Portfolio Watch still sucks, international composition edition

[nisiprius]

My only international stock holding is Vanguard Total International Stock Index Fund, VTIAX. In fact, just to be sure I was doing it correctly, I created an "account group" named "including VTIAX only," including... only my VTIAX holding.



How does stuff like this happen? Vanguard's own portfolio analysis tool is saying that Vanguard's own "total market" international fund has a regional composition that has 9% too little allocated to Europe and 8% too much allocated to the Pacific.

The main take-home here is not to get too obsessed with percentages of anything, because Vanguard's own data sources obviously do not know how much of the world's developed-stock-market holdings are in different regions of the world to an accuracy of better than give-or-take 8-9%.

Sure, I get it--their portfolio analysis tool is using a different index than their own fund is using. Very likely MSCI and FTSE's umpires made different calls about which countries are "developed," and some of the countries only FTSE thinks are "developed" must be in whatever region MSCI thinks is "the Pacific"--hence MSCI thinks I have too much in the Pacific.

In a way it's probably better to show how imprecise this stuff is, than to use the same index and get a false indication of "perfect" alignment.

Another detail. Again, this is for an artificial "account group" containing VTIAX only. This is pretty sucky:



Vanguard's portfolio analysis tool apparently has no idea whatsoever about sector or cap-weight breakdown in VTIAX. I assume that means that the the sector breakdown they show for my whole portfolio is silently omitting VTIAX without warning me about it. Since one of the explanations of differences in US/"International" stock behavior is that industry sector breakdowns are actually meaningfully different between the U.S. and the rest of the world, if VTIAX were included, it would change the whole-portfolio sector allocations. In short, the numbers it is showing me for my whole-portfolio sector allocation numbers it shows me must be inaccurate.

Here's another take, then: what this shows is that regardless of the widespread impression that nowadays international stock is basically up to all the same standards as U.S. stock, obviously it is not easy or cheap for Vanguard to get the same level of information we routinely expect for U.S. stock. The G in GICS stands for "global," so the GICS classification system is supposed to work worldwide. Certainly, the sector composition of international stock is not any deep dark secret, it can't be that hard--but Vanguard doesn't have it. It probably costs extra money or something.

[livesoft]

And to help folks who land on this thread, there are quite a few other tools that do what Vang Port Watch purports to do:
viewtopic.php?t=150267

[Cyclesafe]

PW works for 90%+ of users who would otherwise have no clue even of domestic vs "international". And a US domiciled global company also doesn't register as having international activity. A "30% international" could be actually over 50% international - just don't know.

I completely agree that PW overstates its accuracy and that Vanguard should not show detail that is not true. It's akin to claiming that something is 2.15 when one can only be confident that that something is around 2. PW would then seem a lot less informative, but actually reflect more of the truth.

Anyway, I just glance at the summary topline assessments, hoping for no red entries. The perennial blue entry, signaling <20% foreign bonds, is annoying because I completely disagree with Vanguard on this and I don't like being told by the computer that I am wrong.

[in_reality]

Sure, I get it--their portfolio analysis tool is using a different index than their own fund is using. Very likely MSCI and FTSE's umpires made different calls about which countries are "developed," and some of the countries only FTSE thinks are "developed" must be in whatever region MSCI thinks is "the Pacific"--hence MSCI thinks I have too much in the Pacific.

I agree to not get caught up in it. Obsessive that I am though...

Vanguard isn't comparing to either the MSCI or FTSE.

They claim 22% Pacific is the target allocation, but M* shows

MSCI is 21.33% for Japan + Australasia
FTSE is 22.5% for Japan + Australasia

MSCI is about 42.8% for UK + Dev Europe
FTSE is about 43% for UK + Dev Europe

So the explanation it seems is that they are putting Developed Asia which is about 10% into the Europe Category when calculating Stock Markets Outside the US.

M* is using FTSE global all cap ex-us and MSCI ACWI ex US

[jhfenton]

Portfolio Watch does suck, but M* has issues with its international comparison too, namely that it compares your Foreign Stock holding to MSCI-EAFE, a developed-only index, and then complains when your weightings are out of whack. (Mine would be anyway, since my foreign holdings are entirely VSS and emerging markets.

[sunnywindy]

Morningstar X-Ray (Premium and Free) still has some problems where it sometimes only has data for domestic stocks and it always benchmarks to the S&P 500 even though few people's entire portfolio would be represented by this index. The benchmark problem is particularly galling as I am sure their Institutional and Advisor analysis tools let you pick your benchmark and they don't include that function even if you pay the now $23 Premium fee. Even the free SigFig portfolio tool will benchmark to the MSCI World Index (when it works, which isn't often & we don't know if it is the 'World' Index or the 'All-Country World' Index).

[iceport]

Vanguard's portfolio analysis tool apparently has no idea whatsoever about sector or cap-weight breakdown in VTIAX. I assume that means that the the sector breakdown they show for my whole portfolio is silently omitting VTIAX without warning me about it.

As aggravating as it is, there's absolutely nothing silent about Vanguard's exclusion of international holdings for its market capitalization or sector breakdowns. The image you posted shows exactly the notification they use:

Includes only your U.S. stock and stock mutual fund holdings, which are...

That said, I am glad you posted this and I hope Vanguard is reading. The exclusion of the entire non-US market from the analysis is absolutely indefensible, especially now that their analyses include an inherent recommendation for a whopping 40% allocation (of equities) to non-US equities.

[livesoft]

Morningstar X-Ray (Premium and Free) still has some problems where it sometimes only has data for domestic stocks and it always benchmarks to the S&P 500 even though few people's entire portfolio would be represented by this index. The benchmark problem is particularly galling as I am sure their Institutional and Advisor analysis tools let you pick your benchmark and they don't include that function even if you pay the now $23 Premium fee. Even the free SigFig portfolio tool will benchmark to the MSCI World Index (when it works, which isn't often & we don't know if it is the 'World' Index or the 'All-Country World' Index).

One can select a benchmark when one uses M* through TDAmeritrade (see this screen capture: viewtopic.php?p=3233928#p3233928 ), so I would have expected using X-ray through Morningstar.com would give the same options just like you expected it to be there.

[CheeseFlip]

Thanks for posting this Nisiprius.

Just to pile on - If you use the "Outside Holdings" feature to track other accounts, the US-based holdings are reported and categorized correctly. "Domestic vs. international details" are reported correctly. However, drill down to "International regions details", and the outside holdings are not recorded at all.

It's surprising VG hasn't worked the bugs out on Portfolio Watch yet.

[asset_chaos]

Here's another take, then: what this shows is that regardless of the widespread impression that nowadays international stock is basically up to all the same standards as U.S. stock, obviously it is not easy or cheap for Vanguard to get the same level of information we routinely expect for U.S. stock. The G in GICS stands for "global," so the GICS classification system is supposed to work worldwide. Certainly, the sector composition of international stock is not any deep dark secret, it can't be that hard--but Vanguard doesn't have it. It probably costs extra money or something.

I don't think that's quite correct because even if Vanguard doesn't hook up the international sector breakdown data into portfolio watch, they do have it and do show it elsewhere. What appears to have happened is that Vanguard decided that regular investors would never be interested in such information. On Vanguard's investor website, the profile page for total international stock index fund under the portfolio tab doesn't list sector breakdown information, but on the institutional site the total international investor class fund profile page does list the sector breakdown at the bottom of the page, located here https://institutional.vanguard.com/VGAp ... undId=0113.

Investor class fund profiles on the institutional site are freely available to anyone, meaning you don't need a login to see the data. But I agree, Vanguard has the data, makes it publicly available, but inexplicably and bizarrely does not integrate non-US data into the portfolio watch tool.

[Dead Man Walking]

Since Vanguard is pushing international equities and bonds in their Target Retirement Funds and Life Strategy Funds, one would think that they would have a better handle on tracking international indices. Perhaps tracking will improve when they begin using blockchain to track indices.

DMW

[in_reality]

Since Vanguard is pushing international equities and bonds in their Target Retirement Funds and Life Strategy Funds, one would think that they would have a better handle on tracking international indices.

I don't think the info in Portfolio Watch has anything to do with their tracking indexes. In fact, their fund holdings seem in line with the index. As to how Portfolio Watch breaks down markets outside the US, it doesn't seem connected to any index I know.

Perhaps tracking will improve when they begin using blockchain to track indices.

Again, tracking is generally for how close the fund follows the index. I haven't seen any evidence that Vanguard is not tracking their index.

Blockchain could be really great tool for tracking data. Past history would be there with current results and we wouldn't have to deal with paying for access to day. I probably won't be around when it gets really useful unless they put data from the past into it. It'd be great if companies released info that way too. I'd think research would be much simpler and more powerful!!!!

[in_reality]

Here's another take, then: what this shows is that regardless of the widespread impression that nowadays international stock is basically up to all the same standards as U.S. stock, obviously it is not easy or cheap for Vanguard to get the same level of information we routinely expect for U.S. stock. The G in GICS stands for "global," so the GICS classification system is supposed to work worldwide. Certainly, the sector composition of international stock is not any deep dark secret, it can't be that hard--but Vanguard doesn't have it. It probably costs extra money or something.

Schwab has it.

This chart displays the percentage of current equity holdings by sector compared to the overall market (S&P Global BMI). Alert is identified for any difference of at least 20% from the market allocation. For more information on Global Industry Classification Standard (GICS) by MSCI click here.

They even break it down by fund ...

The following table shows the detailed breakdown of your equity and mutual fund holdings over the 10 major economic sectors. You should compare your sector diversification to that of the overall market to make sure that your portfolio is in line with the overall market.

It's kind of interesting to see I am 2% under in Information Technology and what is leading to that. I wouldn't expect EWX (small emerging) to by 2X heavier in IT than Vanguard Total International, but I guess there must be some small growth companies in there.

It's probably most useful for people who tilt. Depending on methodology, value tilting can induce a sector tilt and it's interesting to see how various methodologies result in different allocations.