Vanguard Total World

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Vanguard Total World

Post by HotRod140 » Sun May 31, 2009 2:47 pm

One quick question. Would Vanguard Total World ETF (VT) satisfy anyone for the equity portion of thier total portfoilo. Would you have to add a small cap?

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Re: Vanguard Total World

Post by CyberBob » Sun May 31, 2009 3:37 pm

HotRod140 wrote:One quick question. Would Vanguard Total World ETF (VT) satisfy anyone for the equity portion of thier total portfoilo. Would you have to add a small cap?
It satisfies me, and it's the only equity fund I currently own. Why would you need another fund since this one covers almost everything? And by 'almost everything', I refer to you're mentioning that it doesn't include small caps. This is correct, but I'm not overly concerned since they make up such a small portion of a cap-weighted fund.

For example, here's a graph of an S&P 500 fund versus a total market fund. In theory, the more 'total' the better. But looking at that graph, they look close enough in both return and standard deviation that I wouldn't lose much sleep holding either. And Total World actually goes deeper into the mid-cap arena than an S&P 500 fund does, so it's likely an even closer match to a total world cap-weighted index.


Tracking a world index over the long term has looked pretty good too when compared to the S&P 500 and EAFE indexes.

Last edited by CyberBob on Sun May 31, 2009 3:41 pm, edited 1 time in total.

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Post by White Coat Investor » Sun May 31, 2009 3:38 pm

My child's taxable investment account consists of nothing but this fund. The only reason I find it inadequate is there is only one of them so when I TLH I have to get pretty creative.

If you're a lumper it would be fine as a one stop equity fund. Lots of us enjoy slicing and dicing though.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Post by asset_chaos » Sun May 31, 2009 9:04 pm

I'll add another vote for being satisfied with cap-weighted indexing of the world stock markets. If you feel the optional desire for small-cap, then by all means add in a modest holding. In fact, I feel the optional desire for a bit of small-value in my stock holdings, so I have some. But I do keep the bond portion of my portfolio entirely in US dollar denominated funds.

Two other miscellaneous votes---of different sorts---for the total world stock index fund:

(1) In a Journal of Indexes article ( ... ssive.html) Mr Bogle says "you can take an all-market index fund—all U.S. market or all global market as you wish—and do nothing with it; that's the extreme of passive management. And that is the position that I endorse." (my emphasis)

(2) Based on the Vanguard proxy statement, it appears that the hedge fund manager Cliff Assness has about $15 million of his own money invested in total world stock index fund.
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A Nay Sayer

Post by grok87 » Sun May 31, 2009 9:45 pm

I don't like this fund as much as some of you (although I dont think its bad). Personally I would go with 3 funds:

Vanguard Total Stock Market index (VTI)
Vanguard FTSE World ex US (VEU)
Vanguard International Small Cap (VSS)

Couple of thoughts...
1) Splitting between US and ex-US does not harm tax-efficiency in the same way that a Developed Markets/Emerging Markets split does. While countries can migrate in and out of Emerging Markets status, the US ex-US split is not going to change.

2) Market cap weighting is not always the answer. For example consensus is that US investors should hold few if any international bonds (at least without currency hedging). Foreign stocks are riskier than US stocks to US investors because of currency issues (see Cyberbob's first post above). I think the optimum mix to minimize standard deviation is something like 70/30 or 80/20 US/Foreign.

RIP Mr. Bogle.

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Post by gw » Mon Jun 01, 2009 12:48 am

A couple more things to consider:

1) VT has slightly more than half its assets in foreign holdings. Many people choose a smaller allocation to foreign stock. As grok87 mentioned, the case for market-cap weighting may get a little complicated once you add in foreign companies.

2) Investing in foreign stocks is more expensive. Thus VT charges 4 times the expense ratio of VTI, a similar ETF that tracks only the U.S. market. The expense ratio for VT is 0.29%, compared to 0.07% for VTI.

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Post by Ziggy75 » Mon Jun 01, 2009 7:49 am

Might consider using this fund if it droped the purchase and redemption fees....

Total US and FTSE Intl. minus US combine holds about twice as many stocks as Total World. If you want to keep it simple just keep half in one and half in the other.

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Post by Ping Pong » Mon Jun 01, 2009 10:55 am

I hold Total Stock Market Index and FTSE All World ex-US in proportion to market weights. You get a lower expense ratio this way.

An advantage of Total World Index is you don't have to pay capital gains taxes and market impact costs every time there is a US/non-US merger or spinoff or when the CEO decides to move his office from the US or to the US. These happen every once in awhile. The Daimler Chrysler merger was an example. The Daimler Chrysler split-up is another example.

Mergers are often non-taxable events. Unless one of your funds must sell a holding to another of your funds. Then you may owe taxes.

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Post by geekpryde » Tue Jun 02, 2009 7:39 am

This is the only ETF I own, also the only investment I have in a taxable account. I guess this means I like it... 8)

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