VT vs VTI+VXUS
VT vs VTI+VXUS
I've read before that even if your intention is to generally follow a global market weighted index like VT for your asset allocation, you should still purchase them separately with VTI+VXUS because of some tax reasons. Can someone help explain to me what that reason is more specifically?
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Re: VT vs VTI+VXUS
That would only apply if you were holding the funds in a taxable account as it would allow for tax loss harvesting of the individual components.
Holding them separately anywhere would also allow for allocations other than market weight.
Cheers
Holding them separately anywhere would also allow for allocations other than market weight.
Cheers
Re: VT vs VTI+VXUS
Not only tax-loss harvesting, but also the foreign tax credit.Silk McCue wrote: ↑Sat Jun 03, 2023 8:36 am That would only apply if you were holding the funds in a taxable account as it would allow for tax loss harvesting of the individual components.
Holding them separately anywhere would also allow for allocations other than market weight.
Cheers
You cannot claim it for VT, but can get it for VXUS. Thus holding VXUS + VTI will save you some money. Perhaps 0.1-0.2% annually? I’d have to redo the math
Crom laughs at your Four Winds
Re: VT vs VTI+VXUS
In a taxable account, I would hold them separately. This allows you to
1. Take the foreign tax credit.
2. Sell one without selling the other.
3. Two different opportunities to tax loss harvest.
4. Used to be a very slightly lower cost, but I'm not sure if this is true anymore.
In a tax-advantaged account, these points are not very important. I would still hold them separately, but it is easy enough to hold together with no problems.
1. Take the foreign tax credit.
2. Sell one without selling the other.
3. Two different opportunities to tax loss harvest.
4. Used to be a very slightly lower cost, but I'm not sure if this is true anymore.
In a tax-advantaged account, these points are not very important. I would still hold them separately, but it is easy enough to hold together with no problems.
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Re: VT vs VTI+VXUS
When you hold foriegn stock you pay taxes in those country's when you get dividends. American law is written so that you can write that off. If you hold ETF's that hold international stock, if the amount of international stock is over 50% you get to do it as well. VT holds less than 50% so you can't.Kaione wrote: ↑Sat Jun 03, 2023 8:26 am I've read before that even if your intention is to generally follow a global market weighted index like VT for your asset allocation, you should still purchase them separately with VTI+VXUS because of some tax reasons. Can someone help explain to me what that reason is more specifically?
Now how much? VXUS pays out about 3%. And of that in 2022 8.5% of it was taxed. So multiplied together that's 0.25%. So if you held a $1,000,000 in VT, about 40% of that would be international. So that meant you'd be missing out on about $1000 annyally for every $1,000,000 dollars. With that $1,000,000 of VT paying out a dividend of $20,000 a year total.
For myself personally, I don't have anywhere near $1,000,000 and so its worth it to just be able to buy one fund for all stocks and let the market decide the allocation of domestic/international. Also if there's ever a major downturn don't forget about tax loss harvesting. Let's say you hold VT and then theres a stock market crash. You can sell VT and then pick up VTI/VXUS at the market weighting ratio and write off your loss. And when it happens again in the future in another year you can swap back.
60% VT 40% BNDW (no bonds in Roth)
Re: VT vs VTI+VXUS
Thanks for the explanation! So it seems reasonable to consider it as an implied additional 0.1% expense ratio then right?Trance wrote: ↑Sat Jun 03, 2023 1:11 pmWhen you hold foriegn stock you pay taxes in those country's when you get dividends. American law is written so that you can write that off. If you hold ETF's that hold international stock, if the amount of international stock is over 50% you get to do it as well. VT holds less than 50% so you can't.Kaione wrote: ↑Sat Jun 03, 2023 8:26 am I've read before that even if your intention is to generally follow a global market weighted index like VT for your asset allocation, you should still purchase them separately with VTI+VXUS because of some tax reasons. Can someone help explain to me what that reason is more specifically?
Now how much? VXUS pays out about 3%. And of that in 2022 8.5% of it was taxed. So multiplied together that's 0.25%. So if you held a $1,000,000 in VT, about 40% of that would be international. So that meant you'd be missing out on about $1000 annyally for every $1,000,000 dollars. With that $1,000,000 of VT paying out a dividend of $20,000 a year total.
For myself personally, I don't have anywhere near $1,000,000 and so its worth it to just be able to buy one fund for all stocks and let the market decide the allocation of domestic/international. Also if there's ever a major downturn don't forget about tax loss harvesting. Let's say you hold VT and then theres a stock market crash. You can sell VT and then pick up VTI/VXUS at the market weighting ratio and write off your loss. And when it happens again in the future in another year you can swap back.
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Re: VT vs VTI+VXUS
vti .03%retiredjg wrote: ↑Sat Jun 03, 2023 11:13 am In a taxable account, I would hold them separately. This allows you to
1. Take the foreign tax credit.
2. Sell one without selling the other.
3. Two different opportunities to tax loss harvest.
4. Used to be a very slightly lower cost, but I'm not sure if this is true anymore.
In a tax-advantaged account, these points are not very important. I would still hold them separately, but it is easy enough to hold together with no problems.
vxus .07%
assuming a weighting of 60% US and 40% International (?)
(.60 X .03) + (.40 X .07) = .018 + .028 = .046% or 4.6 basis points/year. Dirt cheap to own the world.
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Re: VT vs VTI+VXUS
Apparently VT is 0.07%, higher than the combination of the two funds. However, the difference is so small, I would not pay it much attention. But some people here might.
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Re: VT vs VTI+VXUS
Yep! That's a good way of thinking of itKaione wrote: ↑Sat Jun 03, 2023 7:38 pmThanks for the explanation! So it seems reasonable to consider it as an implied additional 0.1% expense ratio then right?Trance wrote: ↑Sat Jun 03, 2023 1:11 pmWhen you hold foriegn stock you pay taxes in those country's when you get dividends. American law is written so that you can write that off. If you hold ETF's that hold international stock, if the amount of international stock is over 50% you get to do it as well. VT holds less than 50% so you can't.Kaione wrote: ↑Sat Jun 03, 2023 8:26 am I've read before that even if your intention is to generally follow a global market weighted index like VT for your asset allocation, you should still purchase them separately with VTI+VXUS because of some tax reasons. Can someone help explain to me what that reason is more specifically?
Now how much? VXUS pays out about 3%. And of that in 2022 8.5% of it was taxed. So multiplied together that's 0.25%. So if you held a $1,000,000 in VT, about 40% of that would be international. So that meant you'd be missing out on about $1000 annyally for every $1,000,000 dollars. With that $1,000,000 of VT paying out a dividend of $20,000 a year total.
For myself personally, I don't have anywhere near $1,000,000 and so its worth it to just be able to buy one fund for all stocks and let the market decide the allocation of domestic/international. Also if there's ever a major downturn don't forget about tax loss harvesting. Let's say you hold VT and then theres a stock market crash. You can sell VT and then pick up VTI/VXUS at the market weighting ratio and write off your loss. And when it happens again in the future in another year you can swap back.
60% VT 40% BNDW (no bonds in Roth)