Vanguard Diehards

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

rohosombrero — Thu, 14 Aug 2008 22:08:12 GMT

Thanks Paul. This is exactly what I was looking for and didn't even have to drive to the library! I was up on this a couple years ago, last time I had a pretty big chunk of change to invest, but its amazing how fast you forget. I knew TSM was pretty good (though I prefer to slice and dice a bit more) and that Vanguard had some good tax-managed funds for domestic stocks but didn't know this precedence at all. Now I feel like I have the tools to rejigger things around.

This is all new ground for me. Until recently I've only held cash outside of retirement accounts but now we just set up a rental home and are hoping that this can generate some cash after retirement so we are only putting bare minimums in the 401K (to get the company match) and putting the difference directly into taxable funds, so had to do a bit more research.

With your inputs, FTSE all-world, ex.U.S. (which I didn't even know about) and maybe VG small cap index (NAESX) should do nicely for now. I like the tax managed domestic funds but they all seemed to be tilted a bit too much to large for my taste as I'm already getting overloaded there. The only bonds I really like are short term (all mine are in VBISX) but I may want to pick up some tax-exempt bonds at some point.

Thanks again!

- Mike

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

pkcrafter — Thu, 14 Aug 2008 13:33:50 GMT

Mike, the new total world index contains 40% U.S., so it's not really a good option for your application. Use total international or FTSE all-world, ex.U.S. Also total stock market is excellent for taxable. For small caps, VG small cap index (NAESX) is pretty tax efficient now that they have moved from tracking S&P to MSCI.

Usual recommendations for taxable have included TSM and FTSE, but now total international should also be a good choice.

Be sure you view all holding in all account as one portfolio. Use the funds I mentioned above in taxable and use the 401k for bonds and other funds to fill in your AA. If eligible for Roth, use that too.

Here is Taylor Larimore's 4-step rule for fund placement:

1. Put your most tax-Inefficient funds in 401Ks, 403Bs, Traditional IRAs and similar retirement
accounts. When full..

2. Put your next most tax-Inefficient funds in your Roth(s). When your Roth(s) are full--

3. Put what's left into your taxable account.

4. Try to use only tax-Efficient funds in taxable accounts.
-------------------------------------------------------------------
Here is a list of securities in approximate order of their tax-efficiency. (Least tax-efficient at the
top.):

Hi-Yield bonds
Taxable bonds
TIPs
REIT stocks
Stock trading accounts
Balanced funds
Small-Value stocks
Small-Cap stocks
Large Value stocks
International stocks
Large Growth stocks
Most stock index funds
Tax-Managed funds
I-Bonds and EE bonds
Tax-Exempt bonds

Taylor Larimore
------------------------------------------

Paul

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

pkcrafter — Thu, 14 Aug 2008 13:19:03 GMT

Deleted. Double post, which the system is supposed to prevent.

Paul

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

Limoman — Thu, 14 Aug 2008 13:15:53 GMT

Well, As I understand it?

Paul is Right and maybe a good play for the future..Butt?

considering Anything else but the Primary indexes of L/M/S & Reit caps to be *Risky Bets" and after Moving more into Mid caps the past 10 yrs & for the foreseeable future.* When I include the Downside of Int'l ( 00-02' more recently) and were just a Very small play in my Retirement Port..

Comparing The Likes of VGTSX to AMF's Like DODFX and others, for past 1 & 3 yrs and YTD? Looks like The VGTSX is the way to go for Int'l and even Global as far as I'm concerned.. But, then again, I bailed out of My Int'l funds Mid last yr., seeing as fearing a Downturn and Int'l doesn't do well in a Bear market..And I sure didn't like yrs 00-02' in any Int'l fund..loosing so much..( I am a +10% Risk tolerance..LOL )

And based upon VGTSX doing 6.42% past 10 yrs? My other funds have done better and why bother.. and since they also own Foreign, so I let them decide how much "int'l" to own.

A downside I found with AMF's is that they have to be constantly supervised and be prepare to Replace them once they get to Big, Change Mgrs., Close, etc..

I did follow JB's Advice on Balanced Funds...and let them decide..

And if the Indexes Don't give you want you want? Just Add More $ to them to make up the Shortfall....LOL

As my 20 something Daughters and Son said? We Have to Save more $? God forbid! And they said "Dad, Why don't you Save More $ and Leave Us More instead! " LOL

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

Mel Lindauer — Thu, 14 Aug 2008 04:48:39 GMT

viiejo:

I am thinking about selling out of this fund of funds and taking a capital loss and then reinvesting into the underlying funds directly. I would appreciate an opinion if this would be considered a wash sale ?
thanks, Rudy

Hi Rudy:

IMO, that probably wouldn't pass the IRS smell test, if questioned, since it's "substantially identical". Perhaps you should simply look at switching to Vanguard's FTSE, since that fund already qualifies for the foreign tax credit and it follows a different bogey.

Regards,

Mel

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

viiejo — Thu, 14 Aug 2008 02:37:02 GMT

I am thinking about selling out of this fund of funds and taking a capital loss and then reinvesting into the underlying funds directly. I would appreciate an opinion if this would be considered a wash sale ?

thanks, Rudy

taylor, no response??

Linus — Thu, 14 Aug 2008 00:48:24 GMT

i'm guessing that taylor's not gonna provide any insight as to his comments re: this fund and 'beating its loser bogey' or how his comments square against vanguard's statement that it's still an index fund, just purchasing the stocks within the funds. taylor seems to be vocal when he feels he's right, maybe now he recognizes he's wrong, the fund is still and index fund. how can vanguard's statment be seen as admitting 'indexing doesn't work' when they say it'll still follow the index?? if taylor has a point it's sure not clear.

linus

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

MikeH — Wed, 13 Aug 2008 17:00:55 GMT

Thanks Paul. That's great news. I'll probably dump the majority there then. What about the new, (I think its called) World Fund. As I understand it this is an index fun too correct? Would this be a possibility? I notice that the TI fund has slightly more stocks which surprised me but it seems like they both have pretty much the same strategy so I'll probably just go with TI.

For domestic funds I've been considering the tax managed funds, although most of them seem to have a large cap bias. In my 401K I'm stuck with expensive Schwabb funds (most of them have expense ratios 5 times higher than Vanguards - I have no idea why anyone would invest with these guys of their own free will) but some of the large cap domestic funds have the smallest ratio of Schwabb fees to Vanguard fees so I think I'll probably put most of my large cap AA there and dump my Vanguard 500 Index Fund AA. Schwabb has a managed foreign small cap growth fund too and I have nothing in my AA for that (actually Bernstein recommends against them for indexing) but since it's managed and the fees aren't too outrageous (compared to their average) I'm considering adding allocation for that, though still haven't made up my mind.

Anyway, any more recommendations for tax efficient funds from this group would be greatly appreciated. This group has so many knowledgeble folks on it that its been a godsend for a guy like me (dumb engineer with no financial background.) I've read quite a few investment books but the info I've gotten here has been at least as good.

Thanks again!

- Mike

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

majamail — Tue, 12 Aug 2008 12:30:59 GMT

The Italians have a word perfect to this situation: testadura. Hard head.

Meanwhile, outside the asylum, it seems that the transition of Total Inter from fund of funds to individual indexed stocks will make it possible eventually for Total Inter to be merged with FTSE Ex-USA. Not only will the foreign tax credit be available, more importantly FTSE is a more complete international index including Canada.

peace

mikey

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

pkcrafter — Tue, 12 Aug 2008 00:04:48 GMT

Mike,

Vanguard total international was a fund-of-funds and was fairly tax-efficient, but it could not benefit from foreign tax credit. New law is now allowing these types of funds to also invest in individual stocks. Doing so will allow the fund to become even more tax efficient because it will now receive foreign tax credit for that portion of the fund that invests in individual stocks. It may also track it's benchmark index a bit closer.

Before this change, the usual recommendation for broad foreign coverage was the FTSE all world ex-U.S. fund which is not a fund-of-funds. The FTSE is not yet three years old, but by all indications, it will show very tax-efficient numbers. With changes to total international, the two funds should be pretty close together in overall efficiency when considering the small expense ratio differences.

Paul

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

MikeH — Mon, 11 Aug 2008 22:57:39 GMT

i just read the entire thread - probably would have been smart to do that before posting - but didn't see the earlier stuff until after I hit reply. I just did a search on 'taxes" to see if there was something on the topic I'm trying to research i.e., "what is a good Vanguard fund to hold in after tax funds?" To clarify, I *am* an indexer, and generally avoid any type of managed fund due to the outrageous fees that usually accompany them. I believe in the monkey/dart argument to the point that I really don't see how anyone who's done much research on investing can deny it. So, probably I would like to hear more from the others on this topic than Taylor, though I respect all points of view here.

Thanks again,

- Mike

Taylor,

Is it your contention that the additional distributions have made this no longer a reasonable fund for after tax funds? I wondered about this myself. I just recently got reimbursed for moving expenses and I'm trying to find a good place to put about $30,000. Tax favorability is my main concern.Asset allocation is a more minor concern because I currently am holding quite a bit in retirement funds and I can juggle the AA around there to make up for whatever I purchase.

Any recommendations? I'm weighted heavily towards foreign/small/value and intend to keep it that way, so a foreign fund would be nice.

Thanks in advance!

- Mike

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

Linus — Sun, 10 Aug 2008 18:01:17 GMT

TaylorZR:
Basically, they're quietly admitting that indexing does not really work............
That's why they keep the loser international index the bogey, so they can easily beat it!...
TaylorZR

this makes no sense taylor, they're still running an index fund, just purchasing the stocks that make up the index. that way the investors can get foreign tax credit. You state they're trying to beat a loser international index. what in their press release leads you to believe they're trying to beat the 'loser international index bogey'?

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

Howie — Sun, 10 Aug 2008 16:21:30 GMT

TaylorZR:

Typical diehard response. Attack the messenger......
Taylor

What message?

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

TaylorZR — Sun, 10 Aug 2008 15:29:18 GMT

Re: Vanguard Total International Stock Market Will No Longer be a Fund of Funds

dkturner — Sun, 10 Aug 2008 14:19:51 GMT

Actually, Taylor, we are anxiously waiting for an intelligent response to the question Mel posed to you. Do you really understand what Vanguard has announced concerning it's Total International Fund, or not? Your initial reply indicates a bit of egg on your face, none of which has been wiped off by your subsequent,rather juvenile, posts. I hate to see an individual make a ass of himself, but I'm willing to make an exception in this case.