Author Topic: Vanguard - Investment Mix  (Read 2104 times)

newton

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Vanguard - Investment Mix
« on: April 05, 2016, 02:22:40 PM »

Hi

Based on recommendations on this site I recently moved my IRA and Roth IRA to Vanguard.  I have them split into VTIAX (international) and VTSAX.  I noticed the fees for the VTIAX were double that of VTSAX.

Am I better off just putting all into VTSAX?  Any benefits either way?

Thanks!

PhysicianOnFIRE

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Re: Vanguard - Investment Mix
« Reply #1 on: April 05, 2016, 02:27:38 PM »
There are different thoughts on this, but most investors like to have some international exposure (in addition to the exposure you get from American businesses that do business overseas).  Most recommendations are for 20% to 40% of your stock portfolio be international.

That being said, John Bogle has said international funds are not vital to a portfolio, and Buffet has said something similar.

Current valuations make international look more attractive right now, with significantly lower P/E ratios than American stocks.

Whatever you do, pick an asset allocation and stick to it.  If international underperforms for the next year or 2, rebalance into it, don't abandon it. Take advantage of buying low and selling high with proper rebalancing.

Best,
-PoF

seattlecyclone

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Re: Vanguard - Investment Mix
« Reply #2 on: April 05, 2016, 02:27:54 PM »
Yes, international funds often have higher fees than US-only funds because it actually does cost more to run these funds. You should still own both.

BarkyardBQ

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Re: Vanguard - Investment Mix
« Reply #3 on: April 05, 2016, 02:31:50 PM »
Yes, if it's part of your allocation you should own both. These are the 2 cheapest funds you can get to own the world.

Our portfolio is 75/25 US/Intl, with everything in some version of VTSAX or VTIAX. All accounts are 75/25 except for our taxable account which is 50/50.

PhysicianOnFIRE

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Re: Vanguard - Investment Mix
« Reply #4 on: April 05, 2016, 02:36:58 PM »
As an aside, you get a tax refund on foreign taxes paid by the international fund, so that helps offset the higher expense ratio.  How much depends on your marginal tax rates on qualified and ordinary dividends.

BarkyardBQ

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Re: Vanguard - Investment Mix
« Reply #5 on: April 05, 2016, 02:40:29 PM »
As an aside, you get a tax refund on foreign taxes paid by the international fund, so that helps offset the higher expense ratio.  How much depends on your marginal tax rates on qualified and ordinary dividends.

*In a taxable account (won't matter in tax advantaged accounts)

forummm

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Re: Vanguard - Investment Mix
« Reply #6 on: April 05, 2016, 04:19:19 PM »
Double of a very small amount is still pretty small. I wouldn't shy away from the extra diversification because of 4 basis points per year.

newton

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Re: Vanguard - Investment Mix
« Reply #7 on: April 05, 2016, 05:45:24 PM »
There are different thoughts on this, but most investors like to have some international exposure (in addition to the exposure you get from American businesses that do business overseas).  Most recommendations are for 20% to 40% of your stock portfolio be international.

That being said, John Bogle has said international funds are not vital to a portfolio, and Buffet has said something similar.

Current valuations make international look more attractive right now, with significantly lower P/E ratios than American stocks.

Whatever you do, pick an asset allocation and stick to it.  If international underperforms for the next year or 2, rebalance into it, don't abandon it. Take advantage of buying low and selling high with proper rebalancing.

Best,
-PoF

Thanks for the info!

newton

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Re: Vanguard - Investment Mix
« Reply #8 on: April 05, 2016, 05:46:03 PM »
Yes, if it's part of your allocation you should own both. These are the 2 cheapest funds you can get to own the world.

Our portfolio is 75/25 US/Intl, with everything in some version of VTSAX or VTIAX. All accounts are 75/25 except for our taxable account which is 50/50.

Thanks.  Makes me feel good about the decision. 

newton

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Re: Vanguard - Investment Mix
« Reply #9 on: April 05, 2016, 05:46:40 PM »
As an aside, you get a tax refund on foreign taxes paid by the international fund, so that helps offset the higher expense ratio.  How much depends on your marginal tax rates on qualified and ordinary dividends.

Great point.  I was not aware of that.

PhysicianOnFIRE

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Re: Vanguard - Investment Mix
« Reply #10 on: April 05, 2016, 06:43:25 PM »
As an aside, you get a tax refund on foreign taxes paid by the international fund, so that helps offset the higher expense ratio.  How much depends on your marginal tax rates on qualified and ordinary dividends.

Great point.  I was not aware of that.

It's true (as BackyarBQ pointed out) that you only benefit when holding international funds in your taxable account.  Based on your original post, it looks like these dollars are all inside IRA accounts.  If you open a taxable account in the future, international funds could preferentially be held there.