Risk of investing a large sum in a small fund (VTABX vs. FBIIX)

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Topic Author
tom8584
Posts: 6
Joined: Mon Jul 21, 2014 1:28 am

Risk of investing a large sum in a small fund (VTABX vs. FBIIX)

Post by tom8584 »

Assume I have to invest $1M in an international ex-us bond fund.

There are two options from Fidelity and Vanguard tracking the same underlying index:
- FBIIX, expense rate 0.06%, Portfolio Net Assets: $180M, about 600 holdings
- VTABX, expense rate 0.11%, Portfolio Net Assets: $163B, about 6,000 holdings

The Fidelity fund is cheaper by $500 per year but it is smaller than the Vanguard option. Net assets are 1% of the other fund and holdings are more concentrated. If I invest in FBIIX, I'll own about 0.5% of the fund. If I invest in VTABX, I'll own 0.0005%.

What considerations would you make around owning 0.5% of a small fund?

Thanks
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vineviz
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Joined: Tue May 15, 2018 1:55 pm

Re: Risk of investing a large sum in a small fund (VTABX vs. FBIIX)

Post by vineviz »

tom8584 wrote: Wed Jan 13, 2021 5:38 pm Assume I have to invest $1M in an international ex-us bond fund.

There are two options from Fidelity and Vanguard tracking the same underlying index:
- FBIIX, expense rate 0.06%, Portfolio Net Assets: $180M, about 600 holdings
- VTABX, expense rate 0.11%, Portfolio Net Assets: $163B, about 6,000 holdings

The Fidelity fund is cheaper by $500 per year but it is smaller than the Vanguard option. Net assets are 1% of the other fund and holdings are more concentrated. If I invest in FBIIX, I'll own about 0.5% of the fund. If I invest in VTABX, I'll own 0.0005%.

What considerations would you make around owning 0.5% of a small fund?

Thanks
I doubt either Vanguard or Fidelity would blink at a $1 million buy order on a fund like this.

Personally I wouldn’t let a measly 0.05% cost difference play any role and would prefer the broader exposure of the Vanguard fund.
But the size of the Fidelity fund would also not be a concern to me.

Really you can’t go wrong. I’d you can’t decide, why not $500k in each?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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vineviz
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Joined: Tue May 15, 2018 1:55 pm

Re: Risk of investing a large sum in a small fund (VTABX vs. FBIIX)

Post by vineviz »

vineviz wrote: Wed Jan 13, 2021 5:54 pm
tom8584 wrote: Wed Jan 13, 2021 5:38 pm Assume I have to invest $1M in an international ex-us bond fund.

There are two options from Fidelity and Vanguard tracking the same underlying index:
- FBIIX, expense rate 0.06%, Portfolio Net Assets: $180M, about 600 holdings
- VTABX, expense rate 0.11%, Portfolio Net Assets: $163B, about 6,000 holdings

The Fidelity fund is cheaper by $500 per year but it is smaller than the Vanguard option. Net assets are 1% of the other fund and holdings are more concentrated. If I invest in FBIIX, I'll own about 0.5% of the fund. If I invest in VTABX, I'll own 0.0005%.

What considerations would you make around owning 0.5% of a small fund?

Thanks
I doubt either Vanguard or Fidelity would blink at a $1 million buy order on a fund like this.

Personally I wouldn’t let a measly 0.05% cost difference play any role and would prefer the broader exposure of the Vanguard fund.
But the size of the Fidelity fund would also not be a concern to me.

Really you can’t go wrong. I’d you can’t decide, why not $500k in each?
Plus, the Vanguard fund is available as an ETF at only 8bps. That’s my first choice overall.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Topic Author
tom8584
Posts: 6
Joined: Mon Jul 21, 2014 1:28 am

Re: Risk of investing a large sum in a small fund (VTABX vs. FBIIX)

Post by tom8584 »

Good point. And for everyone's reference, that ETF would be BNDX.
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