=158519

If you had asked a tax accountant to make these calculations for you, I would guess they would charge you $500.
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JDDS
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Re: Lowest cost Vanguard international fund for taxable account?

Post by JDDS » Thu Dec 17, 2015 10:40 am

It is worth noting that developed markets is transitioning to an all-cap, including Canada index next year: https://advisors.vanguard.com/VGApp/iip ... exFundChgs

So past data will not be as comparable.

I'm not sure if adding Canada will push up the qualified dividends, but it might.

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Re: Lowest cost Vanguard international fund for taxable account?

Post by SeeMoe » Thu Dec 17, 2015 12:26 pm

Have you considered all 3 ? Maybe a third in each . If nearing retirement the DCP's may be better off in 100% bond funds , experts say . :confused
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Norton750
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Re: Lowest cost Vanguard international fund for taxable account?

Post by Norton750 » Fri Dec 18, 2015 11:30 am

OP here.

livesoft - Thanks for the quick and thorough response. Much appreciated. Since there doesn't appear to be an obvious tax efficiency winner, I will go with my original inclination of using Total International Index.

I'm just as glad, since this is likely to be a step-up basis account to be included in my estate many years hence, and I plan to consolidate my current assortment of sliced-and-diced international funds in my tax-advantaged accounts into just the Total International Index fund when I'm simplifying the portfolio in my 70's and still have (most of) my marbles left. At that point, I'd just as soon be using the same international fund in all accounts.

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Re: Lowest cost Vanguard international fund for taxable account?

Post by livesoft » Fri Dec 18, 2015 11:36 am

One of the most popular tax-loss harvesting transactions discussed in the forum is going back and forth between VTIAX and VFWAX. I would think that you will not buy VTIAX and hold it forever without some TLHing along the way.
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Angelus359
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Re: Lowest cost Vanguard international fund for taxable account?

Post by Angelus359 » Mon Dec 21, 2015 10:44 am

I'd go with tax loss harvesting methods.
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BW1985
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Re: Lowest cost Vanguard international fund for taxable account?

Post by BW1985 » Mon Dec 21, 2015 11:18 am

livesoft wrote:One of the most popular tax-loss harvesting transactions discussed in the forum is going back and forth between VTIAX and VFWAX. I would think that you will not buy VTIAX and hold it forever without some TLHing along the way.
I regret not holding atleast some VTIAX in taxable to TLH, I carry it all in my IRA's and carry VTSAX in taxable.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

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Re: Lowest cost Vanguard international fund for taxable account?

Post by livesoft » Mon Dec 21, 2015 12:22 pm

BW1985 wrote:I regret not holding atleast some VTIAX in taxable to TLH, I carry it all in my IRA's and carry VTSAX in taxable.
Yes, do not hold things that lose money in your Roth IRA, but hold them in your taxable and tax-deferred accounts where you don't pay taxes on losses and/or get other taxpayers to pay for your losses.
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Taylor Larimore
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Need reference

Post by Taylor Larimore » Mon Dec 21, 2015 12:29 pm

SeeMoe wrote:Have you considered all 3 ? Maybe a third in each . If nearing retirement the DCP's may be better off in 100% bond funds , experts say . :confused
SeeMoe:

What are "DCP's"? Also, can you give a reference to what "experts say?"

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

BW1985
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Re: Lowest cost Vanguard international fund for taxable account?

Post by BW1985 » Mon Dec 21, 2015 1:11 pm

livesoft wrote:
BW1985 wrote:I regret not holding atleast some VTIAX in taxable to TLH, I carry it all in my IRA's and carry VTSAX in taxable.
Yes, do not hold things that lose money in your Roth IRA, but hold them in your taxable and tax-deferred accounts where you don't pay taxes on losses and/or get other taxpayers to pay for your losses.
So you hold all fixed income in your Roth IRA?
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

livesoft
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Re: Lowest cost Vanguard international fund for taxable account?

Post by livesoft » Mon Dec 21, 2015 1:14 pm

BW1985 wrote:
livesoft wrote:
BW1985 wrote:I regret not holding atleast some VTIAX in taxable to TLH, I carry it all in my IRA's and carry VTSAX in taxable.
Yes, do not hold things that lose money in your Roth IRA, but hold them in your taxable and tax-deferred accounts where you don't pay taxes on losses and/or get other taxpayers to pay for your losses.
So you hold all fixed income in your Roth IRA?
Of course not. I just sell any equity holding the day before it goes down and then I buy it back just before it starts to go back up.
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BW1985
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Re: Lowest cost Vanguard international fund for taxable account?

Post by BW1985 » Mon Dec 21, 2015 1:16 pm

livesoft wrote:
BW1985 wrote:
livesoft wrote:
BW1985 wrote:I regret not holding atleast some VTIAX in taxable to TLH, I carry it all in my IRA's and carry VTSAX in taxable.
Yes, do not hold things that lose money in your Roth IRA, but hold them in your taxable and tax-deferred accounts where you don't pay taxes on losses and/or get other taxpayers to pay for your losses.
So you hold all fixed income in your Roth IRA?
Of course not. I just sell any equity holding the day before it goes down and then I buy it back just before it starts to go back up.
Solid plan.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

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SeeMoe
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Re: Need reference

Post by SeeMoe » Mon Dec 21, 2015 8:43 pm

Taylor Larimore wrote:
SeeMoe wrote:Have you considered all 3 ? Maybe a third in each . If nearing retirement the DCP's may be better off in 100% bond funds , experts say . :confused
SeeMoe:

What are "DCP's"? Also, can you give a reference to what "experts say?"

Thank you and best wishes.
Taylor
DCP:Deferred Compensation Plans . EXPERTS: Such as Fidelity and Vanguard Group recommend all bonds in IRA plans . I am not sure if they mean (all bonds)at retirement age, or earlier though ?
SeeMoe ...
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

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