September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

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Paul Romano
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September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Paul Romano »

Vanguard Introduces Low-Cost Total World Bond ETF

06 Sep 2018

Vanguard Introduces Low-Cost Total World Bond ETF

VALLEY FORGE, PA (September 6, 2018) – Vanguard today launched Vanguard Total World Bond ETF (BNDW), the industry’s first U.S.-domiciled index ETF offering investors access to the global investment-grade bond universe in a single fund. The new ETF trades on Nasdaq and seeks to track the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index. It has an estimated expense ratio of 0.09%.1

The fund is structured as an ETF of ETFs, investing directly in two Vanguard building-block bond ETFs: Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX). This structure enables the Vanguard Total World Bond ETF to achieve immediate scale by using existing exposure from the underlying ETFs and is expected to result in tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark’s constituents. The approach is similar to Vanguard Total Corporate Bond ETF (VTC), which launched in November, 2017, and invests in Vanguard’s existing short-, intermediate-, and long-term corporate bond ETFs.

“With BNDW, Vanguard is the first firm to offer U.S. investors a single index product with exposure to the entire global investment-grade bond universe,” said Vanguard Chief Investment Officer Greg Davis. “It’s a simple, convenient, and low-cost way to obtain the diversification benefits offered by bonds of many countries and issuers.”

Vanguard’s Fixed Income Group is the investment advisor to Vanguard Total World Bond ETF. Vanguard is one of the world’s largest bond fund managers with $1.4 trillion in assets under management and more than 175 investment professionals across the globe. Through June 2018, Vanguard’s global lineup of 131 fixed income mutual funds and ETFs have experienced more than $54 billion in global cash flow. Vanguard is a pioneer in bond indexing, having launched the first bond index fund, Vanguard Total Bond Market Index Fund (VBTLX), in 1986.

ETF tandem offers low-cost global diversification

Vanguard Total World Bond ETF may also serve as a complement to Vanguard Total World Stock ETF (VT) in investors’ portfolios. VT is Vanguard’s global equity index offering and the industry’s largest global equity ETF at more than $12.4 billion in assets. By combining these two ETFs, investors can now achieve a globally diversified portfolio of more than 20,000 stocks and bonds at an estimated asset-weighted expense ratio of less than 10 basis points.

Low costs across-the-board

For more than 40 years, Vanguard has been driving down the cost of investing. BNDW is another example of Vanguard’s continued commitment to lowering the cost of investing across our entire lineup of mutual funds and ETFs – stock and bond, index and active. Vanguard’s complex-wide asset-weighted average expense ratio of 0.11% remains unmatched by competitors in the industry.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Fclevz »

Sort of a bummer that there isn't a traditional mutual fund option available.

Interesting that the reasoning for making this an ETF-of-ETF's would also have applied to Total World Stock (VT), yet they made that an entirely new fund, rather than just combining Total Stock and Total International Stock. I guess back then ETF's weren't the future yet. :)
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by nisiprius »

1) Can't find the actual relative percentage allocations, but I'll bet that you could hold the same proportions of BND and BNDX and not need to rebalance any more often than once every five years.

2) I didn't know you could have an ETF-of-ETFs. Not shocked, just surprised.

I remember a very strange mutual fund offering once (not from Vanguard). It tracked the NASDAQ 100, and held a portfolio of exactly two assets, something like 99.7% QQQ and 0.3% money market. [Added] Found it. Homestead HNASX, 1.5% expense ratio, 99.9% QQQ and 0.1% money market. It still exists! But it isn't the same as it was.

I wonder if Vanguard will introduce a Total World Bond mutual fund holding BND, BNDX, and a money market fund?
Last edited by nisiprius on Thu Sep 06, 2018 9:56 am, edited 3 times in total.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by CyberBob »

Volume so far, in the first hour of existence, about $11,000.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by starkinthesouth »

I was intrigued when I saw the news release, but I little disappointed when I found out it is just an ETF of 2 ETFs (BND & BNDX). In my opinion it is not worth investing in, especially if you already have both funds in your portfolio as you will lose the flexibility of deciding what allocation (percentage split) to have between the two funds.

Further, I was surprised/disappointed it was so heavy in BNDX. Based on my quick calculation it appears that BNDW is composed of 46.7% BND and 53.3% BNDX (based on 18,275 shares BNDX and 11,075 shares BND). Although, it appears that the expense ratio is the same (or near same if you held their asset allocation separately). At the above asset allocation your expense ratio would be 0.082%. BNDW is listed at 0.09%; the difference is not material in my opinion). However, I'm not interested in that high a percentage of international bonds and am not interested in the added complexity that would come with owning BND and BNDW and determining what the relative exposure is.

Simply stated - I enjoy the flexibility of deciding the split between US and International Bonds and I don't want international bonds to make up 62.8% of my bond portfolio. Easier to just have the 2 separate funds.

Edit to fix math, thanks to spdoublebass catching the mistake.
Last edited by starkinthesouth on Thu Sep 06, 2018 12:14 pm, edited 1 time in total.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by spdoublebass »

starkinthesouth wrote: Thu Sep 06, 2018 10:55 am Based on my quick calculation it appears that BNDW is composed of 37.2% BND and 62.8% BNDX (based on 18,275 shares BNDX and 11,075 shares BND).
May I ask where you found this info? I can't find anything on the Vanguard website. I am not doubting your figures, just want to be able to see it for myself.


I am surprised that it is comprised of 62.8% BNDX. Using William Sharpes method, market weight would be more around 48.5% BNDX. I realize that may still be too high for some, but at least that would be market weight.

I understand that Non US bonds are a large market, but but it's not like they added more EM bonds to represent that market, they only used the 4% inside BNDX.

I wonder how they are determining the market weight.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by mervinj7 »

nisiprius wrote: Thu Sep 06, 2018 9:44 am 2) I didn't know you could have an ETF-of-ETFs. Not shocked, just surprised.
iShares has a set of Allocation ETFs that consist of a portfolio of their ETFs in various ratios. For example, here's the Aggressive Allocation ETF (AOA) that started ten years ago in Nov 2008. I don't like them since they tack on a 0.25% Management Fee on top of the underlying fund's 0.08% ER (and then waive the underlying fee but not the management fee).

https://www.ishares.com/us/products/239 ... cation-etf
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by randomizer »

I wouldn't bother with this as a US Investor (would outside the US though, but non-US-domiciled currency-hedged total world funds have existed for a while).
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by starkinthesouth »

spdoublebass wrote: Thu Sep 06, 2018 11:06 am
starkinthesouth wrote: Thu Sep 06, 2018 10:55 am Based on my quick calculation it appears that BNDW is composed of 37.2% BND and 62.8% BNDX (based on 18,275 shares BNDX and 11,075 shares BND).
May I ask where you found this info? I can't find anything on the Vanguard website. I am not doubting your figures, just want to be able to see it for myself.

Found it here: https://investor.vanguard.com/etf/profi ... o/BNDW/pcf I know this is't going to be exactly what it stays at but for now it is the only thing I found and since it agreed with the expense ration I figure it was mostly accurate.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by spdoublebass »

starkinthesouth wrote: Thu Sep 06, 2018 11:33 am
spdoublebass wrote: Thu Sep 06, 2018 11:06 am
starkinthesouth wrote: Thu Sep 06, 2018 10:55 am Based on my quick calculation it appears that BNDW is composed of 37.2% BND and 62.8% BNDX (based on 18,275 shares BNDX and 11,075 shares BND).
May I ask where you found this info? I can't find anything on the Vanguard website. I am not doubting your figures, just want to be able to see it for myself.

Found it here: https://investor.vanguard.com/etf/profi ... o/BNDW/pcf I know this is't going to be exactly what it stays at but for now it is the only thing I found and since it agreed with the expense ration I figure it was mostly accurate.
Thank you!

Maybe my math is wrong, but I got different figures then you.

The BNDW Fund holds:
18275 shares of BNDX
11075 shares of BND

In dollars that would mean:
18275 x $54.74 (share price of BNDX) = $1,000,373.50
11075 x $79.14 (share price of BND) = $876,475.50

That would mean:
BNDX = 53.3%
BND = 46.7%

This would be closer to market weight.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by starkinthesouth »

spdoublebass wrote: Thu Sep 06, 2018 12:03 pm
starkinthesouth wrote: Thu Sep 06, 2018 11:33 am
spdoublebass wrote: Thu Sep 06, 2018 11:06 am
starkinthesouth wrote: Thu Sep 06, 2018 10:55 am Based on my quick calculation it appears that BNDW is composed of 37.2% BND and 62.8% BNDX (based on 18,275 shares BNDX and 11,075 shares BND).
May I ask where you found this info? I can't find anything on the Vanguard website. I am not doubting your figures, just want to be able to see it for myself.
Found it here: https://investor.vanguard.com/etf/profi ... o/BNDW/pcf I know this is't going to be exactly what it stays at but for now it is the only thing I found and since it agreed with the expense ration I figure it was mostly accurate.
Thank you!

Maybe my math is wrong, but I got different figures then you.

The BNDW Fund holds:
18275 shares of BNDX
11075 shares of BND

In dollars that would mean:
18275 x $54.74 (share price of BNDX) = $1,000,373.50
11075 x $79.14 (share price of BND) = $876,475.50

That would mean:
BNDX = 53.3%
BND = 46.7%

This would be closer to market weight.
Agreed my math was not accurate, will update my post. Thanks
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by spdoublebass »

starkinthesouth wrote: Thu Sep 06, 2018 12:09 pm
Agreed my math was not accurate, will update my post. Thanks
I make so many mistakes calculating stuff it's crazy. I just wanted to make sure. With this ETF of ETF structure it gets confusing fast.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by mervinj7 »

spdoublebass wrote: Thu Sep 06, 2018 12:03 pm That would mean:
BNDX = 53.3%
BND = 46.7%
This would be closer to market weight.
Eff Weighted ER: .533*0.11%+.467*.05% =0.082%
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Whakamole »

One question: since this is an ETF-of-ETFs, if this fund took off, could Vanguard redeem creation units and have an ETF that owns the bonds directly without it being a taxable event?

I wonder if that is the reason for starting off this way - ETF-of-ETFs is going to be very cheap to run, and has the potential to own securities directly once that becomes economical for Vanguard.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by whodidntante »

Expense ratios are so 2017.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by spdoublebass »

Well, I jumped in to this new ETF.
I had such a low amount in BND and BNDX that it won't make much difference.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

whodidntante wrote: Thu Sep 06, 2018 2:02 pm Expense ratios are so 2017.
3 fund portfolio is what's 2017

With VT's expense ratio where it's at and now this new fund all one needs to be globally diversified at market cap is VT+BNDW.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by nisiprius »

So, when do they announce a VT + BNDW ETF-of-ETFs?
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

nisiprius wrote: Thu Sep 06, 2018 5:07 pm So, when do they announce a VT + BNDW ETF-of-ETFs?
:)
Most people prefer to have their stock/bond ratio at levels different from market cap.

Interestingly though, the market cap ratio currently appears to be close to commonly recommended 60/40 ;)
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by MnD »

I don't think "biggest debtors", be it individual issuers or countries is a good criteria for weighting bond investment selections.
Does the fact that General Electric and the Japanese Treasury have issued mountains of debt make them good picks for major positions in your bond fund? It's a very different situation than having very large and extremely profitable companies holding the biggest positions in an equity index fund.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by spdoublebass »

nisiprius wrote: Thu Sep 06, 2018 5:07 pm So, when do they announce a VT + BNDW ETF-of-ETFs?

I think they might one day do an ETF that tracks Global Market weight.
So for example right now that would be:
57.8% VT
42.2% BNDW

William Sharpe wrote a lot about this as I'm sure you know. I'm still (hopefully) a long way from retirement. I follow Global Weights now, I'm considering from a certain age holding it indefinitely. Right now though I want less bonds in my AA.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

MnD wrote: Thu Sep 06, 2018 5:16 pm I don't think "biggest debtors", be it individual issuers or countries is a good criteria for weighting bond investment selections.
You do not think this information is priced in?
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by columbia »

In terms of ETFs of ETFs:

That’s how the currency hedged ETFs from iShares operate: they own the underlying index ETF (in question) + the currency hedge aspect. Check the holdings for HEFA:
https://www.ishares.com/us/products/259 ... i-eafe-etf
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Ping Pong »

Vulcan wrote: Thu Sep 06, 2018 5:04 pm
With VT's expense ratio where it's at and now this new fund all one needs to be globally diversified at market cap is VT+BNDW.
Whoa, slow down. Bndw in choosing its index made a conscious choice to underweight Tips. You’ll have to use 3 funds to get market weight.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

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Ping Pong wrote: Thu Sep 06, 2018 5:58 pm Whoa, slow down. Bndw in choosing its index made a conscious choice to underweight Tips. You’ll have to use 3 funds to get market weight.
In a global market weight bond portfolio TIPS currently represent less than 4% (~50% of ~8% they represent in the US government debt marketable securities - and that does not include corporate and municipal debt, pushing the share TIPS represent even lower).

https://treasurydirect.gov/govt/reports ... 072018.prn

In an 60/40 stocks/bonds portfolio they would be less than 1% of total holdings.
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Vanguard Total World Bond ETF

Post by yousha »

[Thread merged into here, see below. --admin LadyGeek]

Any thoughts? Secondly, possibility of a mutual Fund by Vanguard matching this ETF in the future.
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Re: Vanguard Total World Bond ETF

Post by fortyofforty »

There are not a lot of fans of international bonds on this forum. I don't know enough not to be a fan. If I needed to add a bond fund and believed in the power of diversification I might be interested. If I were concerned about the tax situation with foreign debt or view bond holdings as a relatively stable counter to stocks, I would probably look elsewhere. I will keep an eye on it for now, though.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by LadyGeek »

I merged yousha's thread into the on-going discussion.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Wm_o_o_o »

Fclevz wrote: Thu Sep 06, 2018 9:42 am Sort of a bummer that there isn't a traditional mutual fund option available.
The EUR / GBP / etc versions of this have been around for a few years as highly regarded traditional mutual fund(s).

To quote Morningstar UK "The global multisector nature of Vanguard Bond Index GBP Hedged is designed to make it work as the central--perhaps the only--developed fixed-income element in a portfolio."

My bold

The EUR / GBP funds do hold actual bonds, my guess is the fund-of-funds ETF is just so they can get the thing going quickly.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by UpperNwGuy »

Has Vanguard ever previously created an ETF without first creating a mutual fund? Could this be the wave of the future at Vanguard? If so, it would mesh well with Vanguard's efforts to move investors from the old mutual fund platform to the new brokerage platform.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by vineviz »

UpperNwGuy wrote: Fri Sep 07, 2018 6:00 am Has Vanguard ever previously created an ETF without first creating a mutual fund?
Yes. Many times.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by EyeDee »

.
UpperNwGuy,

Yes, the Total Corporate Bond ETF (VTC) created November 2017 is a corporate bond ETF made up of other corporate bond funds that only has an ETF version. Most of the rest of Vanguard's ETF's have other fund shares. However, it may appear that they do not have other fund shares because in many cases the only fund shares are Institutional shares that do not show on the Vanguard Investor site that most of us use to access Vanguard information.
UpperNwGuy wrote: Fri Sep 07, 2018 6:00 am Has Vanguard ever previously created an ETF without first creating a mutual fund? Could this be the wave of the future at Vanguard? If so, it would mesh well with Vanguard's efforts to move investors from the old mutual fund platform to the new brokerage platform.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by pokebowl »

nisiprius wrote: Thu Sep 06, 2018 5:07 pm So, when do they announce a VT + BNDW ETF-of-ETFs?
I feel the sarcasm, but I do wonder how far brokerage companies will push ETF wrappers in the future. Here we currently have an ETF that follows two additional ETFs (BNDX/BND) which themselves are a share class of two corresponding mutual funds. Now we just need BNDW to be included in some of the Vanguard LifeStrategy mututal funds or TDFs and the loop will be complete.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by MnD »

Vulcan wrote: Thu Sep 06, 2018 5:18 pm
MnD wrote: Thu Sep 06, 2018 5:16 pm I don't think "biggest debtors", be it individual issuers or countries is a good criteria for weighting bond investment selections.
You do not think this information is priced in?
No. Exhibit A is Japanese Treasury bonds which, if you index, are going to be your biggest position in a total international bond fund.
Bond yields reflect many things including internal monetary policy and deeply ingrained domestic cultural practices which have little or nothing to do with whether a bond is a good investment or not from the perspective of an individual investor.

JGB 2 Year Yield -0.11%
JGB 5 Year Yield -0.08%
JGB 10 Year Yield 0.10%
https://www.bloomberg.com/markets/rates ... onds/japan
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

MnD wrote: Fri Sep 07, 2018 11:19 am
Vulcan wrote: Thu Sep 06, 2018 5:18 pm You do not think this information is priced in?
No. Exhibit A is Japanese Treasury bonds which, if you index, are going to be your biggest position in a total international bond fund.
Bond yields reflect many things including internal monetary policy and deeply ingrained domestic cultural practices which have little or nothing to do with whether a bond is a good investment or not from the perspective of an individual investor.
Be that as it may, foregoing international bonds was a losing bet 5 years ago.

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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by pascalwager »

Ping Pong wrote: Thu Sep 06, 2018 5:58 pm
Vulcan wrote: Thu Sep 06, 2018 5:04 pm
With VT's expense ratio where it's at and now this new fund all one needs to be globally diversified at market cap is VT+BNDW.
Whoa, slow down. Bndw in choosing its index made a conscious choice to underweight Tips. You’ll have to use 3 funds to get market weight.
The two bond funds Sharpe uses in his risky world portfolio don't include TIPS either; but his overall portfolio does include a personally determined riskless allocation to TIPS--0 to 100% of the overall portfolio.

As a retiree, I don't like the longer maturity of the new world bond fund and would only combine it with a much shorter maturity fund for a maximum maturity of five years.
VT 60% / VFSUX 20% / TIPS 20%
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by pascalwager »

pascalwager wrote: Sat Sep 08, 2018 3:13 pm
Ping Pong wrote: Thu Sep 06, 2018 5:58 pm
Vulcan wrote: Thu Sep 06, 2018 5:04 pm
With VT's expense ratio where it's at and now this new fund all one needs to be globally diversified at market cap is VT+BNDW.
Whoa, slow down. Bndw in choosing its index made a conscious choice to underweight Tips. You’ll have to use 3 funds to get market weight.
The two bond funds Sharpe uses in his risky world portfolio don't include TIPS either; but his overall portfolio does include a personally determined riskless allocation to TIPS--0 to 100% of the overall portfolio.

As a retiree, I don't like the longer maturity of the new world bond fund and would only combine it with a much shorter maturity fund for a maximum maturity of five years.
I'd like to add that basic living expenses would be covered by the TIPS and any pension/SS. Then, if VG offered a World Bond/Stock Fund as per Sharpe, then many retirees would have access to a very simple risky investment. This would be an alternative to the VG TR Income Fund.
VT 60% / VFSUX 20% / TIPS 20%
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by arf30 »

I wouldn't mind an ETF of VTI/VXUS (which VT is not).
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Vulcan
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

arf30 wrote: Sat Sep 08, 2018 5:27 pm I wouldn't mind an ETF of VTI/VXUS (which VT is not).
In what ways would it be better than VT?
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Wm_o_o_o »

pokebowl wrote: Fri Sep 07, 2018 10:58 am
nisiprius wrote: Thu Sep 06, 2018 5:07 pm So, when do they announce a VT + BNDW ETF-of-ETFs?
I feel the sarcasm, but I do wonder how far brokerage companies will push ETF wrappers in the future. Here we currently have an ETF that follows two additional ETFs (BNDX/BND) which themselves are a share class of two corresponding mutual funds. Now we just need BNDW to be included in some of the Vanguard LifeStrategy mututal funds or TDFs and the loop will be complete.
The EUR / GBP equivalent *is* the core bond holding in non USA LifeStrategy / Target Retirement funds.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Wm_o_o_o »

MnD wrote: Fri Sep 07, 2018 11:19 am
Vulcan wrote: Thu Sep 06, 2018 5:18 pm
MnD wrote: Thu Sep 06, 2018 5:16 pm I don't think "biggest debtors", be it individual issuers or countries is a good criteria for weighting bond investment selections.
You do not think this information is priced in?
No. Exhibit A is Japanese Treasury bonds which, if you index, are going to be your biggest position in a total international bond fund.
Bond yields reflect many things including internal monetary policy and deeply ingrained domestic cultural practices which have little or nothing to do with whether a bond is a good investment or not from the perspective of an individual investor.

JGB 2 Year Yield -0.11%
JGB 5 Year Yield -0.08%
JGB 10 Year Yield 0.10%
https://www.bloomberg.com/markets/rates ... onds/japan
Shouldn't you look at the Index the ETF is going to be following before you say what you think it will follow ?

Hint: there isn't that much Japan in it.

Have a look at https://global.vanguard.com/portal/site ... ocId=13281 to get an idea
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by siamond »

Will ponder about switching to it by the end of the year, as my IPS dictates. This is very tempting. Plain and simple, no need to fiddle with multiple bond funds, sounds all good to me.

As usual with diversification, my approach is always to maximize diversification by default, hence to ask "is there a good reason to NOT go worldwide" as opposed to the home-country biased "is there a good reason to add ex-US to my domestic investments". After running some backtests with Citigroup/FTSE and Barclays bonds indices, I just don't see any such reason.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by MJW »

Vulcan wrote: Sat Sep 08, 2018 9:05 pm
arf30 wrote: Sat Sep 08, 2018 5:27 pm I wouldn't mind an ETF of VTI/VXUS (which VT is not).
In what ways would it be better than VT?
VTI/VXUS combine to hold more stocks, if you believe that to be an advantage.

VTI/VXUS would rebalance between the two funds, whereas VT would just shift with the market, if you believe that the ability to rebalance would be an advantage.

I don't know that either aspect would objectively make such an opportunity "better" but an argument could be made for it.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

MJW wrote: Tue Sep 11, 2018 1:34 pm VTI/VXUS combine to hold more stocks, if you believe that to be an advantage.

VTI/VXUS would rebalance between the two funds, whereas VT would just shift with the market, if you believe that the ability to rebalance would be an advantage.

I don't know that either aspect would objectively make such an opportunity "better" but an argument could be made for it.
It is true that VT holds less stocks (8,116) than a VTI+VXUS combo (3,654+6,354). I anticipated this argument, but I am not sure how much of a difference the additional 2,000 of what are likely micro-caps make. They probably represent a microscopic portion of the total portfolio.

For me personally, it doesn't make enough of a difference. I trust Vanguard that 8,000 stocks covering all caps in the entire world as per FTSE Global All Cap Index is a good enough approximation of the world market.

I am not sure I understand the second argument re: rebalancing. Both funds would fluctuate with the market and not have to purposely rebalance, just like BNDW.

I do not believe there is any practical difference for the fund shareholders whether Vanguard structures the fund as ETF of ETFs (like BNDW), or not (like VT). We hold VT in IRAs and would gladly hold BNDW if it was available in the employer-sponsored accounts where the bond portion of our portfolio is held.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by MJW »

Vulcan wrote: Tue Sep 11, 2018 1:48 pm
MJW wrote: Tue Sep 11, 2018 1:34 pm VTI/VXUS combine to hold more stocks, if you believe that to be an advantage.

VTI/VXUS would rebalance between the two funds, whereas VT would just shift with the market, if you believe that the ability to rebalance would be an advantage.

I don't know that either aspect would objectively make such an opportunity "better" but an argument could be made for it.
It is true that VT holds less stocks (8,116) than a VTI+VXUS combo (3,654+6,354). I anticipated this argument, but I am not sure how much of a difference the additional 2,000 of what are likely micro-caps make. They probably represent a microscopic portion of the total portfolio.

For me personally, it doesn't make enough of a difference. I trust Vanguard that 8,000 stocks covering all caps in the entire world as per FTSE Global All Cap Index is a good enough approximation of the world market.

I am not sure I understand the second argument re: rebalancing. Both funds would fluctuate with the market and not have to purposely rebalance, just like BNDW.

I do not believe there is any practical difference for the fund shareholders whether Vanguard structures the fund as ETF of ETFs (like BNDW), or not (like VT). We hold VT in IRAs and would gladly hold BNDW if it was available in the employer-sponsored accounts where the bond portion of our portfolio is held.
Yeah, I don't believe more automatically equals better in this case, either. But it's a common argument. Either way you are getting a ton of stocks.

Regarding the rebalancing, if VTI/VXUS were to be held at fixed weights (e.g. 60/40 as in the LS, TD funds) wouldn't they need to rebalance if individual fund performances throw the allocation out of whack? VT doesn't need to because it's based on market cap. It just drifts along with the market. That doesn't have to be the case with a VTI/VXUS combination.

I could see this sort of offering being useful for investors that would like to use an approach similar to that of the Lifestrategy funds, but using different stock/bond percentages...i.e 90/10. Granted, they would still need to hold more than one fund to accomplish it but it would take some of the need to manage US/International allocations out of the equation.
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

MJW wrote: Tue Sep 11, 2018 2:00 pm Regarding the rebalancing, if VTI/VXUS were to be held at fixed weights (e.g. 60/40 as in the LS, TD funds) wouldn't they need to rebalance if individual fund performances throw the allocation out of whack? VT doesn't need to because it's based on market cap. It just drifts along with the market. That doesn't have to be the case with a VTI/VXUS combination.
It doesn't *have* to be if weights different from market cap are used, but that is the case for BNDW, which holds BND and BNDX at market weights.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by MJW »

Vulcan wrote: Tue Sep 11, 2018 2:22 pm
MJW wrote: Tue Sep 11, 2018 2:00 pm Regarding the rebalancing, if VTI/VXUS were to be held at fixed weights (e.g. 60/40 as in the LS, TD funds) wouldn't they need to rebalance if individual fund performances throw the allocation out of whack? VT doesn't need to because it's based on market cap. It just drifts along with the market. That doesn't have to be the case with a VTI/VXUS combination.
It doesn't *have* to be if weights different from market cap are used, but that is the case for BNDW, which holds BND and BNDX at market weights.
If it was going to be market weight I'd just hold VT then, unless the theoretical fund was cheaper. Either way, not much point in further discussing something that probably won't even happen. :happy
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Re: September 6,2018-Vanguard Introduces Low-Cost Total World Bond ETF

Post by Vulcan »

MJW wrote: Tue Sep 11, 2018 2:28 pm If it was going to be market weight I'd just hold VT then, unless the theoretical fund was cheaper. Either way, not much point in further discussing something that probably won't even happen. :happy
Just trying to understand why someone would hold fund of funds, but would not hold the regular version.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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