This is a spinoff from a Rick Ferri Thread, I did not want to clutter his thread with my reply, as their is some great discussion around core and simple portfolio construction, and the questions of Fund A versus Fund B, I thought were better discussed offline.
foodnerd. This issue has been discussed at length on these boards. I will try a high level summary.foodnerd wrote:Rick, my question to you (and to the forum) is that won't the cost difference between All World Index versus the Total International index also make some of the difference in tax deferred accounts (.4 for All World vs .27 for Total Int). Will the tax credit make up that difference in the taxable account?
First, I will say I did Total International Index in taxale, starting many years ago, and if not for the large capital gains I have, I would have FTSE ex-US. All my new money for International Equity is going into FYSE ex-US, and I shut off reinvestment of dividends and capital gains in Total International.
Here is why, again this really matters only in Taxable. Also, there is NOT a huge difference, and both funds are excellent.
Due to Total International being Fund of Funds, there are TWO major downsides, the third one being minor:
1 - no foreign tax credit. Again, ask the IRS if you want to know why, it makes little sense to anyone here.
2 - There will not be Admiral Shares offered.
3 - Total International has no exposure to Canada, if this is important to you.
You notice the only downside that I see, that being higher expense ratio. Most here expect that to go down with time, as most other Vanguard Funds do as they grow. I would expect in 1-2 years or less, the expense ratios will be similar. I am also hopeful that Vanguard offers an Admiral Share Class on this fund someday. On Total International they cannot.
Hope this helps. It is a fine line, not HUGE differences, but to me it is a clear choice to go with FTSE ex-US in taxable.