Author Topic: What happens when VT will have the same MER as the respective VXUS/VTI mix  (Read 1115 times)

Kalergie

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If you look at VT, the MER is 0.11% although the same respective AA using VXUS (50%) and VTI (50%) would be around 0.075%. Vanguard managed to reduce VTs MER significantly so it is not out of reach to assume that VT will be low enough to do away with the need to splice and dice VXUS and VTI and get the same AA for the same cost.

First question: why is VT more expensive than the same VXUS and VTI mix?
Second question: what would happen if VT hits the sweet spot? Will we see a move of volume out of both VTI and VXUS into VT? And if so, what impact might that have on each fund?

Third question: Am I overthinking this? Answer: yes, probably! :D
« Last Edit: February 21, 2018, 02:23:08 PM by Kalergie »

AdrianC

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Re: What happens when VS will have the same MER as the respective VXUS/VTI mix
« Reply #1 on: February 21, 2018, 08:24:39 AM »
VT?

Kalergie

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Re: What happens when VS will have the same MER as the respective VXUS/VTI mix
« Reply #2 on: February 21, 2018, 02:22:27 PM »
Shame on me. Yes, i meant VT. World fund. I edited.

AdrianC

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Re: What happens when VT will have the same MER as the respective VXUS/VTI mix
« Reply #3 on: February 22, 2018, 07:33:45 AM »
I think VT follows a different index, I don't think it's a splice of VTI and VXUS. VT is relatively small ($16B?).

Yeah, you're over thinking it. If it makes you feel better to reduce expenses to the minimum do VTI/VXUS. If it makes you feel better to simplify do VT. Won't matter much either way.

Tyler

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Re: What happens when VT will have the same MER as the respective VXUS/VTI mix
« Reply #4 on: February 22, 2018, 05:07:37 PM »
They're priced differently because international data costs more to Vanguard from the source index providers (FTSE, MSCI, etc).  The two funds containing international data are priced identically at a 0.11 ER, while the one US-only fund is cheaper.  I see your point about being able to mix VXUS and VTI to get a similar (but not identical) performance to VT at a slightly lower price, but that's not how the data business that drives the ERs behind the scenes works. 

Kalergie

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Re: What happens when VT will have the same MER as the respective VXUS/VTI mix
« Reply #5 on: February 28, 2018, 11:32:57 PM »
Thanks Tyler. I never thought of the data costs raised by FTSE and MSCI. That's actually quite interesting. Who actually controls these? Are they government entities or publicly traded companies? What if one index provider decided to hike prices? Ok...I'm overthinking again. :D

Tyler

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I know MSCI is a publicly traded company.  Not sure about FTSE.

Luckily for us, the data business is competitive.  One of the ways Vanguard keeps its fees so low is that they periodically switch data providers to get the best deal.  For example, several years ago they switched a bunch of their funds away from MSCI and towards FTSE and CRSP to save on costs

« Last Edit: March 01, 2018, 09:28:29 AM by Tyler »

ChpBstrd

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If you want the lowest possible fees for a total market fund, SPTM charges less than Vanguard's VTI and trading it is free on Ameritrade. So you could trickle in your savings a couple shares at a time without commissions. A few bucks commission a couple times a year adds up to more than a few basis points for most of us poor folk.