Why Doesn't Vanguard Have Tax Managed Value Funds?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Random Walker
Posts: 4631
Joined: Fri Feb 23, 2007 8:21 pm

Why Doesn't Vanguard Have Tax Managed Value Funds?

Post by Random Walker »

Seems to me that an obvious hole in the Vanguard offerings is tax managed value funds. In particular I would be a big fan of a tax managed small cap value fund. Instead I use the tax managed small cap fund as a proxy. But small growth has historically been a poor performer. I would really like a true value tilt.

Dave
livesoft
Posts: 73522
Joined: Thu Mar 01, 2007 8:00 pm

Post by livesoft »

Picky picky. You ain't satisfied with VTV and VBR??? Just because they don't have "tax-managed" in the name, doesn't mean they are not tax efficient.
Topic Author
Random Walker
Posts: 4631
Joined: Fri Feb 23, 2007 8:21 pm

Livesoft

Post by Random Walker »

what are VTY and VBR? Are they ETFs? I've been shy about expanding my portfolio into the etf world. maybe I shouldn't be.

Dave
Gregory
Posts: 1554
Joined: Tue Feb 20, 2007 2:26 pm

Post by Gregory »

VTV is the LCV ETF http://tinyurl.com/3drztl

VBR is the SCV ETF http://tinyurl.com/yrrpfs
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus
caklim00
Posts: 2284
Joined: Mon May 26, 2008 10:09 am

Post by caklim00 »

I agree a bit picky, but I'm with you on this one. A tax managed small cap value index with ETF would be great. It could be as simple as VBR ex REITs to try and get the qualified dividends close to 100%. I think VBR is about 12% REITs which are essentially equivalent to taxable bonds in terms of tax efficiency. If you wanted to keep the same exposure to REITs, you could just increase VNQ (Vanguard REIT ETF) percentage a bit in your IRA.

I think this would be a worthwhile class to add, but I think Vanguard should focus on geting a small cap international/small cap value international index first.
Alex Frakt
Founder
Posts: 11093
Joined: Fri Feb 23, 2007 1:06 pm
Location: Chicago
Contact:

Re: Why Doesn't Vanguard Have Tax Managed Value Funds?

Post by Alex Frakt »

Random Walker wrote:Seems to me that an obvious hole in the Vanguard offerings is tax managed value funds. In particular I would be a big fan of a tax managed small cap value fund. Instead I use the tax managed small cap fund as a proxy. But small growth has historically been a poor performer. I would really like a true value tilt.

Dave
Vanguard's institutional philosophy is that there is no difference in the expected returns between value and growth (which is why the STAR fund and Vanguard's suggested portfolios contain equal amounts of both).

Combine this with the fact that value stocks are (slightly) less tax efficient because of their typically greater dividends and you can see Vanguard doesn't bother.
richard
Posts: 7961
Joined: Tue Feb 20, 2007 3:38 pm
Contact:

Post by richard »

Total return over the past ten years of VTMSX (tax managed small cap) and Vanguard's small cap value fund are very similar - see this graph

http://cxa.marketwatch.com/Fidelity/Cha ... eriod=10yr
livesoft
Posts: 73522
Joined: Thu Mar 01, 2007 8:00 pm

Re: Livesoft

Post by livesoft »

Random Walker wrote:what are VTY (sic) and VBR? Are they ETFs? I've been shy about expanding my portfolio into the etf world. maybe I shouldn't be.

Dave
VTV is the same as VIVAX and VBR is the same as VISVX
From the number of posts you have made and the context of this particular thread, I just thought you were familiar with Vanguard value index funds. And I thought you were familiar with how to use the Vanguard web site to look up funds. My apologies.
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 12:37 pm
Location: American Gardens Building, West 81st St.

Re: Livesoft

Post by ddb »

livesoft wrote:
Random Walker wrote:what are VTY (sic) and VBR? Are they ETFs? I've been shy about expanding my portfolio into the etf world. maybe I shouldn't be.
VTV is the same as VIVAX and VBR is the same as VISVX
From the number of posts you have made and the context of this particular thread, I just thought you were familiar with Vanguard value index funds. And I thought you were familiar with how to use the Vanguard web site to look up funds. My apologies.
LOL, cranky this morning, eh?!

In any event, I'm with you. The regular index funds are very tax-efficient as-is. No need to have the special "Tax-Managed" term in the fund name.

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
User avatar
SpringMan
Posts: 5421
Joined: Wed Mar 21, 2007 11:32 am
Location: Michigan

Post by SpringMan »

My opinion is Vanguard's tax managed funds are not a good idea. Even Vanguard's own Certified Financial Planners don't recommend them. Why? Because of the 5 year redemption fee. Tax loss harvesting any time within 5 years will trip the redemption fee. These tax managed funds funds were designed prior to the availability of Vanguard's ETFs, they made more sense back then than they do now. If there is room, value funds are best held in tax advantaged accounts.

Best,
Best Wishes, SpringMan
Gregory
Posts: 1554
Joined: Tue Feb 20, 2007 2:26 pm

Post by Gregory »

SpringMan wrote:My opinion is Vanguard's tax managed funds are not a good idea. Even Vanguard's own Certified Financial Planners don't recommend them. Why? Because of the 5 year redemption fee. Tax loss harvesting any time within 5 years will trip the redemption fee. These tax managed funds funds were designed prior to the availability of Vanguard's ETFs, they made more sense back then than they do now. If there is room, value funds are best held in tax advantaged accounts.

Best,
Dr. Bill Bernstein rec'd the TM Int'l fund for those of us who invest primarily in taxable accts. While I haven't been able to TLH from it, I'm still happy with it. Until now there were enough CG's to make a move from it unwise.
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus
PatrickS
Posts: 51
Joined: Sat Feb 24, 2007 6:38 pm
Location: San Diego

Post by PatrickS »

SpringMan wrote:My opinion is Vanguard's tax managed funds are not a good idea. Even Vanguard's own Certified Financial Planners don't recommend them. Why? Because of the 5 year redemption fee. Tax loss harvesting any time within 5 years will trip the redemption fee.
Very good point. That's exactly the problem I have right now. The vast majority of our "losses" in our taxable account are in tax managed small cap and international, but we haven't held either 5 years yet.
Post Reply