Looking to diversify International holdings

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
rockAction
Posts: 235
Joined: Wed Apr 08, 2020 4:56 pm

Looking to diversify International holdings

Post by rockAction »

A few years ago I made a rookie mistake and decided to purchase Vanguard International Growth (VWIGX) as my core International holding. It's performed well, but I now realize that it was not the proper Boglehead thing to do, and I am now looking to diversify my International stock holdings.

I have very large capital gains on this fund, and am trying to decide the appropriate path forward for diversifying my International stock holdings.

Rather than sell VWIGX and purchase Total International Stock (VXUS), and thus pay large capital gains taxes, I am considering using new money to purchase an international value (or perhaps international small-cap value) fund to complement VWIGX since VWIGX is primarily large-cap growth.

Does this seem like the most prudent path forward? If so, what international value fund would you suggest as a complement to VWIGX?
40% VT | 20% Global SCV | 20% LTPZ | 10% I-Bonds | 10% Cash
bei22000
Posts: 175
Joined: Mon Jan 30, 2017 1:58 pm

Re: Looking to diversify International holdings

Post by bei22000 »

I have that fund in my ROTH IRA and it is doing well. if need a more diversified international holdings, I would invest in vanguard total international fund.
User avatar
vineviz
Posts: 14921
Joined: Tue May 15, 2018 1:55 pm
Location: Baltimore, MD

Re: Looking to diversify International holdings

Post by vineviz »

rockAction wrote: Thu Apr 22, 2021 8:28 am Rather than sell VWIGX and purchase Total International Stock (VXUS), and thus pay large capital gains taxes, I am considering using new money to purchase an international value (or perhaps international small-cap value) fund to complement VWIGX since VWIGX is primarily large-cap growth.

Does this seem like the most prudent path forward? If so, what international value fund would you suggest as a complement to VWIGX?
I think the best approach would be to simply adopt VXUS or Vanguard Total International Stock Index Fund Admiral Shares (VTIAX). It's much cheaper than any international value fund and since you seem to be reluctant to rebalance in the taxable account anyway it's probably going to be the smarter move long-term.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Topic Author
rockAction
Posts: 235
Joined: Wed Apr 08, 2020 4:56 pm

Re: Looking to diversify International holdings

Post by rockAction »

vineviz wrote: Thu Apr 22, 2021 8:47 am
rockAction wrote: Thu Apr 22, 2021 8:28 am Rather than sell VWIGX and purchase Total International Stock (VXUS), and thus pay large capital gains taxes, I am considering using new money to purchase an international value (or perhaps international small-cap value) fund to complement VWIGX since VWIGX is primarily large-cap growth.

Does this seem like the most prudent path forward? If so, what international value fund would you suggest as a complement to VWIGX?
I think the best approach would be to simply adopt VXUS or Vanguard Total International Stock Index Fund Admiral Shares (VTIAX). It's much cheaper than any international value fund and since you seem to be reluctant to rebalance in the taxable account anyway it's probably going to be the smarter move long-term.
Perfect, thank you. And just to confirm, you are saying I should just keep the VWIGX I have, and apply all new money for International towards VTIAX, correct?
40% VT | 20% Global SCV | 20% LTPZ | 10% I-Bonds | 10% Cash
Topic Author
rockAction
Posts: 235
Joined: Wed Apr 08, 2020 4:56 pm

Re: Looking to diversify International holdings

Post by rockAction »

bei22000 wrote: Thu Apr 22, 2021 8:42 am I have that fund in my ROTH IRA and it is doing well. if need a more diversified international holdings, I would invest in vanguard total international fund.
Agreed, it has been spectacular, which is great, but also leaves me with the capital gains dilemma since I hold the fund in a taxable account.
40% VT | 20% Global SCV | 20% LTPZ | 10% I-Bonds | 10% Cash
MishkaWorries
Posts: 1362
Joined: Wed Aug 14, 2019 4:39 pm

Re: Looking to diversify International holdings

Post by MishkaWorries »

rockAction wrote: Thu Apr 22, 2021 9:21 am
bei22000 wrote: Thu Apr 22, 2021 8:42 am I have that fund in my ROTH IRA and it is doing well. if need a more diversified international holdings, I would invest in vanguard total international fund.
Agreed, it has been spectacular, which is great, but also leaves me with the capital gains dilemma since I hold the fund in a taxable account.
Just turn off dividend reinvestment and dividends plus new money go to total international. You can also tax loss harvest any losses in growth and buy total.
We plan. G-d laughs.
Topic Author
rockAction
Posts: 235
Joined: Wed Apr 08, 2020 4:56 pm

Re: Looking to diversify International holdings

Post by rockAction »

MishkaWorries wrote: Thu Apr 22, 2021 9:48 am
rockAction wrote: Thu Apr 22, 2021 9:21 am
bei22000 wrote: Thu Apr 22, 2021 8:42 am I have that fund in my ROTH IRA and it is doing well. if need a more diversified international holdings, I would invest in vanguard total international fund.
Agreed, it has been spectacular, which is great, but also leaves me with the capital gains dilemma since I hold the fund in a taxable account.
Just turn off dividend reinvestment and dividends plus new money go to total international. You can also tax loss harvest any losses in growth and buy total.
+1
40% VT | 20% Global SCV | 20% LTPZ | 10% I-Bonds | 10% Cash
rgs92
Posts: 3436
Joined: Mon Mar 02, 2009 7:00 pm

Re: Looking to diversify International holdings

Post by rgs92 »

Fidelity FZILX is the total international zero-expense fund. It works well. VXUS and IXUS charge about 10 basis points.
VXUS and IXUS are the Vanguard and Ishares total int'l mkt etfs.
bei22000
Posts: 175
Joined: Mon Jan 30, 2017 1:58 pm

Re: Looking to diversify International holdings

Post by bei22000 »

You are right. Fidelity has a few zero cost index funds, such as total stock index fund, extended market index fund, international index fund.
User avatar
vineviz
Posts: 14921
Joined: Tue May 15, 2018 1:55 pm
Location: Baltimore, MD

Re: Looking to diversify International holdings

Post by vineviz »

rockAction wrote: Thu Apr 22, 2021 9:04 am
vineviz wrote: Thu Apr 22, 2021 8:47 am
rockAction wrote: Thu Apr 22, 2021 8:28 am Rather than sell VWIGX and purchase Total International Stock (VXUS), and thus pay large capital gains taxes, I am considering using new money to purchase an international value (or perhaps international small-cap value) fund to complement VWIGX since VWIGX is primarily large-cap growth.

Does this seem like the most prudent path forward? If so, what international value fund would you suggest as a complement to VWIGX?
I think the best approach would be to simply adopt VXUS or Vanguard Total International Stock Index Fund Admiral Shares (VTIAX). It's much cheaper than any international value fund and since you seem to be reluctant to rebalance in the taxable account anyway it's probably going to be the smarter move long-term.
Perfect, thank you. And just to confirm, you are saying I should just keep the VWIGX I have, and apply all new money for International towards VTIAX, correct?
In general I'd recommend selling as much of the VWIGX as you can justify, balancing the risk of keeping a somewhat narrow holding with the known tax implications.

But if you just turn off dividend reinvestment for VWIGX and put new money towards VTIAX, I'd say that's still a very reasonable course of action.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Angst
Posts: 2968
Joined: Sat Jun 09, 2007 11:31 am

Re: Looking to diversify International holdings

Post by Angst »

OP, regarding the Fidelity "zero-expense" or "zero cost" alternatives, they're perfectly good funds but their names really boil down to marketing plays; all mutual funds entail costs to run them.

It's reasonable to expect that Vanguard's large, vanilla index funds will actually exceed the Fidelity Zero funds by a few, and perhaps as few as single digits of basis points of return over perhaps as many as double digits of years. Not a huge issue either way, but nothing is really free.
User avatar
vineviz
Posts: 14921
Joined: Tue May 15, 2018 1:55 pm
Location: Baltimore, MD

Re: Looking to diversify International holdings

Post by vineviz »

bei22000 wrote: Thu Apr 22, 2021 10:18 am You are right. Fidelity has a few zero cost index funds, such as total stock index fund, extended market index fund, international index fund.
Fidelity “zero” cost funds should NEVER be held in a taxable account.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
dorster
Posts: 278
Joined: Tue Aug 15, 2017 4:20 pm

Re: Looking to diversify International holdings

Post by dorster »

bei22000 wrote: Thu Apr 22, 2021 10:18 am You are right. Fidelity has a few zero cost index funds, such as total stock index fund, extended market index fund, international index fund.
This is off topic but it's worth pointing out that while the Fidelity Zero Total US (FZROX), Total International (FZILX), and Total Large Cap (FNILX) all seem reasonable and have performed equivalent to non-proprietary index funds (Vanguard's VTSAX/VTIAX/VLCAX for example).

Fidelity Zero Extended Market (FZIPX) has had significantly worse performance than other non-proprietary "extended market" index funds such as Vanguard's (VEXAX).
Post Reply