Author Topic: Help creating an vanguard total international fund  (Read 1273 times)

nsmall

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Help creating an vanguard total international fund
« on: January 31, 2019, 12:01:41 AM »
My 403b does Not have the Vanguard Total International fund as an option.

However it does have....

Vanguard Developed Markets Index
Vanguard Emerging Markets Index

If I buy both of the funds mentioned above does it come close to matching Vangaurd's Total International Fund?

Thanks in advance.

flipboard

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Re: Help creating an vanguard total international fund
« Reply #1 on: January 31, 2019, 01:32:39 AM »
Yes, and you can actually have a look at the exact composition of Vanguard total "international" here:
https://investor.vanguard.com/mutual-funds/profile/VGTSX

Splitting them up lets you get a rebalancing bonus.

OTOH if you're in the US it can sometimes be worth holding "international" funds/stocks in taxable accounts (and use the tax-sheltered account for e.g. US).

Born2Run

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Re: Help creating an vanguard total international fund
« Reply #2 on: January 31, 2019, 06:22:33 AM »
80% Vanguard Developed Markets Index (VTMGX)
20% Vanguard Emerging Markets Index (VEMAX)
... will provide a close approximation of Vanguard Total International Stock Index (VTIAX).
https://www.bogleheads.org/forum/viewtopic.php?t=254784

MustacheAndaHalf

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Re: Help creating an vanguard total international fund
« Reply #3 on: January 31, 2019, 06:53:19 AM »
I would use the above 4:1 with 4x as much developed markets per 1x emerging markets.  Besides it being very close to the actual amount, it will be easy to spot when when they're no longer aligned.  Divide developed by four (the asset value), and that's where emerging markets should be.

nsmall

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Re: Help creating an vanguard total international fund
« Reply #4 on: January 31, 2019, 09:27:41 AM »
Thank you very much.  I really appreciate the help.

 @flipboard isn't there a disadvantage using Vanguard Total International in a taxable account?  I dont understand the details, maybe its not worth worrying about. 

I am curious if there is an ideal account for the Vanguard Total International fund.

Thanks

nsmall

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Re: Help creating an vanguard total international fund
« Reply #5 on: January 31, 2019, 09:37:30 AM »
Someone shared this with me...

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

Thanks again.

MustacheAndaHalf

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Re: Help creating an vanguard total international fund
« Reply #6 on: January 31, 2019, 08:55:27 PM »
Not flipboard, but I can speak to international vs U.S. in a taxable account.  I consider it to have no benefit and require some additional effort on tax forms.  When you put international in a taxable account, you can take a foreign tax credit on the dividends from the international stocks.  But right now, U.S. markets offer 2% dividends while international is closer to 3% dividends.  There's more dividends, so you're paying more taxes on the dividends - and then you get the foreign tax credit.  Overall I think they roughly cancel each other out.

nsmall

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Re: Help creating an vanguard total international fund
« Reply #7 on: January 31, 2019, 09:55:49 PM »
Thanks @MustacheAndaHalf

So basically there is no major disadvantage?  I can hold international funds in a taxable account and it all ends up balancing out?

I have a Roth and a 403b so those are options too.  Trying to chose the best option

Thanks again. 

Telecaster

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Re: Help creating an vanguard total international fund
« Reply #8 on: February 01, 2019, 02:26:58 AM »
The conventional wisdom is that if you are going to hold foreign dividend paying stocks, you should hold them in a taxable account in order to tax advantage of the foreign tax credit.  If it is in your IRA (for example), then you still have to pay the foreign tax, but you don't get the credit. 

But as MustacheAndaHalf points out there is a little bit of nuance because foreign indices like VTIAX tend to be less tax efficient, so maybe it doesn't matter too much.  Might depend on how your state taxes dividends as well.   

MustacheAndaHalf

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Re: Help creating an vanguard total international fund
« Reply #9 on: February 01, 2019, 08:41:49 AM »
And to be fair, my advice will change if VTIAX has the same dividend as VTSAX, but it hasn't for many years now.

I also wanted to add it may be worth "tax loss harvesting" in a taxable account, which is easiest if you have both U.S. and international there.  Whichever one drops within a year or so of buying it, you can sell to realize the loss (the IRS shares your loss, essentially, provided you follow their rules).

If you already have an allocation with unrealized gains (meaning it will incur taxes to sell), I'd just keep it.