Vanguard Total World Stock (VTWAX) and All-World ex-US Small Cap Admiral Shares (VFSAX) now available (February 7)

[pdavi21]

I am going to guess that the average expense ratio of the two funds is .07%. .10% is almost negligible.

If 0.1% was negligible we wouldn't be rejoicing so hard over the introduction of these Admiral share classes.

but 0.03% is pretty close to negligible.

On 50k, making 6%, over 10 years, it will cost you 150 in today dollars. That's a credit card sign up bonus. Unless you lose more money by tracking error, I'd say it's a bit above negligible.

[retiringwhen]

I am going to guess that the average expense ratio of the two funds is .07%. .10% is almost negligible.

If 0.1% was negligible we wouldn't be rejoicing so hard over the introduction of these Admiral share classes.

but 0.03% is pretty close to negligible.

On 50k, making 6%, over 10 years, it will cost you 150 in today dollars. That's a credit card sign up bonus. Unless you lose more money by tracking error, I'd say it's a bit above negligible.

You can easily have a 5 times bigger impact depending whether or not you bought it on a random Monday or a Tuesday. $150 on $50K over 10 years IS noise. I love to get my ER as low as anyone, but the law of diminishing marginal returns set in somewhere around 0.2% (full disclosure, my fully allocated ER for all moneys in stock, bonds and money markets is under 0.05%)

Heck, I sold VSS today at around 1pm, and it went up another 10 cents after I finished the sale. That was a 0.1% drift in 2 hours.

[jibantik]

Amazing news. Conversion in process. LET'S GO!!!!

[oneleaf]

Been waiting for this for years!

[Drovor]

Went smooth for me. All setup with VTWAX.

[xb7]

I am going to guess that the average expense ratio of the two funds is .07%. .10% is almost negligible.

If 0.1% was negligible we wouldn't be rejoicing so hard over the introduction of these Admiral share classes.

but 0.03% is pretty close to negligible.

On 50k, making 6%, over 10 years, it will cost you 150 in today dollars. That's a credit card sign up bonus. Unless you lose more money by tracking error, I'd say it's a bit above negligible.

You can easily have a 5 times bigger impact depending whether or not you bought it on a random Monday or a Tuesday. $150 on $50K over 10 years IS noise. I love to get my ER as low as anyone, but the law of diminishing marginal returns set in somewhere around 0.2% (full disclosure, my fully allocated ER for all moneys in stock, bonds and money markets is under 0.05%)

Heck, I sold VSS today at around 1pm, and it went up another 10 cents after I finished the sale. That was a 0.1% drift in 2 hours.

The .03% difference is annual, and thus compounded over time. The 0.1% drift is a one-time thing, and not something that an investor can control --- unless you think you have some sort of market timing edge.

It's true that 0.03% isn't much on a relative basis, and if the portfolio size is small, really no big deal. But for larger portfolios, in a boglehead universe I think you're typically talking about replacing all of your stock holdings with this one fund. Compound that over many years, and it could add up to a significant amount. One of the ways that people build wealth is by being thrifty.

It also puzzles me. The only difference between owning VTWAX and a proportional amount of VTSAX + VTIAX is that with VTWAX you've got someone else keeping these in relative balance to each other. Well, and maybe just a touch more bookkeeping simplicity in owning one vs. two funds to do the same job I guess. IMO 0.03% is a hefty fee in a Vanguard context JUST to do that.

I'm not suggesting that VTWAX is a poor purchase or that an EP of 0.10% is a high one or anything like that. Just that I don't find it a compelling purchase; keeping VTSAX+VTIAX in proportion isn't difficult, and possibly gives me some flexibility in future that I'll want (?). I guess the downside to THAT might be an infrequent temptation to tinker with the ratios. This is where the "stay the course" mantra comes in.

[ThatGuy]

So how do places like Google Finance track mutual funds; they aren't listed on stock exchanges I believe?

I'm mostly wondering when Excel will update to allow me to pull in prices for the new funds.

[jhfenton]

So how do places like Google Finance track mutual funds; they aren't listed on stock exchanges I believe?

I'm mostly wondering when Excel will update to allow me to pull in prices for the new funds.

I don't know when M* and Google will have them in their data set. Yahoo has the tickers and correct pricing, but not the names. Yahoo shows no name for VTWAX, and shows the defunct Victory Select Fund name for VFSAX (even though it has the right price).

I use the SMF Add-in to pull Yahoo data into Excel, so I'm getting the correct price, just not the correct name. (There are some threads on Bogleheads.org discussing the SMF Add-in.)

I sent a message to M* asking them to please add the new Admiral Shares, particularly VTWAX and VFSAX. The portfolio data and holdings match existing funds, so it should be an easy add. (But I don't expect much from M* these days. Their IT and systems capabilities are stuck in the 90's.)

[AHTFY]

The .03% difference is annual, and thus compounded over time. The 0.1% drift is a one-time thing, and not something that an investor can control --- unless you think you have some sort of market timing edge.

It's true that 0.03% isn't much on a relative basis, and if the portfolio size is small, really no big deal. But for larger portfolios, in a boglehead universe I think you're typically talking about replacing all of your stock holdings with this one fund. Compound that over many years, and it could add up to a significant amount. One of the ways that people build wealth is by being thrifty.

It also puzzles me. The only difference between owning VTWAX and a proportional amount of VTSAX + VTIAX is that with VTWAX you've got someone else keeping these in relative balance to each other. Well, and maybe just a touch more bookkeeping simplicity in owning one vs. two funds to do the same job I guess. IMO 0.03% is a hefty fee in a Vanguard context JUST to do that.

I'm not suggesting that VTWAX is a poor purchase or that an EP of 0.10% is a high one or anything like that. Just that I don't find it a compelling purchase; keeping VTSAX+VTIAX in proportion isn't difficult, and possibly gives me some flexibility in future that I'll want (?). I guess the downside to THAT might be an infrequent temptation to tinker with the ratios. This is where the "stay the course" mantra comes in.

You are correct, for the most part, but I assume that the 0.03% difference will decrease and perhaps disappear completely over the next few years.

If you are currently in VTSAX+VTIAX, probably no reason to switch unless you really prefer the simplicity of one fund vs two. But for new investors, I'd recommend VTWAX over VTSAX+VTIAX.

[bluquark]

VTWAX enables clean dividend reinvestment and automatic investment while perfectly tracking market cap. That alone is worth the ER in my opinion.

We are way past the point of diminishing returns on ER at this point. Once ERs got to 15 bps they got overwhelmed by other factors, but we continue to obsess over them out of habit.

[yogesh]

Will Blackrock, Fidelity and Schwab follow world cap index funds like VTWAX?

Over time as AYM grows VTWAX will become way cheaper.

[retiringwhen]

VTWAX enables clean dividend reinvestment and automatic investment while perfectly tracking market cap. That alone is worth the ER in my opinion.

We are way past the point of diminishing returns on ER at this point. Once ERs got to 15 bps they got overwhelmed by other factors, but we continue to obsess over them out of habit.

That is why I am putting it as my sole fund in the second tier (in asset size) accounts we hold. I want to put one fund in the account on dividend re-investment and forget about them except when I have opportunities to add to the account.... some of those accounts may never get touched again until they get inherited by my kids if all goes well....

[jotun]

I currently have ~$75k of VSS in my Roth IRA. I don't like dealing with ETFs for my retirement accounts, mainly because of always having leftover money due to the per-share cost. I also like the simplicity of mutual funds and the fire-and-forget mentality, not worrying about bid/ask spreads and getting in a market order on time, etc.

I've read threads about basis points and, to me, 3 BP isn't that much in the real world if you get convenience in return. But is there any other reason why I shouldn't sell my VSS shares and immediately buy VFSAX in its place? Concerns about a new fund not tracking with its target, or some other thing other than the fundamental differences between ETFs and MFs?

Thanks.

[North Borders]

As a new(ish) investor gobbling up the wisdom of this site, would you folks recommend the new VTWAX over holding exclusively VTSAX in my Roth? I have some VTIAX and VFWSX exposure in my two 401k accounts.

[jhfenton]

I've read threads about basis points and, to me, 3 BP isn't that much in the real world if you get convenience in return. But is there any other reason why I shouldn't sell my VSS shares and immediately buy VFSAX in its place? Concerns about a new fund not tracking with its target, or some other thing other than the fundamental differences between ETFs and MFs?

VFSAX isn't really a new mutual fund. It's a new share class. It has a proportional claim to the same pool of invested assets as VFSVX and VSS. There is no runway for it to get rolling like a new, new fund.

The only caveat I'd make in converting is to pick a day when VSS is higher and trading at a premium (or at least not a discount) to NAV. Lately, VSS has been trading at a discount most days, so I haven't moved my $190K in VSS to VFSAX yet. You can watch the VSS.IV for a general idea of whether it's a good day.

I've written about it a few times, but I actually do arbitrage with VSS and VFSVX/VFSAX when I see the opportunity: selling VSS at a premium, buying the mutual fund, and then converting the mutual fund back to VSS at NAV. I average about 0.5% on each round trip--in other words, I end up with 0.5% more shares of VSS than I started with.

Last night, VSS closed at $100.21, and Vanguard reported its NAV at $100.47. So you would have lost ~25 bp if you made the swap near the close yesterday.

[arf30]

Looking at the cost basis tab in Vanguard I can see my shares of VTIAX only have a small gain - I could easily exchange that for VTWAX. Problem is I'll still be left with large gains in VTSAX that I'll probably never be able to get rid of, effectively leaving me with a large US tilt forever even if I invest all future income and dividends in VTWAX.

[jotun]

The only caveat I'd make in converting is to pick a day when VSS is higher and trading at a premium (or at least not a discount) to NAV. Lately, VSS has been trading at a discount most days, so I haven't moved my $190K in VSS to VFSAX yet. You can watch the VSS.IV for a general idea of whether it's a good day.

This is very helpful, and honestly not something I would have considered. Thanks for the info! Looks like you're in a similar state, but with more at stake.

[dster]

Yahoo Finance and Morningstar are now showing VFSAX as a Vanguard fund instead of Victory Select.

[jhfenton]

Yahoo Finance and Morningstar are now showing VFSAX as a Vanguard fund instead of Victory Select.

M* has had VFSAX in with the right name and basic portfolio information for a couple of days. They have not imported the performance history from VFSAX yet, so the charts only go back to 2/7/19. VTWAX is still MIA on M*.

Yahoo Finance has had the pricing on VFSAX correct since the morning of February 8, and they have the correct name in most places, but Victory Select Fund still shows up in few random places. Yahoo has the pricing for VTWAX, but they just call it "VANGUARD INTL EQUITY INDEX FUND", which is actually the parent fund company, not the fund name.

[siamond]

And GoogleFinance still doesn't recognize VFSAX nor VTWAX...

[jsmoove123]

For VTWAX in my Google Sheets, I use:

Code: Select all

=index(importxml("https://finance.yahoo.com/quote/VTWAX","//span"),16)

instead of googlefinance.

[yogesh]

VTWAX popped up in Fidelity today with $45 transaction fee. It shows as closed to new investors so I couldn't buy it.
Hoping that my VTWSX will either automatically get converted to VTWAX or I will have to call and convert or Fidelity will refuse to convert. Let's see!

[jhfenton]

VTWAX popped up in Fidelity today with $45 transaction fee. It shows as closed to new investors so I couldn't buy it.
Hoping that my VTWSX will either automatically get converted to VTWAX or I will have to call and convert or Fidelity will refuse to convert. Let's see!

I can see both funds (VTWAX and VFSAX) on the Fidelity order screen (closed, as you said), but they don't show up for me on a general fund search.

[yogesh]

VTWAX popped up in Fidelity today with $45 transaction fee. It shows as closed to new investors so I couldn't buy it.
Hoping that my VTWSX will either automatically get converted to VTWAX or I will have to call and convert or Fidelity will refuse to convert. Let's see!

I can see both funds (VTWAX and VFSAX) on the Fidelity order screen (closed, as you said), but they don't show up for me on a general fund search.

I feel the reason why they are showing up is because some of the customers at Fidelity asking for investor to admiral conversion?

[Beaker]

VTWAX and VFSAX appear to now be loading in Google Finance, and the GOOGLEFINANCE function in Google Sheets.

Returning the expense ratio seems to be broken.

[spdoublebass]

Looks like Vanguard is lowering the ETF for Total World one basis point.

https://citywireusa.com/professional-bu ... PWSasGnACI

[jayabo]

Why do VTWAX and VT overweight US vs international as a percentage of total world market cap? VTWAX currently has 54.5% in US, while currently the US is more like 40% of total world market cap. What gives? Are all Total World indices overweighting the US?

[lukestuckenhymer]

Why do VTWAX and VT overweight US vs international as a percentage of total world market cap? VTWAX currently has 54.5% in US, while currently the US is more like 40% of total world market cap. What gives? Are all Total World indices overweighting the US?

Where are you getting that info? It may be outdated.

[jhfenton]

Why do VTWAX and VT overweight US vs international as a percentage of total world market cap? VTWAX currently has 54.5% in US, while currently the US is more like 40% of total world market cap. What gives? Are all Total World indices overweighting the US?

The differences are total market cap vs free float market cap and uninvestable markets, including the sizeable, but largely excluded, market for China A shares. There are far more non-free float equity shares in international markets, particularly in EM; and the Chinese mainland market (A shares) is still not widely open to foreign investment. Once you only consider global, investable market cap, you end up at VTWAX.

[cheezit]

Why do VTWAX and VT overweight US vs international as a percentage of total world market cap? VTWAX currently has 54.5% in US, while currently the US is more like 40% of total world market cap. What gives? Are all Total World indices overweighting the US?

The short answer is "they don't and it isn't" when you count China A-shares the same way as the indices these funds track.

[jayabo]

Why do VTWAX and VT overweight US vs international as a percentage of total world market cap? VTWAX currently has 54.5% in US, while currently the US is more like 40% of total world market cap. What gives? Are all Total World indices overweighting the US?

The differences are total market cap vs free float market cap and uninvestable markets, including the sizeable, but largely excluded, market for China A shares. There are far more non-free float equity shares in international markets, particularly in EM; and the Chinese mainland market (A shares) is still not widely open to foreign investment. Once you only consider global, investable market cap, you end up at VTWAX.

Aha, this is very interesting. Thanks for the explanation. Are all (or most) world indices free-float adjusted, or are there any full-market capitalization indices available? If they are available, are they using sampling methods to account for the under- and over-weighted market caps of certain countries (e.g., China)? Wouldn't this have to be the case because the mis-weighting is mostly due to the existence of non-free float (e.g., preferred) equity shares? Lastly, and importantly, as an individual investor looking for a single global market-cap weighted stock index should I be preferring one approach to the other (free float vs full-market)? Thanks!

[SimpleGift]

Lastly, and importantly, as an individual investor looking for a single global market-cap weighted stock index should I be preferring one approach to the other (free float vs full-market)?

Not sure that one can find many market-cap weighted indexes anymore, either global or otherwise, that are NOT free-float. Why would one want to invest in companies whose majority ownership is closely-held by promoter groups and/or government agencies? For companies with a low free-float percentage, their market prices are often highly volatile (since just a few trades can significantly impact the price), plus their prices can be more easily manipulated.

Globally, this is not an issue for U.S. markets, since 95% of total market cap is free-float (table below). Even in the developed markets of Europe and Japan, the percentage is fairly high, at 70%-80%. Where the issue becomes most critical is in emerging markets, where only about 50% of total market cap is free-float:

• 
  Source: Bekaert & Harvey, as of 5/31/16.

Personally, I'm thankful that the major index providers (MSCI, FTSE, etc.) screen for free-float in their index construction.