New Vanguard ETF's

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JRA
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New Vanguard ETF's

Post by JRA » Thu Jun 24, 2010 9:01 am

A new article on Morningstar indicates that Vanguard is filing to bring out 20 new ETF's, including an S&P Small Cap Value ETF and an International Real Estate ETF. Interesting.

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Post by mudfud » Thu Jun 24, 2010 9:15 am

Thanks for bringing it to our attention.

Here is the link to the article:

http://news.morningstar.com/articlenet/ ... ?id=342010

Edit: Link to Vanguard article where they talk about five ETFs for personal investors.

https://personal.vanguard.com/us/insigh ... t-06242010
Last edited by mudfud on Thu Jun 24, 2010 1:01 pm, edited 1 time in total.
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Post by Rick Ferri » Thu Jun 24, 2010 9:31 am

It's all good. The more choices, the better.

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Post by ScottW » Thu Jun 24, 2010 9:54 am

Rick Ferri wrote:It's all good. The more choices, the better.
True, but it's a little bizarre. After saying that they couldn't get away from the Russell 2000 index fast enough back in the 90s, they've decided to add it back in.

Also, the article on Vanguard's web site doesn't mention the S&P and Russell indexes being available to regular investors (aside from the S&P 500). The Morningstar article says those funds will only be available to institutional investors with a $5 million minimum, but it does include ETF-versions.

If the S&P and Russell ETFs will be available to the regular Joe, I wonder why Vanguard excluded them from their web site article? Vanguard has a slew of existing ETFs that don't have a "regular" mutual fund counterpart, so why not mention the new ETFs? Am I missing anything?
Last edited by ScottW on Thu Jun 24, 2010 10:07 am, edited 1 time in total.

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Post by CrankyManager » Thu Jun 24, 2010 9:56 am

The ex-US Real Estate is an interesting play to pair with existing any REIT holdings you might have.
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Post by GammaPoint » Thu Jun 24, 2010 9:56 am

International REITs? Neat. How many people would split their existing REIT allocation into half domestic/ half international (or along whatever lines your domestic/international split is normally)? How well correlated are international REITs with domestic REITs?

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Post by Rick Ferri » Thu Jun 24, 2010 10:02 am

International real estate would be an allocation within the international equity portion of your portfolio. For example, if you have 30% in international equity, then allocate 10% of that 30% to international RE, which is 3%. The remaining 27% stays in international stock funds.

Assuming you have 50% in stocks and 50% in bonds, this would mean an allocation of 1.5% overall to international RE. Is this allocation worth the effort? I doubt it. But that's for each investor to decide.

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Post by GammaPoint » Thu Jun 24, 2010 10:26 am

Rick Ferri wrote: Assuming you have 50% in stocks and 50% in bonds, this would mean an allocation of 1.5% overall to international RE. Is this allocation worth the effort? I doubt it. But that's for each investor to decide.
Likely to make a big difference in returns? Yeah, probably not. But there's an aesthetic beauty in consistency between domestic/international when one can get it cheaply :)

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Post by Rick Ferri » Thu Jun 24, 2010 10:30 am

True, but the international RE ETF will be 0.35% verses 0.13% for the US REIT ETF.

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Post by GammaPoint » Thu Jun 24, 2010 10:35 am

Rick Ferri wrote:True, but the international RE ETF will be 0.35% verses 0.13% for the US REIT ETF.
That's true. Although do newly issued VG ETFs drop in ER relatively quickly as they attract assets? I don't know the ER history with, say, VSS.

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Post by SSSS » Thu Jun 24, 2010 10:42 am

So there's going to be a:

Vanguard S&P Sm-Cap 600 Val ETF

But there's already a:

Vanguard Small-Cap Value ETF

.... help? :?

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Post by GammaPoint » Thu Jun 24, 2010 10:45 am

What will the portfolio composition of these new funds (the S&P ones) look like? Will they serve as really good TLH alternatives since they cover a different index or will their value/size weightings be too different to really consider them as being similar in this regard?

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Post by CrankyManager » Thu Jun 24, 2010 11:01 am

GammaPoint wrote:
Rick Ferri wrote: Assuming you have 50% in stocks and 50% in bonds, this would mean an allocation of 1.5% overall to international RE. Is this allocation worth the effort? I doubt it. But that's for each investor to decide.
Likely to make a big difference in returns? Yeah, probably not. But there's an aesthetic beauty in consistency between domestic/international when one can get it cheaply :)
DFA introduced international RE a couple of years ago, and Symmetry uses it when building their models using DFA funds. I've always tried to pay attention to what they've done when considering my own long term holdings. Until now it hasn't exactly been easy to track DFA (without being invested with DFA, of course), so I'm intrigued by the ex-US ETF.

(Note that I'm not copying Symmetry/DFA allocations or asset class breakdowns, just studying them. :wink: )

You're right about the consistency, Gamma. It will be an investment I'll consider in the future, that's for sure.
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Post by jeffp » Thu Jun 24, 2010 11:03 am

SSSS wrote:So there's going to be a:

Vanguard S&P Sm-Cap 600 Val ETF

But there's already a:

Vanguard Small-Cap Value ETF

.... help? :?
The funds will track different indexes. On the current Vanguard SCV ETF (VBR):
Vanguard Small-Cap Value ETF (the Fund) is an exchange-traded share class of Vanguard Small-Cap Value Index Fund, which employs a passive management or indexing investment approach designed to track the performance of the MSCI US Small Cap Value Index (the Index).
The S&P 600 Value is a different small-cap value index. The Russell 2000 value index is yet another small-cap value index that another one of the new ETFs will track.
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Post by tfb » Thu Jun 24, 2010 11:06 am

They left out intl value. EFV needs competition.
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Post by jeffp » Thu Jun 24, 2010 11:08 am

GammaPoint wrote:What will the portfolio composition of these new funds (the S&P ones) look like? Will they serve as really good TLH alternatives since they cover a different index or will their value/size weightings be too different to really consider them as being similar in this regard?
Here's a good post by RobertT on the factor loadings of the different value indexes: http://www.bogleheads.org/forum/viewtop ... 7271#37271
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Post by oneleaf » Thu Jun 24, 2010 11:10 am

cool i wonder if Vanguard S&P Sm-Cap 600 Idx ETF will be an ETF share class of Tax Managed Small Cap (same as VEA being a share class of Tax Managed International).

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Post by jeffp » Thu Jun 24, 2010 11:11 am

tfb wrote:They left out intl value. EFV needs competition.
Yeah, when I read "20 new ETFs" I was hoping one might be intl value, or better yet intl small value. Did we really need 4 new growth ETFs? I guess Vanguard doesn't like to play favorites when it comes to asset classes.
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Returns Data:

Post by Barry Barnitz » Thu Jun 24, 2010 11:43 am

Hi:

Although it has been very difficult to find data, we have been attempting to construct annual returns data for Index provider returns on the wiki.

Please see Small Cap Index Returns on the Bogleheads Wiki.

The sidebar contains links to other return series.

regards,
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Post by dumbmoney » Thu Jun 24, 2010 12:00 pm

oneleaf wrote:cool i wonder if Vanguard S&P Sm-Cap 600 Idx ETF will be an ETF share class of Tax Managed Small Cap (same as VEA being a share class of Tax Managed International).
If I'm reading the press release correctly, the answer is no.

But at least the S&P 500 fund will have an ETF share class now. That's something.
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Post by Scorpion » Thu Jun 24, 2010 12:13 pm

ScottW wrote:
Rick Ferri wrote:It's all good. The more choices, the better.
True, but it's a little bizarre. After saying that they couldn't get away from the Russell 2000 index fast enough back in the 90s, they've decided to add it back in.

Also, the article on Vanguard's web site doesn't mention the S&P and Russell indexes being available to regular investors (aside from the S&P 500). The Morningstar article says those funds will only be available to institutional investors with a $5 million minimum, but it does include ETF-versions.

If the S&P and Russell ETFs will be available to the regular Joe, I wonder why Vanguard excluded them from their web site article? Vanguard has a slew of existing ETFs that don't have a "regular" mutual fund counterpart, so why not mention the new ETFs? Am I missing anything?
I agree. Vanguard only mentions 5 new funds/ETFs for "personal" investors.

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Post by drbagel » Thu Jun 24, 2010 12:19 pm

Why so much overlap? With the exception of the muni and real estate etf's the bulk of these offerings are very similar to one of their current products.

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lots of choices

Post by hollowcave2 » Thu Jun 24, 2010 12:29 pm

Lots of choices, but it's a long way from the simple indexing strategy of Bogle. It's nice to have control and slice/dice your way to a personalized portfolio, but it seems to me that the more ETF's you have, the better chance you have at under-performing a broad based index of the market, like the S&P500. But give the people what they want, I guess..... more complications and better chance of under-performance. But you do feel like you have more control of the portfolio, but that seems like getting into the same problems of stock selection and timing. What is your optimal slice and dice strategy?

I'm going to :yawn get some more coffee.

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Re: New Vanguard ETF's

Post by ddb » Thu Jun 24, 2010 12:39 pm

JRA wrote:A new article on Morningstar indicates that Vanguard is filing to bring out 20 new ETF's, including an S&P Small Cap Value ETF and an International Real Estate ETF. Interesting.
Ugh...

I understand they have to do this for marketing purposes and to attract assets, but still, ugh...

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Post by Doc » Thu Jun 24, 2010 12:41 pm

drbagel wrote:Why so much overlap? With the exception of the muni and real estate etf's the bulk of these offerings are very similar to one of their current products.
Different indexes in the same category have what I consider very different performance. The following chart of five small value ETFs used as proxies for the indexes is several months old but illustrates the differences.

Image

With the new products you get to "keep your cake and eat it too" by actively switching between passive index funds. :)
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Post by jpsfranks » Thu Jun 24, 2010 12:51 pm

Meh. I've always thought it was schizophrenic that iShares had ETFs for both the Russell and S&P indices. Now Vanguard's doing the same thing. How many small-cap growth ETFs does the world need?

And here I'd been hoping they'd want to get rid of some of their current overlap and merge Total International and FTSE ex-US. Wishful thinking I suppose.

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Post by drbagel » Thu Jun 24, 2010 12:53 pm

Doc wrote:
drbagel wrote:Why so much overlap? With the exception of the muni and real estate etf's the bulk of these offerings are very similar to one of their current products.
Different indexes in the same category have what I consider very different performance. The following chart of five small value ETFs used as proxies for the indexes is several months old but illustrates the differences.

Image

With the new products you get to "keep your cake and eat it too" by actively switching between passive index funds. :)
They seem awfully close to me. These kinds of differences could be entirely due to chance. There are already so many options for tax loss harvesting within these asset classes. I can't imagine the 6th and 7th small cap value etf will attract that much interest.

Anyway, I suppose they know what they are doing.

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Post by m_j_paquette » Thu Jun 24, 2010 1:03 pm

SSSS wrote:So there's going to be a:

Vanguard S&P Sm-Cap 600 Val ETF

But there's already a:

Vanguard Small-Cap Value ETF

.... help? :?
Just think of it as a handy new feature for tax loss harvesting. Similar enough, but not 'substantially identical.' :idea:

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Post by infecto » Thu Jun 24, 2010 1:04 pm

The more the better in my opinion.

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Post by Oicuryy » Thu Jun 24, 2010 1:22 pm

https://institutional.vanguard.com/VGAp ... sETFExpand
"We recognize that institutional investors have an affinity for certain benchmarks, and our goal is to offer them best-in-class funds based on a choice of leading index providers, including MSCI, FTSE, Russell, and S&P," said Vanguard CEO Bill McNabb.
https://advisors.vanguard.com/VGApp/iip ... sETFExpand
"We recognize that institutional investors and financial advisors may have a preference for certain benchmarks, and our goal is to offer them best-in-class funds with ETF Shares based on a choice of leading index providers, including MSCI, FTSE, Russell, and S&P," said Vanguard CEO Bill McNabb.
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Post by SSSS » Thu Jun 24, 2010 1:38 pm

jeffp wrote: MSCI US Small Cap Value Index
S&P 600 Value is a different small-cap value index
Russell 2000 value index
Are these indexes all tracking basically the same thing & should they have fundamentally identical performance? All else being equal, should I just pick the ETF with the lowest expense ratio?

I was just about to switch from a Target Retirement to a slice & dice portfolio including the existing Vanguard Small-Cap Value ETF, but is there any practical reason to wait for this new one, i.e. less correlation to Total Stock or anything like that?

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Post by Doc » Thu Jun 24, 2010 1:55 pm

SSSS wrote:
jeffp wrote: MSCI US Small Cap Value Index
S&P 600 Value is a different small-cap value index
Russell 2000 value index
Are these indexes all tracking basically the same thing & should they have fundamentally identical performance? All else being equal, should I just pick the ETF with the lowest expense ratio?
Based on the chart I gave above the answer is no. But if what drbagel suggests is true and the performance difference is just noise then the difference in e/r is less than the noise and doesn't matter either. Of course if it is noise then the difference between the e/r of active funds is within the noise band of index funds e/r and so that data is just noise also. :(
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Post by mammonman » Thu Jun 24, 2010 2:20 pm

Was hoping for a Global Bond - maybe someday...

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Post by jeffp » Thu Jun 24, 2010 2:26 pm

SSSS wrote:
jeffp wrote: MSCI US Small Cap Value Index
S&P 600 Value is a different small-cap value index
Russell 2000 value index
Are these indexes all tracking basically the same thing & should they have fundamentally identical performance? All else being equal, should I just pick the ETF with the lowest expense ratio?

I was just about to switch from a Target Retirement to a slice & dice portfolio including the existing Vanguard Small-Cap Value ETF, but is there any practical reason to wait for this new one, i.e. less correlation to Total Stock or anything like that?
They're all small value funds, but since they're tracking different benchmarks, they're not identical. The funds are similar, but certainly less alike than, say, two funds tracking the S&P 500 managed by different companies.

The fund you should choose depends on your particular slice and dice strategy. Are you tilting to small value? How much? This isn't really an "all else being equal" situation (since the funds are not identical, all else is not equal), so you shouldn't necessarily just choose the lowest ER. You could conceivably have lower total expenses by choosing a SCV that did NOT have the lowest ER. A fund might have a slightly higher ER than others available but be very small and valuey, which would mean you would need less of it in your portfolio to get to the desired tilt. There are other factors to consider as well, of course.
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Post by fluffyistaken » Thu Jun 24, 2010 2:28 pm

Any idea on the ETA for these given that the registration statements were filed with SEC today?

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Post by RaleighStClaire » Thu Jun 24, 2010 2:33 pm

jeffp wrote:
tfb wrote:They left out intl value. EFV needs competition.
Yeah, when I read "20 new ETFs" I was hoping one might be intl value, or better yet intl small value. Did we really need 4 new growth ETFs? I guess Vanguard doesn't like to play favorites when it comes to asset classes.
No kidding.

Intl Value, Intl SV, EM V, EM S?, EMSV!?

Cmon Vanguard. Get your head outta your bass. *strangle*
Where's that red one gonna go?

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Post by caklim00 » Thu Jun 24, 2010 2:50 pm

RaleighStClaire wrote:
jeffp wrote:
tfb wrote:They left out intl value. EFV needs competition.
Yeah, when I read "20 new ETFs" I was hoping one might be intl value, or better yet intl small value. Did we really need 4 new growth ETFs? I guess Vanguard doesn't like to play favorites when it comes to asset classes.
No kidding.

Intl Value, Intl SV, EM V, EM S?, EMSV!?

Cmon Vanguard. Get your head outta your bass. *strangle*
I agree. This is beyond irritating to me. I've never understood why institutional investors would want to invest in a particular index just because everyone else does.

I'm very cost conscious, but this does nothing to influence my choices to leave any of my non-Vanguard funds.

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Post by Quidnam » Thu Jun 24, 2010 4:01 pm

mammonman wrote:Was hoping for a Global Bond - maybe someday...
You and me both... It seems like they should fill out their lineup in terms of actual asset classes, as opposed to releasing multiple U.S. stock ETF products that are essentially duplicative.

The ex-US real estate product is certainly interesting, however...

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Post by GammaPoint » Thu Jun 24, 2010 4:59 pm

jeffp wrote:
GammaPoint wrote:What will the portfolio composition of these new funds (the S&P ones) look like? Will they serve as really good TLH alternatives since they cover a different index or will their value/size weightings be too different to really consider them as being similar in this regard?
Here's a good post by RobertT on the factor loadings of the different value indexes: http://www.bogleheads.org/forum/viewtop ... 7271#37271
Thanks jeffp, that's what I was interested in :)

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Re: Returns Data:

Post by BlueEars » Thu Jun 24, 2010 5:04 pm

Barry Barnitz wrote:Hi:

Although it has been very difficult to find data, we have been attempting to construct annual returns data for Index provider returns on the wiki.

Please see Small Cap Index Returns on the Bogleheads Wiki.

The sidebar contains links to other return series.

regards,
Hi Barry, thanks for the data. For SCV the MSCI looks like it did pretty well in the last decade relative to the S&P and Russell. Maybe I should stick with VBR.

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Post by rustymutt » Thu Jun 24, 2010 5:24 pm

tfb wrote:They left out intl value. EFV needs competition.
And they need a micro cap, to compete with IWC, and DFA
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Post by Rick Ferri » Thu Jun 24, 2010 5:41 pm

There are no micro-cap index funds.

See this article:

The Truth About Micro-Cap Index Funds

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Post by natureexplorer » Thu Jun 24, 2010 5:42 pm

20 new ETFs but still no all-world all-cap fund?

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Post by leonard » Thu Jun 24, 2010 6:40 pm

A benefit of multiple similar ETFs in the same asset class is the ability to Tax loss harvest w/i low cost options. Since they are w/i VG family, you can TLH w/o jeopardizing your voyager and/or flagship status. Previously, if you were on the cusp of one or the other voyager status, TLH in to an I shares ETF or other company ETF might put you below the threshhold to qualify for Voyager Select or flagship.

I think the move makes Tax Loss harvesting choices much easier.
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Post by GammaPoint » Thu Jun 24, 2010 6:55 pm

leonard wrote:A benefit of multiple similar ETFs in the same asset class is the ability to Tax loss harvest w/i low cost options. Since they are w/i VG family, you can TLH w/o jeopardizing your voyager and/or flagship status. Previously, if you were on the cusp of one or the other voyager status, TLH in to an I shares ETF or other company ETF might put you below the threshhold to qualify for Voyager Select or flagship.
And I sometimes worry that switching to a non-VG product is going to expose me to an ER that rises over time. But maybe that's not a well founded fear. Are there many instances of ERs rising over time (even if assets increase) in an attempt to maybe lock in people to high ER funds because they have capital gains that they don't want to realize?

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Post by Quidnam » Thu Jun 24, 2010 7:26 pm

natureexplorer wrote:20 new ETFs but still no all-world all-cap fund?
VT / VTWSX is actually pretty close. The underlying index and fund prospectus are flexible enough that they could be extended to include small cap at some point in the future. Given the cap weighting, the actual effect on fund performance would be pretty small (the expense would likely be of greater significance).

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Post by grabiner » Thu Jun 24, 2010 10:28 pm

GammaPoint wrote:International REITs? Neat. How many people would split their existing REIT allocation into half domestic/ half international (or along whatever lines your domestic/international split is normally)?
I was already planning to do that (buying an international real estate fund in my HSA once the HSA gets large enough for a brokerage account), and now I have an even better reason to make the split because of the lower costs.
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Post by Latestarter » Fri Jun 25, 2010 3:33 pm

fluffyistaken wrote:Any idea on the ETA for these given that the registration statements were filed with SEC today?
I, too, was wondering about that, particularly since it's been a couple of years since V filed for approval of a TIPS ETF and we're still waiting.

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Post by livesoft » Fri Jun 25, 2010 5:44 pm

There are already lots of questions on this forum about "Which int'l index fund should I use?", so you can imagine the number of threads that will appear about "Which small cap index fund should I use?"

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Post by natureexplorer » Fri Jun 25, 2010 5:58 pm

livesoft wrote:There are already lots of questions on this forum about "Which int'l index fund should I use?", so you can imagine the number of threads that will appear about "Which small cap index fund should I use?"
Or which muni fund to use.

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