VGTSX vs VDVIX / VEIEX blend

[msterrr]

Any reason to choose VGTSX for your international allocation over a similarly region weighted 80% VDVIX / 20% VEIEX blend?

Similarly, if one wanted a higher allocation to emerging markets - say 60/40 DEV/EME - would there be any reason to consider a 75/25 VGSTX/VEIEX blend over a 60/40 VDVIX/VEIEX blend?

[DSInvestor]

Not sure how much you're investing but if you're investing around 10K, you can get Admiral shares of Total International and have lower expenses of 0.11%. It would take considerably more 50K to get admiral shares of both Developed Markets and Emerging markets funds held separately. Since you're looking for similar weightings, I think it makes more sense to go with Total International. Keep it simple.

Total International VGTSX er=0.18% VTIAX Admiral er=0.11%, VXUS ETF er=011%

Developed Markets Index VDVIX er=0.17%, VTMGX Admiral er=0.07% VEA ETF er=0.07%
Emerging Markets index VEIEX er=0.32% VEMAX Admiral er=0.14% VWO ETF er=0.14%

Vanguard admiral shares of index funds are available only at Vanguard. If investing at other firms where you may only find investor shares, ETFs may be a good alternative and avoid transaction fees to buy vanguard investor shares.

[lack_ey]

VGTSX - Vanguard Total International Index
VDVIX - Vanguard Developed Markets Index
VEIEX - Vanguard Emerging Markets Index

Okay, I did not know the investor shares ticker symbols for the latter two. Checking just for my own curiosity, the AUM in that share class is a lot lower than the AUM for admiral shares, and both are dwarfed by the ETF.

As for the actual question, with investor shares there is a slight cost advantage to using the total international index rather than the blend. For admiral and ETf shares, it's actually the reverse, with the weighted blend being slightly cheaper. Both differences are too small to care much about, especially if actually looking at investor shares (sub-$10k balances, where single-digits bp differences really don't add up to much).

The more potentially substantive yet small divergence these days is the fact that Vanguard's emerging markets index fund is their only fund that includes the local China A shares market, albeit at significantly reduced weighting compared to market capitalization (or rather, free float market cap). If you're freaked out at 5% (may grow one day, perhaps to market cap weighting) of your emerging markets holdings being that um, rather unique market or otherwise prefer not to hold those securities, you could avoid that small exposure by holding the total international index instead, which does not include those stocks.

[msterrr]

Not sure how much you're investing but if you're investing around 10K, you can get Admiral shares of Total International and have lower expenses of 0.11%. It would take considerably more 50K to get admiral shares of both Developed Markets and Emerging markets funds held separately. Since you're looking for similar weightings, I think it makes more sense to go with Total International. Keep it simple.

Total International VGTSX er=0.18% VTIAX Admiral er=0.11%, VXUS ETF er=011%

Developed Markets Index VDVIX er=0.17%, VTMGX Admiral er=0.07% VEA ETF er=0.07%
Emerging Markets index VEIEX er=0.32% VEMAX Admiral er=0.14% VWO ETF er=0.14%

Vanguard admiral shares of index funds are available only at Vanguard. If investing at other firms where you may only find investor shares, ETFs may be a good alternative and avoid transaction fees to buy vanguard investor shares.

Personally at 60/40 VDVIX/VEIEX and don't have access to Admiral shares (no go for solo 401k's ). Great insights though!

[MotoTrojan]

I could imagine the total fund being more tax-efficient, but not sure how to quantify.

[triceratop]

I could imagine the total fund being more tax-efficient, but not sure how to quantify.

Not really, unless you are counting the possibility of rebalancing between developed and emerging. For lower tax brackets, splitting them has actually improved efficiency while for higher tax brackets you about break even. This all depends on one's situation, but for some typical scenarios they come out about the same or with splitting into two funds inching ahead.

[MotoTrojan]

I could imagine the total fund being more tax-efficient, but not sure how to quantify.

Not really, unless you are counting the possibility of rebalancing between developed and emerging. For lower tax brackets, splitting them has actually improved efficiency while for higher tax brackets you about break even. This all depends on one's situation, but for some typical scenarios they come out about the same or with splitting into two funds inching ahead.

Very interesting. Would happen less than a Large-cap/Small-cap vs. Total US Market scenario with individual companies market cap, but I guess I was envisioning a nation moving from Emerging to Developed, and resulting in a large sale (after indexes are updated) from Emerging.

[jalbert]

Not really, unless you are counting the possibility of rebalancing between developed and emerging. For lower tax brackets, splitting them has actually improved efficiency while for higher tax brackets you about break even. This all depends on one's situation, but for some typical scenarios they come out about the same or with splitting into two funds inching ahead.

Veiex/vemax/vwo has China A-shares which are more tax efficient than emerging markets as a whole. As an example, the ishares China-A fund CNYA had 88.31% of dividends qualified for favorable tax treatment last year. Correlations of historical outcomes between CNYA and global equity markets has been low as well, a diversification benefit if the effect persists (big if).

The downside of the splitting (aside from extra complexity) is if, say, Taiwan were recategorized as a developed market, then the developed markets fund would have to buy the Taiwan securities and the emerging markets fund would have to sell them, possibly causing a capital gain distribution by the emerging mkt fund.