Author Topic: Which of These Two Vanguard Total International Funds? Hmmmmmm.  (Read 10400 times)

William

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Which of These Two Vanguard Total International Funds? Hmmmmmm.
« on: November 10, 2013, 03:28:19 PM »
Vanguard Small-Cap Index Fund Admiral Shares (VSMAX)
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

I need to balance out my taxable account with an international fund but I'm not sure which.  I've tried to decide myself but at the end of the day it seems the only for sure difference I see is that VFWAX has a slightly (.01%) lower E/R.  I guess one other difference is VTIAX has about 7% of its makeup in N. America so assuming some of that is in the US this makes it a little trickier when I rebalance...

What y'all think?

Fun fact: Charlie Chaplin once entered a Charlie Chaplin look-a-like contest.  He lost. -MentalFloss


grantmeaname

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #1 on: November 10, 2013, 04:46:00 PM »
Don't let it keep you up at night - they do the same thing and only both exist for historical reasons, according to strangers on the internet. They behave really similarly, so there's no reason to stress about it.

Stache In Training

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #2 on: November 10, 2013, 09:17:21 PM »
Wait... VSMAX and VTSAX aren't international. VTIAX is, but you only mention that.  It's not one of the two to choose from.  I'm assuming you just copy and pasted the wrong two funds?

grantmeaname

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #3 on: November 11, 2013, 05:43:35 AM »
Stache, VSMAX/VTSAX are the first two funds he's getting and then he's stuck between VTIAX/VFWAX as the third. It took me a couple read throughs to get it.

William

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #4 on: November 11, 2013, 04:54:56 PM »
Sorry for my confusion.  Sometimes when I sleep in late my brain doesn't explain ideas so well.  Strange.

Stache In Training

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #5 on: November 11, 2013, 09:11:52 PM »
Ah, I see.  Then yes, I'll agree with Grant.  They both track pretty much the same thing.  The dividends are pretty much the same percentage.  So I'd probably just go with the one with the lowest fees.  .15 and .16 isn't much difference, but with all else being equal; .15 it is.

That's my two cents.

kyleaaa

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #6 on: November 13, 2013, 10:41:16 AM »
VTIAX is the clearly superior fund for one main reason:

1.) It includes small-cap stocks

VFWAX used to have an advantage in taxable accounts because it qualifies for the Foreign Tax Credit, but now VTIAX does as well, so that advantage is nullified. I can't currently think of a good reason to invest in VFWAX over VTIAX. Costs are similar so that's not an issue.

EDIT: The 7% in North America for VTIAX represents Canadian/Mexican stocks, not US stocks.
« Last Edit: November 13, 2013, 10:43:50 AM by kyleaaa »

grantmeaname

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #7 on: November 13, 2013, 10:54:02 AM »
Do you think vfwax doesn't?

kyleaaa

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #8 on: November 13, 2013, 01:06:12 PM »
Do you think vfwax doesn't?

It does not. VFWAX follows a large-cap index. Vanguard made a pretty big deal about this when it made changes to the Total International fund a few years ago (was it 2011?). Morningstar data backs this up, with an average market cap of $20 billion vs $27 billion. Not a large enough difference to switch if you already own VFWAX, but a big enough reason not to buy it if you're starting from scratch.

grantmeaname

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #9 on: November 13, 2013, 01:53:15 PM »
The prospectus says nothing of the sort and they perform the same.

frugalcoconut

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #10 on: November 13, 2013, 09:56:12 PM »
I actually called Vanguard about this recently and the difference was not clearly defined anywhere so I manually compared the holdings to figure out the crossover.

kyleaaa

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #11 on: November 14, 2013, 08:59:18 AM »
The prospectus says nothing of the sort and they perform the same.

The prospectus tells you which indexes they follow, and if you look at the indexes you'll see the difference. It's like the difference between the total stock market and S&P 500 funds. They perform very similarly, but not the same.

grantmeaname

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #12 on: November 14, 2013, 09:16:52 AM »
I don't think that's a fair comparison. VTSAX/VFIAX have accumulated as much difference in a month as VFWAX and VTIAX have in the more than two years of data available. I agree there are different indices, but if the indices really focused on different asset classes we'd se a much wider divergence between the funds than we do.

Edit: from the prospectuses: VTIAX invests in the "FTSE Global All Cap ex US Index, a free-float-adjusted market-capitalization-weighted index designed to measure equity market performance
of companies located in developed and emerging markets, excluding the United States", while  VFWAX invests in securities to emulate the "FTSE All-World ex US Index, a free-float-adjusted, market-capitalization-weighted index designed to measure equity market performance of international markets". They're both all-cap, developed and emerging.
« Last Edit: November 14, 2013, 09:22:26 AM by grantmeaname »

kyleaaa

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #13 on: November 14, 2013, 12:21:13 PM »

Edit: from the prospectuses: VTIAX invests in the "FTSE Global All Cap ex US Index, a free-float-adjusted market-capitalization-weighted index designed to measure equity market performance
of companies located in developed and emerging markets, excluding the United States", while  VFWAX invests in securities to emulate the "FTSE All-World ex US Index, a free-float-adjusted, market-capitalization-weighted index designed to measure equity market performance of international markets". They're both all-cap, developed and emerging.

No, they aren't. Look at the data. They are distinctly different.

http://www.ftse.com/vanguard/Home/ftse-global-all-cap-index
http://www.ftse.com/Indices/FTSE_All_World_Index_Series/Downloads/FTSE_All_World_ex_US_Index_Factsheet.pdf

Both Morningstar's and Vanguard's tools show the same thing. The fact that they've performed similarly over the last few years says more about asset class returns than the composition of the funds.

grantmeaname

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Re: Which of These Two Vanguard Total International Funds? Hmmmmmm.
« Reply #14 on: November 14, 2013, 12:27:29 PM »
Aah, I wasn't seeing that in the prospectus and didn't think to look on the FTSE site for it.