Those that hold international equities at market-cap weight: what is your method?

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donaldson
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Those that hold international equities at market-cap weight: what is your method?

Postby donaldson » Mon Apr 17, 2017 1:50 pm

There have been many interesting discussions on U.S. versus international equity allocation generally, and several on the reasoning for holding international equity at market-capitalization weight specifically. This thread is not meant to be a debate on either of those topics.

Instead, I am curious to know how those who have chosen to hold international equity at market-cap weight currently accomplish this.

For example,

- Do you use a single index such as Vanguard Total World Stock Index (VTWSX)?
- Do you hold U.S./International in separate indexes (such as VTSAX/VTIAX)?
- If there is a need to rebalance, how often do you do this? What source do you use for the latest market weights?

One of the reasons that I am curious about this is because it seems like the strategy one takes will affect the expense ratios associated with funds. For example, in the case of Vanguard mutual funds, VTWSX carries an expense ratio of 0.21%, with no Admiral shares available. By contrast, holding Admiral shares of VTSAX and VTIAX at the same current weight (~54/46) puts the expense ratio at between 0.07 and 0.08%. Both are low, but there is a difference to consider.

Full disclosure: I do not currently hold international stock at market-cap weight, and at this point I am just interested in gathering information. There has been a lot of discussion on the theoretical side of things, and I thought it would be helpful to hear what this specific allocation looks like in practice.

asif408
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby asif408 » Mon Apr 17, 2017 2:07 pm

I do not currently hold at market cap weight, but did a few years ago. When I did, I used a total US and total international stock ETF, because it was the cheapest way for me to do it (couldn't do Admiral shares at that time because of multiple accounts). Of course, if you believe you should always hold the market weight you'll have to adjust periodically, because it's a moving target. FWIW, VT (the Total World ETF) has only a 0.11% ER. I didn't consider it previously because it was a decent amount more than 2 funds, but now I would consider it.

Rebalancing is a topic of frequent debate here. I'm a believer that every couple of years is fine, and it's even easier if you just rebalance using new contributions.

harvestbook
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby harvestbook » Mon Apr 17, 2017 2:23 pm

Hardly anyone holds at true market-cap weight of anything, we just pick a number that fits our biases and comfort levels: http://pensionpartners.com/searching-fo ... portfolio/

I loosely follow the Merriman portfolio so I hold 10 different index funds to get my desired AA, but I am still in the learning and accumulation stage so I have formed no hard-and-fast rules, only an overriding philosophy of "cheaper is better." For instance, why pay an .08 ER for the Vanguard 60/40 fund when you can get Total Stock and Total Bond for .05 and .06? (I know, the answer is "convenience" if you value convenience and automatic rebalancing over saving a couple of bps.)

Cue Taylor to say "There are many roads to Dublin."

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby QuietProsperity » Mon Apr 17, 2017 2:24 pm

Using the ETFs since they are available to more people (i.e. No Admiral shares outside of Vanguard) we see that:

VTI (US) - 0.05%
VEU (World ex-US) - 0.11%
VT (World w/ US) - 0.11%
VTI (54%) / VEU (46%) - 0.08%

I would say that the 0.03% increase is what I consider a convenience/simplicity charge.

You could easily just buy the two ETFs in their current market-cap proportion, save the 3bps and (In theory) never re-balance, as that would continue to to exhibit the market-cap weight of the respective markets (My guess is somewhere a long the ling you would notice some drift, but I cannot imagine it being too terrible).

Once Vanguard comes out with a market-cap weighted world (including US) bond fund (Bond version of VT), people who believe in market-efficiency can finally construct a simple portfolio to match their beliefs.

balofagus
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby balofagus » Mon Apr 17, 2017 2:53 pm

I hold the Vanguard Total World Stock ETF (VT) in my taxable account and Roth IRA. Within my 401(k) I approximate Total US with Vanguard 500 and Vanguard Extended Market as described in the wiki, and mix in Vanguard Total International for the same ratio of US to ex-US as VT uses.

My 401(k) holds more of my assets than the other accounts, so my weighted ER across the accounts gets pulled down to ~0.07%.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby asset_chaos » Mon Apr 17, 2017 4:43 pm

donaldson wrote:- Do you use a single index such as Vanguard Total World Stock Index (VTWSX)?
- Do you hold U.S./International in separate indexes (such as VTSAX/VTIAX)?
- If there is a need to rebalance, how often do you do this? What source do you use for the latest market weights?

I use total world.

As noted elsewhere, if you use the two funds are current market weight, there is more or less no need to rebalance.

If you did want to check on the "correct" weights, you could go to the information page for total world fund and see the US, non-US breakdown.

Aside from the somewhat simpler portfolio from holding one total world fund versus total world made up of two funds, US and non-US, a further advantage of the single fund is that a single fund obliterates the difference between stock market segments. You don't have to see that US or non-US stocks are doing respectively better or worse than the other: you just own an indexed basket of the biggest companies: one less thing to worry about.
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triceratop
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby triceratop » Mon Apr 17, 2017 4:46 pm

asset_chaos wrote:
donaldson wrote:- Do you use a single index such as Vanguard Total World Stock Index (VTWSX)?
- Do you hold U.S./International in separate indexes (such as VTSAX/VTIAX)?
- If there is a need to rebalance, how often do you do this? What source do you use for the latest market weights?

I use total world.

As noted elsewhere, if you use the two funds are current market weight, there is more or less no need to rebalance.

If you did want to check on the "correct" weights, you could go to the information page for total world fund and see the US, non-US breakdown.

Aside from the somewhat simpler portfolio from holding one total world fund versus total world made up of two funds, US and non-US, a further advantage of the single fund is that a single fund obliterates the difference between stock market segments. You don't have to see that US or non-US stocks are doing respectively better or worse than the other: you just own an indexed basket of the biggest companies: one less thing to worry about.


The dividend yield rates are not at market weight proportions, though, so for this to be true the dividends must be reinvested at the current market weights.

jocdoc
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby jocdoc » Mon Apr 17, 2017 5:47 pm

I use VTI and VSS VSS supposed to be less correlated with VTI than VXUS . I tilt towards at least 50% international for the past several years. Currently, I am tilting to Intl. There are perhaps more tax loss harvesting opportunities with two funds. For simplicity use VT (Total world stock fund)

VTI US Total stock market etf
VXUS Total Intl stock market etf (ex US)
VSS Small cap intl stock market etf (ex US)

Dirghatamas
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Dirghatamas » Mon Apr 17, 2017 10:26 pm

donaldson wrote:- Do you use a single index such as Vanguard Total World Stock Index (VTWSX)?
- Do you hold U.S./International in separate indexes (such as VTSAX/VTIAX)?
- If there is a need to rebalance, how often do you do this? What source do you use for the latest market weights?


Yes, I have been doing this portfolio now for 25 years and haven't made any changes in that time.

1) I use multiple brokerages AND multiple fund families in them for diversification (I had a bad experience during the financial crisis where portions of our 401K got locked so I learned to never have all assets in any brokerage or fund family). I do use Vanguard for a portion of my accounts

2) For the Vanguard portion, I use two funds (VTSAX/VTIAX) due to history. I started in 1992 and have had to change the actual funds as lower/better funds became available. I only change when I can TLH during a bear market. Last time I made big changes (not in investment philosophy but in actual funds used) was in 2009 during financial crisis to TLH. At present I have way too much capital gains to move to a single fund like VTWSX. However, if I were a young person starting out, I would just put all my money into World Stocks (VTWSX) mutual fund or ETF, for simplicity.

3) I invest monthly. I used in the past actual index providers like MSCI to find out index weights but in the last few years, I have gotten lazy and just use Vanguard website (a month old) to look at VTWSX holdings to understand the weights.

4) Balancing/Rebalancing: If you invest monthly using two funds, over time your assets will get tracking error WRT the world stock. If you are OCD, you could fix this each month but I am lazy so I do it once per year using my annual bonus. There are several reasons for tracking error. First, US companies return cash mostly in buybacks while International companies mostly use dividends. Automatic reinvestment of dividends in 1 fund vs. 2 funds will lead to a (small) tracking error because reinvestments are cap weighted. The ER of two funds is different so again it leads to small tracking error. Finally is the issue of taxes and foreign tax credit. Because I also have sizeable tax deferred accounts, I can't claim foreign tax credit in those. Even in taxable, foreign tax credit is not perfect. So, I need to figure out tax wise, how to track my taxes vs. various funds..this again leads to tracking error over time.

I take care of all this stuff once, close to tax season when I have all the info for the tax year and have my annual bonus. I then balance it all to track the world stock index.

Like I said earlier, if I were a young kid starting out today, I wouldn't bother with this complexity. I would just put 100% of my savings each month in World Stocks and go on with more important things in life. :beer

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Ketawa » Mon Apr 17, 2017 11:18 pm

The split between regions for my international equities (Domestic/Intl Developed/Emerging) are set at market weights. I have a heavily tilted portfolio, so I'm definitely not holding market weight funds. But regardless of the specific funds I own, I would be forced to figure out an appropriate split between regions and would not be able to rely on something like VT since my employer's retirement plan is the TSP, which only has an Intl Developed fund.

I use the S&P Global Broad Market Index as a source for country-specific market weights. It is updated in the first few days of each month in a format that is easy to copy/paste. There is a PDF if you follow the "S&P Global Equity Indices Monthly Update March 2017" link under "RESOURCES" at this link: S&P Global Broad Market Index.

I copy/paste the "Index Weight %" into one of the tabs of my asset allocation spreadsheet. I use SUMIF functions to calculate how much is in each region as they are defined in my funds.

Image

Those weights feed into my target asset allocation percentages.

Image

New contributions always go to whatever needs them. If my allocation is off target by more than about $500-$1000, I make a trade to restore it.

For a long time, my portfolio's international funds were mostly in my IRA, which has used AQR funds since June 2014. Now most of my dollars in international funds are in the TSP. The only difference in regions between AQR's developed fund that I use (QICLX) and the I Fund is that Canada is included in the AQR fund. Right now, I calculate the Intl Developed weight as if Canada is included in all my Intl Developed funds. If I really wanted to be technical, I could calculate how much to weight Canada overall in my "Total % Covered" and "Developed % of Total" figures; it would only take another couple entries in a formula. Maybe I'll do that.

According to my notes, I have been using market cap weights since September 2012, although I can't remember when I started using this exact method. This is easy and adaptable in case I ever change the specific funds that I use, I have to use a different index provider, AQR or MSCI changes the region classification of a market, etc. It would take me far more time to switch than to continue copy/pasting.

This is arbitrary for me since I don't even have market cap weight funds. My domestic funds are an AQR small cap multi-style fund and the TSP S Fund. My international funds are all AQR large cap multi-style funds and the TSP I Fund. However, it puts my region splits on autopilot and takes only a couple of minutes each month to update. I'd rather have the weights on autopilot than pick an arbitrary amount, miss a large change in the domestic market weight, etc. I have spent far more time writing this post than I have spent actually updating the numbers over the last year.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Crushtheturtle » Tue Apr 18, 2017 1:50 am

- I use 2 funds (Total US and Total ex-US) rather than 1 fund (Total World). In my TSP, I can approximate Total US (C and S funds) but not Total ex-US. Therefore, holding the 2 funds separately in my other accounts allows me to overweight ex-US to compensate. (In addition to the 2 funds having a lower overall ER and a greater number of companies).

- Source for current Global Weight: FTSE Global All Cap Index Fact Sheet
On the 2nd or 3rd day of the month, you can find this through an internet search. It contains the global index data through the end of the previous month. You just open the .pdf file and scroll down to the section entitled ""Country Breakdown."

For example, the most recent factsheet is current through 31 March. Per the factsheet, the USA constitutes 53.24% of the global index. Therefore, ex-US constitutes 100% - 53.24% = 46.76%. I will typically just round it up to the nearest whole number (47%- good enough for government work). I use an Excel spreadsheet to calculate the underweight asset class, and direct new contributions there.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby bluejello » Tue Apr 18, 2017 2:17 am

My portfolio is 1/3 US stock (VTSAX), 1/3 international stock (VTIAX), and 1/3 bonds (VWIUX). Close enough to market weight for me and very simple to manage. I don't worry about the allocation being exactly at global market cap.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Tamalak » Tue Apr 18, 2017 7:13 am

- Do you hold U.S./International in separate indexes (such as VTSAX/VTIAX)?

This is what I do, since the "world" mutual fund/ETF have higher total ER. VTSAX/VTIAX in my taxable accounts, VTI/VXUS in my Roth. I kinda wish now I had been using the ETFs in my taxable as well, for simplicity's sake (and I think the ER will go down faster in the ETFs, too)

- If there is a need to rebalance, how often do you do this? What source do you use for the latest market weights?

I rebalance whenever I invest. I invest whenever I have 10k lying around (including dividends that come out of my taxable). Rebalancing is not going to need to happen that often because if you hold these equities at cap, they'll generally balance themselves (if VTI goes up 10%, so will its relative market weight.. the exception being new IPOs and dividends)

Source: http://www.ftse.com/Analytics/FactSheet ... me=GEISLMS

This source is always up to a month out of date (it's as of March right now), but I kinda like that because it means I'm buying the recent losers when I rebalance. Buy the dips! :wink:

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby ryman554 » Tue Apr 18, 2017 8:05 am

Ketawa wrote:Those weights feed into my target asset allocation percentages.

Image


75/25 Developed/Emerging is my target also.

I do this with 85% FSGDX abd 15% FPMAX. Gets me close enough.

I'm 50/50 US/Intl.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby donaldson » Tue Apr 18, 2017 12:52 pm

Thanks for the replies so far.

I will attempt to sum up some of the responses for the benefit of anyone who has a similar question later:

Do you use a single index such as Vanguard Total World Stock Index (VTWSX)?


Some have chosen to do this, and often use ETFs such as VT to keep expense ratios down. Simplicity is an advantage here.

Do you hold U.S./International in separate indexes (such as VTSAX/VTIAX)?

This is also a common approach, may offer a slightly lower net expense ratio (in exchange for it being slightly more hands-on), and may offer more opportunities for Tax Loss Harvesting for those with taxable accounts.

If there is a need to rebalance, how often do you do this? What source do you use for the latest market weights?


If one sets the allocation at market weights initially, there will be some drift over time due to factors such as dividend reinvestment, but rebalancing can often be achieved via new contributions at whatever frequency (e.g. yearly) one already might do this with one's overall portfolio.

References mentioned to see current market cap weights (updated monthly):

Vanguard Total World Stock Index fund profile
FTSE Global All Cap Index Fact Sheet (VTWSX/VT tracks this)
S&P Global Equity Indices Monthly Update

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby backpacker » Wed Apr 19, 2017 11:36 am

Like others above, I hold international at cap weight and also have cap weighted funds. One way to estimate the current domestic/international split is to use Vanguard's website:

1) Take the largest US company. Right now, that company is Apple.
2) Find the percentage of Vanguard Total Market invested in Apple (currently 2.9%).
3) Find the percentage of Vanguard Total World invested in Apple (currently 1.6%).
4) Divide the second number (1.6) by the first (2.9) to get 55%. This is the percentage of the total market invested in US stocks.

Dirghatamas
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Dirghatamas » Wed Apr 19, 2017 6:16 pm

backpacker wrote:Like others above, I hold international at cap weight and also have cap weighted funds. One way to estimate the current domestic/international split is to use Vanguard's website:

1) Take the largest US company. Right now, that company is Apple.
2) Find the percentage of Vanguard Total Market invested in Apple (currently 2.9%).
3) Find the percentage of Vanguard Total World invested in Apple (currently 1.6%).
4) Divide the second number (1.6) by the first (2.9) to get 55%. This is the percentage of the total market invested in US stocks.


Why would I do something this complicated :shock: It would take me an entire 2 minutes and a quarter cup of coffee each month to look up two mutual funds, find stuff, open excel and actually divide numbers. What do you think we are some kind of math geniuses around here.

Instead I do something simpler. Just use line 3 in your post! It goes to Vanguard Total World Stock-> portfolio and management. Scroll down and it shows the holdings per country. US is the first country listed! No need to look up multiple funds, actually find companies and do math stuff. Keep investing simple :beer

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Artsdoctor » Wed Apr 19, 2017 7:02 pm

For US equities, I try to approximate Total Market. I realize it's mostly large cap but there's a reasonable amount of small and mid-cap as well.

Total International doesn't really have the small cap exposure that I'd like although I don't have a meticulous formula to supplement. The bulk of my international holdings is in the taxable account (Total International) although I hold small cap international in a Roth (VSS) to help round things out. I don't "overweight" small cap.

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backpacker
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby backpacker » Wed Apr 19, 2017 8:11 pm

Dirghatamas wrote:
backpacker wrote:Like others above, I hold international at cap weight and also have cap weighted funds. One way to estimate the current domestic/international split is to use Vanguard's website:

1) Take the largest US company. Right now, that company is Apple.
2) Find the percentage of Vanguard Total Market invested in Apple (currently 2.9%).
3) Find the percentage of Vanguard Total World invested in Apple (currently 1.6%).
4) Divide the second number (1.6) by the first (2.9) to get 55%. This is the percentage of the total market invested in US stocks.


Why would I do something this complicated :shock: It would take me an entire 2 minutes and a quarter cup of coffee each month to look up two mutual funds, find stuff, open excel and actually divide numbers. What do you think we are some kind of math geniuses around here.

Instead I do something simpler. Just use line 3 in your post! It goes to Vanguard Total World Stock-> portfolio and management. Scroll down and it shows the holdings per country. US is the first country listed! No need to look up multiple funds, actually find companies and do math stuff. Keep investing simple :beer


:oops:

Looks like I can look forward to getting back my couple of minutes and a quarter cup of coffee twice a year. Funny how we often make things weirdly complicated. Thanks for this.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Dominic » Wed Apr 19, 2017 8:47 pm

I have a question regarding Vanguard Total World Stock. This fund holds only 7774 equities. Vanguard Total Stock Market holds 3601, and Vanguard Total International Stock Market holds 6172.

Does anyone know what the Total World Stock fund's index excludes? (It tracks an all-cap index.)

I did some detective work regarding why a combination of Vanguard Developed Markets and Vanguard Emerging Markets has more equities than Vanguard Total International Stock Market, and found that it's because Emerging Markets tracks an index that includes China A-shares, while Total International Stock excludes those. I'm assuming there's a similar story with Total World Stock, and I'm curious as to how significant the excluded equities are.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby TimeRunner » Wed Apr 19, 2017 8:52 pm

VT for equities, TSP G fund for bond allocation. At least, "in a perfect world...". The reality is I have some legacy holdings of VTIAX, VEMAX, VTSAX, GOOG, GOOGL, and I keep some 2nd-tier 'cash' in VCADX (Intermediate Tax-Exempt Calif Admiral). As I need to spend and donate to charity, I'm unwinding the legacy holdings to get more towards the perfect world.

I keep a Google spreadsheet that pulls in daily prices and shows allocation, gain/loss, cost basis, etc. It scrapes TSP website for G Fund price, and uses Googlefinance() function to get the other prices. The cover sheet is basically an "at-a-glance" dashboard.
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Lieutenant.Columbo » Wed Apr 19, 2017 9:10 pm

donaldson wrote:...I am curious to know how those who have chosen to hold international equity at market-cap weight currently accomplish this...
...If there is a need to rebalance, how often do you do this? What source do you use for the latest market weights?
donaldson,
50% of my equities are Ex-USA (and 50% US, in IJS)
The entire Ex-USA 50% is in DWUSX, aka World ex US Targeted Value Portfolio, so no need to rebalance within international. DWUSX is 80% Small Value Developed and 20% Value Emergent markets.
backpacker wrote:1) Take the largest US company. Right now, that company is Apple.
2) Find the percentage of Vanguard Total Market invested in Apple (currently 2.9%).
3) Find the percentage of Vanguard Total World invested in Apple (currently 1.6%).
4) Divide the second number (1.6) by the first (2.9) to get 55%. This is the percentage of the total market invested in US stocks.
Dirghatamas wrote:...Vanguard Total World Stock-> portfolio and management. Scroll down and it shows the holdings per country. US is the first country listed!
interestingly enough, the first approach results in 55% and the second in 53.3%; I wonder for what mathematical reason they don't agree completely.
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Re: Those that hold international equities at market-cap weight: what is your method?

Postby backpacker » Thu Apr 20, 2017 2:15 pm

Lieutenant.Columbo wrote:
backpacker wrote:1) Take the largest US company. Right now, that company is Apple.
2) Find the percentage of Vanguard Total Market invested in Apple (currently 2.9%).
3) Find the percentage of Vanguard Total World invested in Apple (currently 1.6%).
4) Divide the second number (1.6) by the first (2.9) to get 55%. This is the percentage of the total market invested in US stocks.
Dirghatamas wrote:...Vanguard Total World Stock-> portfolio and management. Scroll down and it shows the holdings per country. US is the first country listed!
interestingly enough, the first approach results in 55% and the second in 53.3%; I wonder for what mathematical reason they don't agree completely.


If I had to guess, the difference is probably caused by Vanguard rounding the company weighting to the closets tenth of a percent. Another reasons to prefer the simpler method. That one is probably closer to right.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby Dirghatamas » Thu Apr 20, 2017 3:37 pm

Dominic wrote:I have a question regarding Vanguard Total World Stock. This fund holds only 7774 equities. Vanguard Total Stock Market holds 3601, and Vanguard Total International Stock Market holds 6172.

Does anyone know what the Total World Stock fund's index excludes? (It tracks an all-cap index.)

I did some detective work regarding why a combination of Vanguard Developed Markets and Vanguard Emerging Markets has more equities than Vanguard Total International Stock Market, and found that it's because Emerging Markets tracks an index that includes China A-shares, while Total International Stock excludes those. I'm assuming there's a similar story with Total World Stock, and I'm curious as to how significant the excluded equities are.


I can comment on this because I implement the world stock index by using multiple fund families in multiple brokerages in taxable and deferred accounts (Vanguard, BlackRock and Fidelity) for diversification. You should know about A shares and N shares.

1) A shares: These are the local Chinese companies. They were till recently not legally investable by foreigners. Currently, they are partially investable. Vanguard uses them so far ONLY in Emerging markets stocks index. So, if you use VG total world or total international, you don't get those. MSCI has not allowed these so far due to governance issues. As such my Blackrock equivalents don't have these shares either.

2) N shares. This is something bigger to bother about. These are companies headquartered in country A but with listings in country B. It is quite common to list in NewYork stock exchange for example by European, Chinese, Israeli companies. The handling of this is basically random. "American" companies who list in NewYork but change countries for tax reasons e.g. Ireland are still usually listed by index providers as being US. Some Euro and Asian companies doing the same were also handled reasonably (but not even all European ones). Many Chinese companies not so much. Take Alibaba (Chinese equivalent of Amazon) or Baidu (Chinese Google). They were all listed in NewYork but are not considered American. Fair enough, so they are not in S&P 500. So they should be in Total International? Not the last time I checked. They should certainly be in Total World Stocks right? Not the last time I checked..

How could some of the largest companies in the world, not be in US or International or World Stocks? That's the fun of indexing.. It used to be that both FTSE and MSCI simply decided this was complicated and just ignored them. More recently (last year) MSCI recognized this was silly and now my BlacRock version of Total World Stock does have all these Chinese companies listed correctly but the Vanguard version still completely ignores them :oops:

What I do (because I am a Nerd) is I have a spreadsheet which lists all the companies I own and how much money I have invested in each company. I don't think in terms of countries but actual companies (the concept of a country has always seemed weird to me when investing). Other than a few big players like I mentioned, you have to go way past 5000 in market capitalization to start finding issues between Total World or Total International.

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Re: Those that hold international equities at market-cap weight: what is your method?

Postby JohnDoh » Sat Apr 22, 2017 8:44 am

Many years ago, I adopted a strategy propounded by Rick Ferri. Of International Equity allocation:
1/3 Europe TSM (VGK)
1/3 Pacific TSM (VPL)
1/3 Emerging TSM (VWO)

It's simple and it guards against having a bubble / crash in any one region (e.g. Japan of yore) highjacking the international allocation as a whole.

Over time, I further adapted it to create a little room for International Small:
30% VGK
30% VPL
30% VWO
10% VSS

Of course this can be further tailored by tilting any or all of the regions to Value if desired. I've done that a little as good investment options became available to me.

Beyond that, FWIW, my US/International equity allocation was/is 50/50.

While these allocations may not match world market capitalization precisely, they are roughly in the ballpark and very simple to understand and administer. I was/am very happy with it.

Hope that is responsive to your question.

P.S. if one believes in REITs as a distinct asset class, it is possible to diversity a VNQ allocation with so-called "International REIT" (VNQI). ( I say "so-called" because the REIT legal/tax structure is not that common around the world and so VNQI is not as "REIT-y" as VNQ. VNQI is more of a RE equity sector fund.


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