Vanguard Intl Funds/Baillie Gifford

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FlyEaglesFly52
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Vanguard Intl Funds/Baillie Gifford

Post by FlyEaglesFly52 »

Hello All,

First time poster long time reader. I have a couple questions regarding VG Intl funds and Baillie Gifford.

I’m 26 and my current retirement portfolio is roughly 1/3 Roth all in Vanguard Total Stock with the remaining 2/3 in a pre tax 401(k) comprised of a roughly 60/40 split between Vanguard Total Stock and Vanguard Intl Growth Admiral. I selected Intl Growth over Total Stock Intl partly due to previous performance (yes I already know I went wrong here). I am bullish on the companies and industries the fund invests in but I am wondering if I’d be better off for the long run in Total Intl Stock Index as I will likely need to rely on retirement assets as a primary source of income in the future (probably 35-40 years from retirement). With that being said I would like to continue to have some exposure to Baillie Gifford based on their investment style and portfolio management and wanted to know if Scottish Mortgage Investment Trust is a suitable way to do so with a very small amount of taxable account money.

1) Should I switch all VG Intl Growth to VG Total Intl Index?
2) As a US citizen in the 22% bracket how would Scottish Mortgage Investment Trust be taxed if held in a taxable account?
3) Is some combination of VG Intl Growth and VG Total Intl Index the best of both worlds?

Thank you in advance
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Re: Vanguard Intl Funds/Baillie Gifford

Post by pkcrafter »

FlyEaglesFly52 wrote: Tue May 11, 2021 11:47 am Hello All,

Welcome,

First time poster long time reader. I have a couple questions regarding VG Intl funds and Baillie Gifford.

I’m 26 and my current retirement portfolio is roughly 1/3 Roth all in Vanguard Total Stock with the remaining 2/3 in a pre tax 401(k) comprised of a roughly 60/40 split between Vanguard Total Stock and Vanguard Intl Growth Admiral.

I selected Intl Growth over Total Stock Intl partly due to previous performance (yes I already know I went wrong here).

You mean previous recent performance.

I am bullish on the companies and industries the fund invests in but I am wondering if I’d be better off for the long run in Total Intl Stock Index as I will likely need to rely on retirement assets as a primary source of income in the future (probably 35-40 years from retirement).

Yes, you are better off using total international.

With that being said I would like to continue to have some exposure to Baillie Gifford based on their investment style and portfolio management and wanted to know if Scottish Mortgage Investment Trust is a suitable way to do so with a very small amount of taxable account money.

How much is Baillie Gifford charging you?

1) Should I switch all VG Intl Growth to VG Total Intl Index?

Yes.

2) As a US citizen in the 22% bracket how would Scottish Mortgage Investment Trust be taxed if held in a taxable account?

I don't know that one.

3) Is some combination of VG Intl Growth and VG Total Intl Index the best of both worlds?

It is right now, but it will underperform when value takes the lead.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
FlyEaglesFly52
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Joined: Tue May 11, 2021 11:37 am

Re: Vanguard Intl Funds/Baillie Gifford

Post by FlyEaglesFly52 »

Thanks
pkcrafter wrote: Tue May 11, 2021 2:23 pm [quote=FlyEaglesFly52 post_id=6000043 time=<a href="tel:1620751634">1620751634</a> user_id=175107]
Hello All,

Welcome,

First time poster long time reader. I have a couple questions regarding VG Intl funds and Baillie Gifford.

I’m 26 and my current retirement portfolio is roughly 1/3 Roth all in Vanguard Total Stock with the remaining 2/3 in a pre tax 401(k) comprised of a roughly 60/40 split between Vanguard Total Stock and Vanguard Intl Growth Admiral.

I selected Intl Growth over Total Stock Intl partly due to previous performance (yes I already know I went wrong here).

You mean previous recent performance.

Looking at Vanguard’s Institutional website the fund has a cumulative return of 7,687% compared to 2,702% for the index. It appears it is more than just recent performance unless I am missing something.

I am bullish on the companies and industries the fund invests in but I am wondering if I’d be better off for the long run in Total Intl Stock Index as I will likely need to rely on retirement assets as a primary source of income in the future (probably 35-40 years from retirement).

Yes, you are better off using total international.

Is this based on the cost, holdings, etc.? Or simply reversion to the mean which unless I am missing something above does not seem to be the case.

With that being said I would like to continue to have some exposure to Baillie Gifford based on their investment style and portfolio management and wanted to know if Scottish Mortgage Investment Trust is a suitable way to do so with a very small amount of taxable account money.

How much is Baillie Gifford charging you?

Exp. is 0.36 for the OTC stock of the Investment Trust. Higher than the Admiral shares of Intl Growth. Different holdings and exposure to companies not yet public. If it was to be in a taxable account it would be ~1-2% of total portfolio. Nothing like what is currently held in retirement holdings.

1) Should I switch all VG Intl Growth to VG Total Intl Index?

Yes.

All at once, DCA, allocate new contributions?

2) As a US citizen in the 22% bracket how would Scottish Mortgage Investment Trust be taxed if held in a taxable account?

I don't know that one.

3) Is some combination of VG Intl Growth and VG Total Intl Index the best of both worlds?

It is right now, but it will underperform when value takes the lead.

Is this based on reversion to mean economic cycle or something else?

Paul
[/quote]

Thank you for your input. I am not sure how to change my response color, my responses are below yours.
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WoodSpinner
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Re: Vanguard Intl Funds/Baillie Gifford

Post by WoodSpinner »

Op,

Do you know the holdings of Vanguard Intl Growth fund? Which assets have contributed to their outperformance of Total International?

Understanding this might be very helpful in your decision....

WoodSpinner
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Re: Vanguard Intl Funds/Baillie Gifford

Post by abuss368 »

FlyEaglesFly52 wrote: Tue May 11, 2021 11:47 am Hello All,

First time poster long time reader. I have a couple questions regarding VG Intl funds and Baillie Gifford.

I’m 26 and my current retirement portfolio is roughly 1/3 Roth all in Vanguard Total Stock with the remaining 2/3 in a pre tax 401(k) comprised of a roughly 60/40 split between Vanguard Total Stock and Vanguard Intl Growth Admiral. I selected Intl Growth over Total Stock Intl partly due to previous performance (yes I already know I went wrong here). I am bullish on the companies and industries the fund invests in but I am wondering if I’d be better off for the long run in Total Intl Stock Index as I will likely need to rely on retirement assets as a primary source of income in the future (probably 35-40 years from retirement). With that being said I would like to continue to have some exposure to Baillie Gifford based on their investment style and portfolio management and wanted to know if Scottish Mortgage Investment Trust is a suitable way to do so with a very small amount of taxable account money.

1) Should I switch all VG Intl Growth to VG Total Intl Index?
2) As a US citizen in the 22% bracket how would Scottish Mortgage Investment Trust be taxed if held in a taxable account?
3) Is some combination of VG Intl Growth and VG Total Intl Index the best of both worlds?

Thank you in advance
If you want international, I would consider Vanguard Total International. That includes all stocks at market weight.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Vanguard Intl Funds/Baillie Gifford

Post by TropikThunder »

WoodSpinner wrote: Tue May 11, 2021 8:09 pm Op,

Do you know the holdings of Vanguard Intl Growth fund? Which assets have contributed to their outperformance of Total International?

Understanding this might be very helpful in your decision....

WoodSpinner
Nobody tell OP what #5 is ............
backpacker61
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Re: Vanguard Intl Funds/Baillie Gifford

Post by backpacker61 »

In my opinion, it is okay to have a small allocation to an active fund that you like.

I would "major" in Vanguard Total International Index and "minor" in Vanguard International Growth Index.

Vanguard's active funds are different than some others, because they can change active managers if their performance suffers at some point.
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
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Re: Vanguard Intl Funds/Baillie Gifford

Post by abuss368 »

WoodSpinner wrote: Tue May 11, 2021 8:09 pm Op,

Do you know the holdings of Vanguard Intl Growth fund? Which assets have contributed to their outperformance of Total International?

Understanding this might be very helpful in your decision....

WoodSpinner
Simple! TESLA! How again does that fit into an international fund?

Tony
John C. Bogle: “Simplicity is the master key to financial success."
Topic Author
FlyEaglesFly52
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Joined: Tue May 11, 2021 11:37 am

Re: Vanguard Intl Funds/Baillie Gifford

Post by FlyEaglesFly52 »

TropikThunder wrote: Tue May 11, 2021 9:06 pm
WoodSpinner wrote: Tue May 11, 2021 8:09 pm Op,

Do you know the holdings of Vanguard Intl Growth fund? Which assets have contributed to their outperformance of Total International?

Understanding this might be very helpful in your decision....

WoodSpinner
Nobody tell OP what #5 is ............
Well aware of the holdings, allocation to regions, and countries, turnover rate, etc.
Topic Author
FlyEaglesFly52
Posts: 5
Joined: Tue May 11, 2021 11:37 am

Re: Vanguard Intl Funds/Baillie Gifford

Post by FlyEaglesFly52 »

WoodSpinner wrote: Tue May 11, 2021 8:09 pm Op,

Do you know the holdings of Vanguard Intl Growth fund? Which assets have contributed to their outperformance of Total International?

Understanding this might be very helpful in your decision....

WoodSpinner
Other than TSLA (not thrilled about the allocation there), some overweighting to ASML, BABA, Tencent, MercadoLibre. The risk is more concentrated than Total International and the companies were all ones that did extremely well over the past year. I have not been investing long enough to experience rotation from growth to value back to growth, etc. simply because I am young enough that growth has been in favor during the time I’ve contributed to a 401(k). The crux of my question is two fold 1) Did this fund just get lucky the past few years or are the cumulative returns mentioned above something worth noting and 2) If not allocating to Intl Growth going forward is Scottish Mortgage Investment Trust a suitable replacement for a small amount of taxable assets to have exposure to these innovative and growing companies that are not within a growth ETF or total market ETF?

Thanks
Topic Author
FlyEaglesFly52
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Re: Vanguard Intl Funds/Baillie Gifford

Post by FlyEaglesFly52 »

backpacker61 wrote: Tue May 11, 2021 9:46 pm In my opinion, it is okay to have a small allocation to an active fund that you like.

I would "major" in Vanguard Total International Index and "minor" in Vanguard International Growth Index.

Vanguard's active funds are different than some others, because they can change active managers if their performance suffers at some point.
Thank you. The manager tenure on most VG active funds is pretty strong if I am not mistaken. PRIMECAP dates back close to forty years now. I know that is a benefit in outsourcing active while indexing in house. Is there a guideline on how much to allocate to active vs passive in these instances?
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Re: Vanguard Intl Funds/Baillie Gifford

Post by desiderium »

FlyEaglesFly52 wrote: Tue May 11, 2021 11:47 am Hello All,

First time poster long time reader. I have a couple questions regarding VG Intl funds and Baillie Gifford.

I’m 26 and my current retirement portfolio is roughly 1/3 Roth all in Vanguard Total Stock with the remaining 2/3 in a pre tax 401(k) comprised of a roughly 60/40 split between Vanguard Total Stock and Vanguard Intl Growth Admiral. I selected Intl Growth over Total Stock Intl partly due to previous performance (yes I already know I went wrong here). I am bullish on the companies and industries the fund invests in but I am wondering if I’d be better off for the long run in Total Intl Stock Index as I will likely need to rely on retirement assets as a primary source of income in the future (probably 35-40 years from retirement). With that being said I would like to continue to have some exposure to Baillie Gifford based on their investment style and portfolio management and wanted to know if Scottish Mortgage Investment Trust is a suitable way to do so with a very small amount of taxable account money.

1) Should I switch all VG Intl Growth to VG Total Intl Index?
2) As a US citizen in the 22% bracket how would Scottish Mortgage Investment Trust be taxed if held in a taxable account?
3) Is some combination of VG Intl Growth and VG Total Intl Index the best of both worlds?

Thank you in advance
You are asking questions that don't have an answer. The default always goes something like "You can't predict the future, so best to invest in a cap-weighted total market fund". I, too, have been impressed by some of the Baille Gifford long-term thinking, as well as the track record. Over the years I have dabbled with modest allocations to a whole range of investing ideas that I have studied. Some have been moderately successful; others not so much. Also, with relatively small bets, one does not really move the needle much either way. Now I mostly stay with simplicity. I would suggest investing the bulk of your international allocation in a total market fund and take a modest portion and pursue your investing ideas. Set the amount small enough that you are willing to stick with for a number of years even if it underperforms Most important, track your results over time, be patient and learn.
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WoodSpinner
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Re: Vanguard Intl Funds/Baillie Gifford

Post by WoodSpinner »

FlyEaglesFly52 wrote: Wed May 12, 2021 6:20 am
WoodSpinner wrote: Tue May 11, 2021 8:09 pm Op,

Do you know the holdings of Vanguard Intl Growth fund? Which assets have contributed to their outperformance of Total International?

Understanding this might be very helpful in your decision....

WoodSpinner
Other than TSLA (not thrilled about the allocation there), some overweighting to ASML, BABA, Tencent, MercadoLibre. The risk is more concentrated than Total International and the companies were all ones that did extremely well over the past year. I have not been investing long enough to experience rotation from growth to value back to growth, etc. simply because I am young enough that growth has been in favor during the time I’ve contributed to a 401(k). The crux of my question is two fold 1) Did this fund just get lucky the past few years or are the cumulative returns mentioned above something worth noting and 2) If not allocating to Intl Growth going forward is Scottish Mortgage Investment Trust a suitable replacement for a small amount of taxable assets to have exposure to these innovative and growing companies that are not within a growth ETF or total market ETF?

Thanks
A year ago this fund held an even larger amount of US Growth stocks that were juicing their returns. No idea how to go back and pull that data up — I remember because I took a good look at it myself. Personally I passed and invested in VXUS - Vanguard Total International since I wanted the International exposure and not more exposure to the US Growth market (I also hold VTI).

From my perspective, I don’t think the holdings of this fund match the stated Goals of the prospectus. I would expect to have minimal additional exposure to the US market instead of 13% or more (2nd largest country exposure).

https://investor.vanguard.com/mutual-fu ... view/VWIGX
The International Growth Fund focuses on non-U.S. companies with high growth potential. Created in 1981, the fund employs an aggressive approach that attempts to capitalize on global economic expansion.
I don’t know if they got lucky or not, nor do I know about the Scottish Mortgage Investment Trust.

WoodSpinner
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Re: Vanguard Intl Funds/Baillie Gifford

Post by Gaston »

FlyEaglesFly52 wrote: Tue May 11, 2021 11:47 am 2) As a US citizen in the 22% bracket how would Scottish Mortgage Investment Trust be taxed if held in a taxable account?
I believe you will need to consult a US/UK tax accountant on the Scottish Trust question. I recently lived in the UK and can recommend the one I used. Google “USTAXFS London” if interested. I was a client and am not affiliated with them in any other way. FYI they will charge about $500 per hour.

In general, the US has tax treaties with various countries, and the tax impact will depend on the country and the treaty. Most counties that I am familiar with impose tax withholding on interest and dividends, and even if the US has a tax treaty with the country, you’ll still lose about 35% of your interest/dividend income because it is withheld at source and cannot be reclaimed. Also, if the IRS considers the Trust to be a passive income investment, you will fall under IRS PFIC tax and reporting rules, which can be cumbersome.

The bottom line is that investing in stocks, bonds, funds or trusts in other countries requires research and, IMHO, should only be done with one’s eyes open.
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