VFWIX vs Total International

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Rocketsciencegirl
Posts: 5
Joined: Tue Jul 17, 2007 6:54 am

VFWIX vs Total International

Post by Rocketsciencegirl »

VFWIX has an expense ratio of .40%
Total Int'l has an expense ratio of .32%

Sometime ago someone metioned that some investors think
VFWIX offers superior tax benefits. really?

What is the real difference between the two and what
are the benefits of each?

Thank you!
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

VFWIX vs Total International

Post by YDNAL »

What is the real difference between the two and what
are the benefits of each?
Rocketsciencegirl,

Welcome to the forum.

VGTSX is a fund of funds and you can't claim the foreign tax credit that you CAN with VFWIX [0.16?].

VFWIX offers Canada.

Otherwise, they are pretty much the same.

Regards,
Landy
User avatar
grabiner
Advisory Board
Posts: 30793
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: VFWIX vs Total International

Post by grabiner »

Rocketsciencegirl wrote:VFWIX has an expense ratio of .40%
Total Int'l has an expense ratio of .32%

Sometime ago someone metioned that some investors think
VFWIX offers superior tax benefits. really?

What is the real difference between the two and what
are the benefits of each?

Thank you!
Besides the foreign tax credit, VFWIX is likely to see its costs go down a bit. It's a new (and thus small) fund; as it gets larger, the expenses will drop, and it may even add Admiral shares eventually.
x36900
Posts: 220
Joined: Fri Sep 21, 2007 12:47 pm
Location: Oklahoma City, OK

You may not have considered this before, but many of

Post by x36900 »

Vanguard's stock funds have an ETF share class. VFWIX is the FTSE all-world ex.-U.S. mutual fund (investor class shares); the ETF version of it has ticker VEU.

It's the exact some fund -- same portfolio -- but has a lower expense ratio. Only 0.25% for VEU.

The "problem" with ETF's is that you have to purchase them through a brokerage, in other words you'll pay a commission to buy shares or to sell shares. Also, there is a bid/ask spread, so it is possible that you may pay more than n.a.v. for the ETF, as well as paying a commission. (On the other hand, it is entirely possible, though not likely, that you could actually purchase ETF shares for less than the n.a.v.)

Anyway, it may be worthwhile for you to read up on ETF's (exchange traded funds), and then determine if it would be worthwhile for you to open a brokerage account, which would allow you to buy or sell ETF's, stocks, etc.

Best of luck!
Brian
User avatar
woof755
Posts: 3233
Joined: Sun Aug 05, 2007 2:03 pm
Location: Honolulu

Post by woof755 »

Seriously...can we post a quick overview of these two funds as a sticky, even if only for a month or two?
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." | | --Jason Zweig, quoted in The Bogleheads' Guide to Investing
User avatar
DaveTH
Posts: 2504
Joined: Thu Apr 05, 2007 7:23 pm

Post by DaveTH »

Seriously...can we post a quick overview of these two funds as a sticky, even if only for a month or two?
Honestly, I don't understand why there is so much confusion. Would it have been clearer if Vanguard called the fund All World-US+Canada?
xenial
Posts: 2764
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Post by xenial »

woof755 wrote:Seriously...can we post a quick overview of these two funds as a sticky, even if only for a month or two?
Here's something I propose as a sticky if the powers that be desire. Please check for errors and omissions.

Image

Best wishes,
Ken
User avatar
DaveTH
Posts: 2504
Joined: Thu Apr 05, 2007 7:23 pm

Post by DaveTH »

Here's something I propose as a sticky if the powers that be desire. Please check for errors and omissions.
The only thing that I would add is that none of these funds have any exposure to small caps. So even though they are quite broad, they are not as all inclusive as the Total Stock Market fund. If someone desires an allocation to Int'l small caps, they would need to include another fund.
User avatar
alvinsch
Posts: 1620
Joined: Mon Feb 19, 2007 10:16 pm
Location: Northwest

Post by alvinsch »

Ken Schwartz wrote:
woof755 wrote:Seriously...can we post a quick overview of these two funds as a sticky, even if only for a month or two?
Here's something I propose as a sticky if the powers that be desire. Please check for errors and omissions.

Best wishes,
Ken
I think that is an excellent summary. It might be useful to add VWO to the last table since the ETF choice often would be VEU versus a VEA/VWO combination. Also possible footnotes might be:

1. VFWIX and VTMGX can be converted to the equivalent ETF for $50 (or free for flagship), and then sold to avoid the redemption fees.

2. Qualified dividends were as follows as of 9/07.

VFWIX/VEU: 93% qualified
VTMGX/VEA: 100% qualified
VGTSX: 74% qualified
VEIEX/VWO: 68% qualified

BTW: I find it interesting that VFWIX is currently 93% qualified while VGTSX has traditionally been around 70% qualified. Since they are both broad international indexes that include EM, why the big disparity? Doesn't seem like a single digit weighting to Canada could affect QDI that much. I wonder if the QDI percentage will converge over time or if there is some fundamental difference that accounts for this (on the other hand I expect QDI's to disappear in 2009 or at best 2011 for many of us).

- Al
xenial
Posts: 2764
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Post by xenial »

DaveTH wrote:The only thing that I would add is that none of these funds have any exposure to small caps. So even though they are quite broad, they are not as all inclusive as the Total Stock Market fund. If someone desires an allocation to Int'l small caps, they would need to include another fund.
Good observation. I will include it it my next iteration.

Best wishes,
Ken
xenial
Posts: 2764
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Post by xenial »

alvinsch wrote:It might be useful to add VWO to the last table since the ETF choice often would be VEU versus a VEA/VWO combination.
I was trying to get away with a minimalist treatment for newbies. :) But my next iteration will include all Vanguard international index funds and ETFs.
alvinsch wrote:Also possible footnotes might be:

1. VFWIX and VTMGX can be converted to the equivalent ETF for $50 (or free for flagship), and then sold to avoid the redemption fees.

2. Qualified dividends were as follows as of 9/07.

VFWIX/VEU: 93% qualified
VTMGX/VEA: 100% qualified
VGTSX: 74% qualified
VEIEX/VWO: 68% qualified
I will include these important notes.
alvinsch wrote:BTW: I find it interesting that VFWIX is currently 93% qualified while VGTSX has traditionally been around 70% qualified. Since they are both broad international indexes that include EM, why the big disparity? Doesn't seem like a single digit weighting to Canada could affect QDI that much. I wonder if the QDI percentage will converge over time or if there is some fundamental difference that accounts for this (on the other hand I expect QDI's to disappear in 2009 or at best 2011 for many of us).

Could Vanguard be lending VGTSX stocks to short sellers in exchange for nonqualified payments?

Best wishes,
Ken
xenial
Posts: 2764
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Vanguard International Index Funds & ETFs

Post by xenial »

Image
  • VGTSX and VDMIX are funds-of-funds. They are not eligible for the foreign tax credit.
  • Any fund except VGTSX or VDMIX can be converted to the equivalent ETF for $50 (or free for Flagship clients), and then sold to avoid the redemption fee.
Image
  • Percentages of qualified dividends were as follows as of 9/07.
    VFWIX / VEU: 93%
    VGTSX: 74%
    VTMGX / VEA: 100%
    VDMIX: 75%
    VEIEX / VEMAX / VWO: 68%
    VEURX / VEUSX / VGK: 75%
    VPACX / VPADX / VPL: 77%
  • None of these funds or ETFs provide exposure to foreign small capitalization stocks. The non-Vanguard ETFs DLS and GWX are probably the best current choices in this asset class.
User avatar
CyberBob
Posts: 3368
Joined: Tue Feb 20, 2007 2:53 pm

Re: Vanguard International Index Funds & ETFs

Post by CyberBob »

Ken Schwartz wrote:VGTSX and VDMIX are funds-of-funds. They are not eligible for the foreign tax credit.
Many people seem to think the foreign tax credit is much, much bigger than it actually is. You might mention that for 2006, if Total International (VGTSX) was eligible, it would have been 0.16%. (not sure of the VDMIX number)

And, of course, it only matters in a taxable account.

Bob
stebul
Posts: 332
Joined: Fri Feb 23, 2007 2:15 pm
Location: San Diego, CA

Post by stebul »

One more addition: Need to explain the difference between a load and a purchase fee.
xenial
Posts: 2764
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Post by xenial »

CyberBob wrote:Many people seem to think the foreign tax credit is much, much bigger than it actually is. You might mention that for 2006, if Total International (VGTSX) was eligible, it would have been 0.16%. (not sure of the VDMIX number)
I agree, though current low worldwide dividend yields are largely to blame for the small foreign tax credits. By the way, using the numbers from your earlier post, I get 0.14% for VDMIX. A further complication is the existence of an implicit deduction for foreign taxes paid on funds-of-funds. After all, foreign taxes paid are not added to Form 1099-DIV Box 1a for these funds.

I will add a note to the Sticky (if there is one) addressing your concern. I've started a related conversation in Forum Issues and Administration: A FAQ Sticky

Best wishes,
Ken
xenial
Posts: 2764
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Post by xenial »

stebul wrote:One more addition: Need to explain the difference between a load and a purchase fee.
My table heading Fees (not loads - paid into the fund's assets) is a pathetic attempt to give this explanation. I'll simplify that heading to Fees and add the following comment:
  • The purchase and redemption fees are not loads. They are paid not to Vanguard, but rather to the funds themselves, slightly increasing their net asset values. Investors benefit over time from the fees other shareholders pay.
Note to Rocketsciencegirl: Sorry about hijacking your thread. I hope you're getting something out of the discussion. Please do ask any follow-up questions you have. :)

Best wishes,
Ken
User avatar
woof755
Posts: 3233
Joined: Sun Aug 05, 2007 2:03 pm
Location: Honolulu

Post by woof755 »

Foreign tax credit: 0.14% or 0.16% of what, exactly?
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." | | --Jason Zweig, quoted in The Bogleheads' Guide to Investing
xenial
Posts: 2764
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Post by xenial »

woof755 wrote:Foreign tax credit: 0.14% or 0.16% of what, exactly?
It's a percentage of your investment in the fund each year. So if your balance in a taxable VGTSX account was $10,000 in 2006, you would have missed out on about a $16 credit that year.

Best wishes,
Ken
Post Reply