American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund.

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Medlabscientist
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American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund.

Post by Medlabscientist »

In my 403b at work I have a choice between American Funds Europacific Growth Fund R6 VS Vanguard Total International index fund.

The expense ratio on the American fund off the top of my head is maybe .40 higher expense ratio, but it has been beating the crap out of the Vanguard Index fund for as long as I have been watching it. Generally it outperforms the Vanguard Index fund by 1.5-2.0% a year.

The funny thing is I was originally in the Europacific growth fund, but complained to Mass Mutual rep that we did not have index funds available right before the fiduciary rule was about to pass 2 years ago and got a whole bunch of Vanguard Index funds added which has been awesome.

The problem is, while I am happy with the other index funds, it seems like American funds, as long as you are not paying the load fee's which I am 99.9% sure are not present in the 403b plan, seem to be really great at picking stocks.

Has anyone else noticed this? Perhaps index funds are not always the best option when it comes to international stocks?
BYUvol
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by BYUvol »

We had one of these funds, the Blackrock Global Allocation fund (MDLOX), that our 401(k) rep raved about and said it should be our core position, "look how good it did in comparison to the market" and he was right, it performed spectacularly through the great recession and years after that... until it didn't.

After 2012 the S&P 500 passed it from a 2008 starting point, and by 2018, the return of the S&P500 was TWICE that of MDLOX. So he switched up his recommendation to be an Alger's Capital Appreciation fund, and I suspect in 10 years it will be a similar story.
Jags4186
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Jags4186 »

Lots of American Funds questions lately... :confused

Europac Growth fund is an international large cap growth fund.
Vanguard total international is a cap weighted blend fund.

If you compare American Funds’ Europac Growth to Vanguard’s International Large Cap Growth fund, VWIGX, you will see the Vanguard fund has outperformed the American Fund in 1, 3, 5, 10, and 15 year time periods (numbers as of 12/31/18, used class A fund AEPGX without sales load deducted to get performance that far back.)

So if you want an international LCG fund, I would recommend Vanguard’s over American Funds’.

If you want an international total market fund I would not recommend this American Fund.
MotoTrojan
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by MotoTrojan »

Jags4186 wrote: Sat Mar 30, 2019 10:19 am Lots of American Funds questions lately... :confused

Europac Growth fund is an international large cap growth fund.
Vanguard total international is a cap weighted blend fund.

If you compare American Funds’ Europac Growth to Vanguard’s International Large Cap Growth fund, VWIGX, you will see the Vanguard fund has outperformed the American Fund in 1, 3, 5, 10, and 15 year time periods (numbers as of 12/31/18, used class A fund AEPGX without sales load deducted to get performance that far back.)

So if you want an international LCG fund, I would recommend Vanguard’s over American Funds’.

If you want an international total market fund I would not recommend this American Fund.
This. Always need to first make sure you’re comparing apples to apples.
HEDGEFUNDIE
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by HEDGEFUNDIE »

MotoTrojan wrote: Sat Mar 30, 2019 10:22 am
Jags4186 wrote: Sat Mar 30, 2019 10:19 am Lots of American Funds questions lately... :confused

Europac Growth fund is an international large cap growth fund.
Vanguard total international is a cap weighted blend fund.

If you compare American Funds’ Europac Growth to Vanguard’s International Large Cap Growth fund, VWIGX, you will see the Vanguard fund has outperformed the American Fund in 1, 3, 5, 10, and 15 year time periods (numbers as of 12/31/18, used class A fund AEPGX without sales load deducted to get performance that far back.)

So if you want an international LCG fund, I would recommend Vanguard’s over American Funds’.

If you want an international total market fund I would not recommend this American Fund.
This. Always need to first make sure you’re comparing apples to apples.
Disagree.

The first thing OP said is these are his only two options for international funds. How does suggesting a third fund he does not have access to help him?
HEDGEFUNDIE
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by HEDGEFUNDIE »

BYUvol wrote: Sat Mar 30, 2019 10:09 am We had one of these funds, the Blackrock Global Allocation fund (MDLOX), that our 401(k) rep raved about and said it should be our core position, "look how good it did in comparison to the market" and he was right, it performed spectacularly through the great recession and years after that... until it didn't.

After 2012 the S&P 500 passed it from a 2008 starting point, and by 2018, the return of the S&P500 was TWICE that of MDLOX. So he switched up his recommendation to be an Alger's Capital Appreciation fund, and I suspect in 10 years it will be a similar story.
In this case, though, how much underperformance should one endure before admitting that the index fund just isn’t up to par?

Telltale chart shows 23 years of sustained outperformance by the Europacific fund:

Image
MotoTrojan
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by MotoTrojan »

HEDGEFUNDIE wrote: Sat Mar 30, 2019 10:27 am
MotoTrojan wrote: Sat Mar 30, 2019 10:22 am
Jags4186 wrote: Sat Mar 30, 2019 10:19 am Lots of American Funds questions lately... :confused

Europac Growth fund is an international large cap growth fund.
Vanguard total international is a cap weighted blend fund.

If you compare American Funds’ Europac Growth to Vanguard’s International Large Cap Growth fund, VWIGX, you will see the Vanguard fund has outperformed the American Fund in 1, 3, 5, 10, and 15 year time periods (numbers as of 12/31/18, used class A fund AEPGX without sales load deducted to get performance that far back.)

So if you want an international LCG fund, I would recommend Vanguard’s over American Funds’.

If you want an international total market fund I would not recommend this American Fund.
This. Always need to first make sure you’re comparing apples to apples.
Disagree.

The first thing OP said is these are his only two options for international funds. How does suggesting a third fund he does not have access to help him?
I was actually going to go further along this line. This doesn’t mean the OP shouldn’t pick this fund, but the OP should understand that the outperformance is due to a different allocation, not active vs. passive. Thus if some realignments could allow them to move international into say an IRA, they could be better off (assuming they’re an indexer) holding international growth elsewhere.

Furthermore if it starts losing to Total Int, I’d compare it to VG’s growth fund before saying active is doomed.
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oldcomputerguy
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by oldcomputerguy »

Can you provide a link to the chart? This thumbnail is so blurred that it can’t be made out.
HEDGEFUNDIE
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by HEDGEFUNDIE »

oldcomputerguy wrote: Sat Mar 30, 2019 10:38 am Can you provide a link to the chart? This thumbnail is so blurred that it can’t be made out.
https://www.portfoliovisualizer.com/fun ... F29%2F2019
tibbitts
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by tibbitts »

Medlabscientist wrote: Sat Mar 30, 2019 9:51 am In my 403b at work I have a choice between American Funds Europacific Growth Fund R6 VS Vanguard Total International index fund.

The expense ratio on the American fund off the top of my head is maybe .40 higher expense ratio, but it has been beating the crap out of the Vanguard Index fund for as long as I have been watching it. Generally it outperforms the Vanguard Index fund by 1.5-2.0% a year.

The funny thing is I was originally in the Europacific growth fund, but complained to Mass Mutual rep that we did not have index funds available right before the fiduciary rule was about to pass 2 years ago and got a whole bunch of Vanguard Index funds added which has been awesome.

The problem is, while I am happy with the other index funds, it seems like American funds, as long as you are not paying the load fee's which I am 99.9% sure are not present in the 403b plan, seem to be really great at picking stocks.

Has anyone else noticed this? Perhaps index funds are not always the best option when it comes to international stocks?
I always notice when active funds that I can easily access outperform my index funds (which admittedly might not be an exact style/risk match) year after year. Then sometimes I become a believer and invest in those active funds. Then usually those active funds underperform for years after that. Eventually I give up and sell them, at which time they begin outperforming again.
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Nate79
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Nate79 »

I have this same fund in my 401k and I use it vs the lower cost index fund.
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Kenkat
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Kenkat »

If you bump the timeframe down to the last 10 years, the outperformance is much less. That said, it still outperforms. The thing about American Funds is that they are pretty well run active funds - they are low turnover and relatively low cost. I wouldn’t get too hung up on “active” but would focus on the cost difference instead which is not that much. I would be ok using the American Fund mentioned but would also be under no illusion that it will necessarily continue to outperform either.
Last edited by Kenkat on Sat Mar 30, 2019 11:51 am, edited 1 time in total.
Jags4186
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Jags4186 »

HEDGEFUNDIE wrote: Sat Mar 30, 2019 10:27 am
MotoTrojan wrote: Sat Mar 30, 2019 10:22 am
Jags4186 wrote: Sat Mar 30, 2019 10:19 am Lots of American Funds questions lately... :confused

Europac Growth fund is an international large cap growth fund.
Vanguard total international is a cap weighted blend fund.

If you compare American Funds’ Europac Growth to Vanguard’s International Large Cap Growth fund, VWIGX, you will see the Vanguard fund has outperformed the American Fund in 1, 3, 5, 10, and 15 year time periods (numbers as of 12/31/18, used class A fund AEPGX without sales load deducted to get performance that far back.)

So if you want an international LCG fund, I would recommend Vanguard’s over American Funds’.

If you want an international total market fund I would not recommend this American Fund.
This. Always need to first make sure you’re comparing apples to apples.
Disagree.

The first thing OP said is these are his only two options for international funds. How does suggesting a third fund he does not have access to help him?
The OP posited that American Funds “knows how to pick stocks”. It would seem to be that is not the case when compared to the Vanguard Fund. Therefore I would not make the decision to choose the American Fund because he believes the fund managers have some secret strategy to outperform the market. They just happen to be in a market segment that has performed well. Indeed they have underperformed the Vanguard equivalent fund over 1, 3, 5, 10, 15 years.

If OP is choosing to hold his international position in his 403B where these are the only two options then OP needs to decide what asset allocation he wants. If he decides that he wants his international position to be Large Cap Growth then the American Fund is fine. If he does not want to place a bet in the future on Large Cap Growth continuing to beat a blended index then he should choose the Vanguard Index Fund. If International LCV goes on a tear the next 10 years and International LCG flails then the performance will be reversed.
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Dottie57 »

VG total international stock has more stocks and more diversification that AF EuroPac. VG has large cap , midcap and smallcap growth and value. I like the total haystack method over a more limited selection.

I had AF EuroPac for about 15 years in 401k and IRA. It was fine.

The index captures a lot more. Check Callan’s periodic table.
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by HEDGEFUNDIE »

Jags4186 wrote: Sat Mar 30, 2019 11:48 am
HEDGEFUNDIE wrote: Sat Mar 30, 2019 10:27 am
MotoTrojan wrote: Sat Mar 30, 2019 10:22 am
Jags4186 wrote: Sat Mar 30, 2019 10:19 am Lots of American Funds questions lately... :confused

Europac Growth fund is an international large cap growth fund.
Vanguard total international is a cap weighted blend fund.

If you compare American Funds’ Europac Growth to Vanguard’s International Large Cap Growth fund, VWIGX, you will see the Vanguard fund has outperformed the American Fund in 1, 3, 5, 10, and 15 year time periods (numbers as of 12/31/18, used class A fund AEPGX without sales load deducted to get performance that far back.)

So if you want an international LCG fund, I would recommend Vanguard’s over American Funds’.

If you want an international total market fund I would not recommend this American Fund.
This. Always need to first make sure you’re comparing apples to apples.
Disagree.

The first thing OP said is these are his only two options for international funds. How does suggesting a third fund he does not have access to help him?
The OP posited that American Funds “knows how to pick stocks”. It would seem to be that is not the case when compared to the Vanguard Fund. Therefore I would not make the decision to choose the American Fund because he believes the fund managers have some secret strategy to outperform the market. They just happen to be in a market segment that has performed well. Indeed they have underperformed the Vanguard equivalent fund over 1, 3, 5, 10, 15 years.

If OP is choosing to hold his international position in his 403B where these are the only two options then OP needs to decide what asset allocation he wants. If he decides that he wants his international position to be Large Cap Growth then the American Fund is fine. If he does not want to place a bet in the future on Large Cap Growth continuing to beat a blended index then he should choose the Vanguard Index Fund. If International LCV goes on a tear the next 10 years and International LCG flails then the performance will be reversed.
Let's do a quick thought experiment.

Vanguard Total International Stock outperforms American Europac Growth since inception by almost 3% CAGR per year.

OP comes on to BH and asks: "Has anyone else noticed this? Perhaps active funds are not always the best option when it comes to international stocks?"

Would we tell him that he's "placing a bet in the future on a blended index continuing to beat Large Cap Growth"?
Jags4186
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Jags4186 »

HEDGEFUNDIE wrote: Sat Mar 30, 2019 12:18 pm Let's do a quick thought experiment.

Vanguard Total International Stock outperforms American Europac Growth since inception by almost 3% CAGR per year.

OP comes on to BH and asks: "Has anyone else noticed this? Perhaps active funds are not always the best option when it comes to international stocks?"

Would we tell him that he's "placing a bet in the future on a blended index continuing to beat Large Cap Growth"?
No. I would tell him that no matter what segment of the international market does well in the future, by owning the total international fund he would be guaranteed to own some of it.

I have no problem with someone making a bet on a segment. I overweight US and international small cap in my portfolio. But based on the tone of the OPs post, he doesn’t seem to understand the bet he could potentially be making.
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by TropikThunder »

Jags4186 wrote: Sat Mar 30, 2019 12:52 pm
HEDGEFUNDIE wrote: Sat Mar 30, 2019 12:18 pm Let's do a quick thought experiment.

Vanguard Total International Stock outperforms American Europac Growth since inception by almost 3% CAGR per year.

OP comes on to BH and asks: "Has anyone else noticed this? Perhaps active funds are not always the best option when it comes to international stocks?"

Would we tell him that he's "placing a bet in the future on a blended index continuing to beat Large Cap Growth"?
No. I would tell him that no matter what segment of the international market does well in the future, by owning the total international fund he would be guaranteed to own some of it.

I have no problem with someone making a bet on a segment. I overweight US and international small cap in my portfolio. But based on the tone of the OPs post, he doesn’t seem to understand the bet he could potentially be making.
^This. I’m all for people tilting and making personal choices with their portfolios, as long as it is intentional and conscious. When a poster is clearly missing the fact that they are tilting from total market (only Developed, no Emerging; only Large Cap vs all-cap; only Growth vs Blend) then I think the forum should point that out.

If OP wants to bet that EuroPacific Large Cap Growth will continue to outperform Total Int’l, more power to them. But it’s clear from the original post that they don’t know that’s what they would be doing.
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Aak732 »

One point here. Even if we maintain a Large Growth spectrum, the American Fund had a return in 1999 that was twice as much over the Vanguard Growth Index fund.

With the timeline starting in 1999 or 1998 and ending in 2019, the American Fund beats the Index Growth fund in CAGR per year. If you start the timeline in 2000 ending in 2019, the Index Growth fund beats the American fund.

It all depends on the "Start Date".
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by jeffyscott »

Kenkat wrote: Sat Mar 30, 2019 11:36 am If you bump the timeframe down to the last 10 years, the outperformance is much less. That said, it still outperforms. The thing about American Funds is that they are pretty well run active funds - they are low turnover and relatively low cost. I wouldn’t get too hung up on “active” but would focus on the cost difference instead which is not that much. I would be ok using the American Fund mentioned but would also be under no illusion that it will necessarily continue to outperform either.
I had this fund in employer plan. When I was considering rollover, it was one that I thought I might regret losing access to. But after I realized how the huge asset base is, I thought it unlikely to continue to out perform. Looking at it's more recent record was possible confirmation of this for me.

Nothing is certain, of course, but it may be that the fund is now too big to succeed.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
heyyou
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by heyyou »

Half and half of each for a decade to reduce, but not eliminate, the regret about whichever of the two funds will do better. Consider that both may do okay for the long term, as long as the OP just saves enough.

To show my age, I had the same dilemma about Fidelity's Magellan Fund and the S&P500 fund in my 401k, in the early 1980s.
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by mariezzz »

MotoTrojan wrote: Sat Mar 30, 2019 10:34 am
HEDGEFUNDIE wrote: Sat Mar 30, 2019 10:27 am
MotoTrojan wrote: Sat Mar 30, 2019 10:22 am
Jags4186 wrote: Sat Mar 30, 2019 10:19 am Lots of American Funds questions lately... :confused

Europac Growth fund is an international large cap growth fund.
Vanguard total international is a cap weighted blend fund.

If you compare American Funds’ Europac Growth to Vanguard’s International Large Cap Growth fund, VWIGX, you will see the Vanguard fund has outperformed the American Fund in 1, 3, 5, 10, and 15 year time periods (numbers as of 12/31/18, used class A fund AEPGX without sales load deducted to get performance that far back.)

So if you want an international LCG fund, I would recommend Vanguard’s over American Funds’.

If you want an international total market fund I would not recommend this American Fund.
This. Always need to first make sure you’re comparing apples to apples.
Disagree.

The first thing OP said is these are his only two options for international funds. How does suggesting a third fund he does not have access to help him?
I was actually going to go further along this line. This doesn’t mean the OP shouldn’t pick this fund, but the OP should understand that the outperformance is due to a different allocation, not active vs. passive. Thus if some realignments could allow them to move international into say an IRA, they could be better off (assuming they’re an indexer) holding international growth elsewhere.

Furthermore if it starts losing to Total Int, I’d compare it to VG’s growth fund before saying active is doomed.
People may have options to access other funds, via IRAs, other 401k retirement plans from past employers, etc. If they understand Fund X in their retirement account with their current employer is not all that good of an option, they should explore their options for investing in better funds.
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Medlabscientist
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Medlabscientist »

Thank you everyone for all the advice.

I did think the two funds were apple to apple comparison and realize they are not. I think I will take the suggestion offered of doing 50/50 into each of the two funds.
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by MotoTrojan »

Medlabscientist wrote: Sat Mar 30, 2019 10:30 pm Thank you everyone for all the advice.

I did think the two funds were apple to apple comparison and realize they are not. I think I will take the suggestion offered of doing 50/50 into each of the two funds.
Curious, in your US equity holdings do you tilt to growth?
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Medlabscientist
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by Medlabscientist »

MotoTrojan wrote: Sun Mar 31, 2019 1:28 am
Medlabscientist wrote: Sat Mar 30, 2019 10:30 pm Thank you everyone for all the advice.

I did think the two funds were apple to apple comparison and realize they are not. I think I will take the suggestion offered of doing 50/50 into each of the two funds.
Curious, in your US equity holdings do you tilt to growth?
I believe most of the index fund i have are Core/Blend funds. my portfolio is as follows:

balance year to date
American Funds New World Fund $15,370.82 13.86%
Vanguard Small Cap Index Fund $27,936.26 16.18%
Vanguard Tot Intl Stck Indx Fd $25,796.97 10.24%
Vanguard Institutional Indx Fd $28,227.07 13.65%

I try to go 60% USA 40% International, with a tilt towards small and value. However, the value funds in my 403b are all ridiculous so this is basically what I came up with. The idea was to have the 40% international part of my portfolio further broken down into 60% Developed and 40% emerging markets. So I am thinking about now taking the $28,227 in Vanguard institutional index and moving half of it to American funds europacific growth to have something like.

15K American funds emerging markets
15K American funds Europacific growth
15k Vanguard international index fund.
MotoTrojan
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Re: American Funds Europacific Growth Fund R6 has been drastically outperforming Vanguard Total International Index fund

Post by MotoTrojan »

Medlabscientist wrote: Sun Mar 31, 2019 5:55 am
MotoTrojan wrote: Sun Mar 31, 2019 1:28 am
Medlabscientist wrote: Sat Mar 30, 2019 10:30 pm Thank you everyone for all the advice.

I did think the two funds were apple to apple comparison and realize they are not. I think I will take the suggestion offered of doing 50/50 into each of the two funds.
Curious, in your US equity holdings do you tilt to growth?
I believe most of the index fund i have are Core/Blend funds. my portfolio is as follows:

balance year to date
American Funds New World Fund $15,370.82 13.86%
Vanguard Small Cap Index Fund $27,936.26 16.18%
Vanguard Tot Intl Stck Indx Fd $25,796.97 10.24%
Vanguard Institutional Indx Fd $28,227.07 13.65%

I try to go 60% USA 40% International, with a tilt towards small and value. However, the value funds in my 403b are all ridiculous so this is basically what I came up with. The idea was to have the 40% international part of my portfolio further broken down into 60% Developed and 40% emerging markets. So I am thinking about now taking the $28,227 in Vanguard institutional index and moving half of it to American funds europacific growth to have something like.

15K American funds emerging markets
15K American funds Europacific growth
15k Vanguard international index fund.
Mainly asking because I find it interesting you are moving to this growth fund here even though other parts of your allocation, like your Institutional (S&P500) likely got beat out by its growth component. These things happen, they don’t last forever. Value may be the next hot shot. This may be a hasty move is my point, especially when you note you like value.

Do you have holdings in other accounts you could use to further hone in your overall AA?
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