VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Trance
Posts: 361
Joined: Sun Jun 12, 2022 12:11 am

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Trance »

international001 wrote: Fri Jun 09, 2023 5:34 pm Has somebody analyazed how much worth is VEA/VWO split for TLH purposes

Unless you micro-time manage your portfolio, you typically sell stocks when there is a big market crunh. And both to seem to go hand in hand.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Is there a possible issue if a country is reclassified from emerging market to developed? For example Taiwan is is a whopping 17.40% of VWO, would we have to rebalance a portfolio if it moves to VEA?
60% VT 40% BNDW (no bonds in Roth)
User avatar
hiddenpower
Posts: 564
Joined: Tue Nov 17, 2020 11:24 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by hiddenpower »

Trance wrote: Sat Jun 10, 2023 1:40 pm
international001 wrote: Fri Jun 09, 2023 5:34 pm Has somebody analyazed how much worth is VEA/VWO split for TLH purposes

Unless you micro-time manage your portfolio, you typically sell stocks when there is a big market crunh. And both to seem to go hand in hand.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Is there a possible issue if a country is reclassified from emerging market to developed? For example Taiwan is is a whopping 17.40% of VWO, would we have to rebalance a portfolio if it moves to VEA?
I think it would still be close enough if held at MCW. VEA would then pick it up. If you held it at custom weights then it would be a bit off. But I could be wrong. Following
Trance
Posts: 361
Joined: Sun Jun 12, 2022 12:11 am

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Trance »

hiddenpower wrote: Sat Jun 10, 2023 1:43 pm
Trance wrote: Sat Jun 10, 2023 1:40 pm
international001 wrote: Fri Jun 09, 2023 5:34 pm Has somebody analyazed how much worth is VEA/VWO split for TLH purposes

Unless you micro-time manage your portfolio, you typically sell stocks when there is a big market crunh. And both to seem to go hand in hand.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Is there a possible issue if a country is reclassified from emerging market to developed? For example Taiwan is is a whopping 17.40% of VWO, would we have to rebalance a portfolio if it moves to VEA?
Not if held at MCW. VEA would then pick it up. If you held it at custom weights then it would be a bit off
Are you sure? I might be misunderstanding this but if I held it at market weights (VTI 60% VEA 30% VWO 10%) and Taiwan aka 17.40% gets reclassified then the new allocation would be (VTI 60% VEA 31.74% VWO 8.26%) then I'd have to rebalance to get back market cap weights. Unless my VEA and VWO lost and gained value which I can't believe is the case.
60% VT 40% BNDW (no bonds in Roth)
international001
Posts: 2748
Joined: Thu Feb 15, 2018 6:31 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by international001 »

hiddenpower wrote: Fri Jun 09, 2023 5:49 pm Emerging is supposed to be uncorrelated.

I decided the one extra ETF is worth it to me for the .5bp saving ;). No but actually for the optionality to sin a bit.
It's supposed to be < 100% correlated.

But I'm complaining about the practical operation. I usually do TLH to any security when market goes down 5-10%. It usually goes on some years like 2022, and it applies to all my funds
If emerging is somehow uncorrelated, could you profit out of it by selling every moth when your ETF goes down 1%? How lucky you have to be that you bought that ETF last month.

I'd like to see an actual use case
User avatar
White Coat Investor
Posts: 17413
Joined: Fri Mar 02, 2007 8:11 pm
Location: Greatest Snow On Earth

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by White Coat Investor »

hiddenpower wrote: Sat Jun 10, 2023 12:09 pm
White Coat Investor wrote: Sat Jun 10, 2023 12:09 pm Ha ha. Classic Bogleheads thread. Arguing for 50 posts over something that only matters a few basis points.
16bps (FTC) matters. That's what I decided in the end. Might as well go with avantis for that.
Okay.

But it matters a whole lot less than a lot of other things. Investing $100K for 10 years at 8.16% versus 8% is an extra $3,200. $320 a year. 88 cents a day. I don't know about how you're living your financial life, but there are an awful lot of ways for me to come up with more than 88 cents a day.

Classic Bogleheads. Sure, it's important to get out of those crummy 1.5% ER actively managed funds and it's always good to consider costs and reduce them. Pennies add up to dimes add up to dollars. But keep things in perspective.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
User avatar
hiddenpower
Posts: 564
Joined: Tue Nov 17, 2020 11:24 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by hiddenpower »

White Coat Investor wrote: Sun Jun 11, 2023 8:54 pm
hiddenpower wrote: Sat Jun 10, 2023 12:09 pm
White Coat Investor wrote: Sat Jun 10, 2023 12:09 pm Ha ha. Classic Bogleheads thread. Arguing for 50 posts over something that only matters a few basis points.
16bps (FTC) matters. That's what I decided in the end. Might as well go with avantis for that.
Okay.

But it matters a whole lot less than a lot of other things. Investing $100K for 10 years at 8.16% versus 8% is an extra $3,200. $320 a year. 88 cents a day. I don't know about how you're living your financial life, but there are an awful lot of ways for me to come up with more than 88 cents a day.

Classic Bogleheads. Sure, it's important to get out of those crummy 1.5% ER actively managed funds and it's always good to consider costs and reduce them. Pennies add up to dimes add up to dollars. But keep things in perspective.
I'd happily pay 1% for a good SMA to run managed futures on my portfolio. When you start to layer bps on top of one another though, it begins to hurt more imo.
CletusCaddy
Posts: 2678
Joined: Sun Sep 12, 2021 4:23 am

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by CletusCaddy »

Trance wrote: Sat Jun 10, 2023 1:53 pm
hiddenpower wrote: Sat Jun 10, 2023 1:43 pm
Trance wrote: Sat Jun 10, 2023 1:40 pm
international001 wrote: Fri Jun 09, 2023 5:34 pm Has somebody analyazed how much worth is VEA/VWO split for TLH purposes

Unless you micro-time manage your portfolio, you typically sell stocks when there is a big market crunh. And both to seem to go hand in hand.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Is there a possible issue if a country is reclassified from emerging market to developed? For example Taiwan is is a whopping 17.40% of VWO, would we have to rebalance a portfolio if it moves to VEA?
Not if held at MCW. VEA would then pick it up. If you held it at custom weights then it would be a bit off
Are you sure? I might be misunderstanding this but if I held it at market weights (VTI 60% VEA 30% VWO 10%) and Taiwan aka 17.40% gets reclassified then the new allocation would be (VTI 60% VEA 31.74% VWO 8.26%) then I'd have to rebalance to get back market cap weights. Unless my VEA and VWO lost and gained value which I can't believe is the case.
Off topic but how is Taiwan still an emerging market? Its GDP per capita is the same as Japan’s!
User avatar
hiddenpower
Posts: 564
Joined: Tue Nov 17, 2020 11:24 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by hiddenpower »

White Coat Investor wrote: Sun Jun 11, 2023 8:54 pm
hiddenpower wrote: Sat Jun 10, 2023 12:09 pm
White Coat Investor wrote: Sat Jun 10, 2023 12:09 pm Ha ha. Classic Bogleheads thread. Arguing for 50 posts over something that only matters a few basis points.
16bps (FTC) matters. That's what I decided in the end. Might as well go with avantis for that.
Okay.

But it matters a whole lot less than a lot of other things. Investing $100K for 10 years at 8.16% versus 8% is an extra $3,200. $320 a year. 88 cents a day. I don't know about how you're living your financial life, but there are an awful lot of ways for me to come up with more than 88 cents a day.

Classic Bogleheads. Sure, it's important to get out of those crummy 1.5% ER actively managed funds and it's always good to consider costs and reduce them. Pennies add up to dimes add up to dollars. But keep things in perspective.
BTW do you do a portfolio reveal anywhere on your site? Curious if you chose to split them
User avatar
White Coat Investor
Posts: 17413
Joined: Fri Mar 02, 2007 8:11 pm
Location: Greatest Snow On Earth

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by White Coat Investor »

hiddenpower wrote: Sun Jun 11, 2023 9:52 pm
White Coat Investor wrote: Sun Jun 11, 2023 8:54 pm
hiddenpower wrote: Sat Jun 10, 2023 12:09 pm
White Coat Investor wrote: Sat Jun 10, 2023 12:09 pm Ha ha. Classic Bogleheads thread. Arguing for 50 posts over something that only matters a few basis points.
16bps (FTC) matters. That's what I decided in the end. Might as well go with avantis for that.
Okay.

But it matters a whole lot less than a lot of other things. Investing $100K for 10 years at 8.16% versus 8% is an extra $3,200. $320 a year. 88 cents a day. I don't know about how you're living your financial life, but there are an awful lot of ways for me to come up with more than 88 cents a day.

Classic Bogleheads. Sure, it's important to get out of those crummy 1.5% ER actively managed funds and it's always good to consider costs and reduce them. Pennies add up to dimes add up to dollars. But keep things in perspective.
BTW do you do a portfolio reveal anywhere on your site? Curious if you chose to split them
Yes. 60% stocks, 20% bonds, 20% real estate. VTI is 25% and VXUS is 15% of my portfolio. I don't use VT. Probably more inertia but I'd probably do it just for the 16 bps, as much as I make fun of it.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Trance
Posts: 361
Joined: Sun Jun 12, 2022 12:11 am

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Trance »

CletusCaddy wrote: Sun Jun 11, 2023 9:50 pm
Trance wrote: Sat Jun 10, 2023 1:53 pm
hiddenpower wrote: Sat Jun 10, 2023 1:43 pm
Trance wrote: Sat Jun 10, 2023 1:40 pm
international001 wrote: Fri Jun 09, 2023 5:34 pm Has somebody analyazed how much worth is VEA/VWO split for TLH purposes

Unless you micro-time manage your portfolio, you typically sell stocks when there is a big market crunh. And both to seem to go hand in hand.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Is there a possible issue if a country is reclassified from emerging market to developed? For example Taiwan is is a whopping 17.40% of VWO, would we have to rebalance a portfolio if it moves to VEA?
Not if held at MCW. VEA would then pick it up. If you held it at custom weights then it would be a bit off
Are you sure? I might be misunderstanding this but if I held it at market weights (VTI 60% VEA 30% VWO 10%) and Taiwan aka 17.40% gets reclassified then the new allocation would be (VTI 60% VEA 31.74% VWO 8.26%) then I'd have to rebalance to get back market cap weights. Unless my VEA and VWO lost and gained value which I can't believe is the case.
Off topic but how is Taiwan still an emerging market? Its GDP per capita is the same as Japan’s!
Exactly my point! I'm not sure exactly the criteria is that is used to reclassify nations from emerging to developed according to the indices that do so, but Taiwan surely should be soon and its a huge part of the emerging market at 17%. It really seems like this would cause a rebalancing issue for investors that own each market individually instead of together in an etf like VXUS
60% VT 40% BNDW (no bonds in Roth)
muffins14
Posts: 5529
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by muffins14 »

CletusCaddy wrote: Sun Jun 11, 2023 9:50 pm
Trance wrote: Sat Jun 10, 2023 1:53 pm
hiddenpower wrote: Sat Jun 10, 2023 1:43 pm
Trance wrote: Sat Jun 10, 2023 1:40 pm
international001 wrote: Fri Jun 09, 2023 5:34 pm Has somebody analyazed how much worth is VEA/VWO split for TLH purposes

Unless you micro-time manage your portfolio, you typically sell stocks when there is a big market crunh. And both to seem to go hand in hand.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Is there a possible issue if a country is reclassified from emerging market to developed? For example Taiwan is is a whopping 17.40% of VWO, would we have to rebalance a portfolio if it moves to VEA?
Not if held at MCW. VEA would then pick it up. If you held it at custom weights then it would be a bit off
Are you sure? I might be misunderstanding this but if I held it at market weights (VTI 60% VEA 30% VWO 10%) and Taiwan aka 17.40% gets reclassified then the new allocation would be (VTI 60% VEA 31.74% VWO 8.26%) then I'd have to rebalance to get back market cap weights. Unless my VEA and VWO lost and gained value which I can't believe is the case.
Off topic but how is Taiwan still an emerging market? Its GDP per capita is the same as Japan’s!
There’s not really a non-political way to say this, but Taiwan is China, or at least is very at risk of a lot of things related to China. Most countries in the indexes are independent countries
Crom laughs at your Four Winds
Trance
Posts: 361
Joined: Sun Jun 12, 2022 12:11 am

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Trance »

muffins14 wrote: Mon Jun 12, 2023 6:43 am
CletusCaddy wrote: Sun Jun 11, 2023 9:50 pm
Trance wrote: Sat Jun 10, 2023 1:53 pm
hiddenpower wrote: Sat Jun 10, 2023 1:43 pm
Trance wrote: Sat Jun 10, 2023 1:40 pm

Is there a possible issue if a country is reclassified from emerging market to developed? For example Taiwan is is a whopping 17.40% of VWO, would we have to rebalance a portfolio if it moves to VEA?
Not if held at MCW. VEA would then pick it up. If you held it at custom weights then it would be a bit off
Are you sure? I might be misunderstanding this but if I held it at market weights (VTI 60% VEA 30% VWO 10%) and Taiwan aka 17.40% gets reclassified then the new allocation would be (VTI 60% VEA 31.74% VWO 8.26%) then I'd have to rebalance to get back market cap weights. Unless my VEA and VWO lost and gained value which I can't believe is the case.
Off topic but how is Taiwan still an emerging market? Its GDP per capita is the same as Japan’s!
There’s not really a non-political way to say this, but Taiwan is China, or at least is very at risk of a lot of things related to China. Most countries in the indexes are independent countries
I mean that's objectively false. I'm not being political either, Vanguard and the index it follows treats China and Taiwan as completely separate entities. Hence there is a chance Taiwan can be upgraded to Developed Market and leave China behind in the Emerging Market
60% VT 40% BNDW (no bonds in Roth)
muffins14
Posts: 5529
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by muffins14 »

Trance wrote: Mon Jun 12, 2023 6:58 am
I mean that's objectively false. I'm not being political either, Vanguard and the index it follows treats China and Taiwan as completely separate entities. Hence there is a chance Taiwan can be upgraded to Developed Market and leave China behind in the Emerging Market
Even if they are separate investable entities, what I’m trying to say is that the risks that Taiwan faces, as a result of actually being China (per China at least), are quite unique relative to other countries. That risk may be something that causes a lot of instability or uncertainty in markets, resulting in decisions to keep Taiwan as an emerging market rather than developed market.
Crom laughs at your Four Winds
8000m
Posts: 84
Joined: Mon Jan 02, 2023 8:38 am

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by 8000m »

muffins14 wrote: Mon Jun 12, 2023 6:43 am
There’s not really a non-political way to say this, but Taiwan is China, or at least is very at risk of a lot of things related to China.


EM is certainly living up to the 'emerging' brand and the dynamics that word connotes. Independent of opinions on the complicated web of China-Tawain issues, they make up >50% of the index at present as most here are well aware. "It's priced accordingly" is what I tell myself, but that part is not behaviorally difficult for me. Any behavioral struggle/s I have with the index stem from non-financial topics.

Wrapping the discussion back into VT - VXUS, VEA/VWO, index construction/re-categorization of constituent markets is an interesting topic. How VT, VXUS, VEA would each be impacted by any change to the component indexes is something I don't know enough about. Independent of geopolitical China/Taiwan opinions, they are in fact 2 of the largest economies in the world. With both sitting atop FTSE EM, the impact of any change would be a spectacle. It's difficult to see FTSE being motivated to modify anything any time soon.

(VWO Top 5 Weights pasted for convenient lookup ref.)
COUNTRY % of fund
China 34.00%
Taiwan 17.40%
India 16.90%
Brazil 5.80%
Saudi Arabia 4.60%
zachlovescoffee
Posts: 1
Joined: Thu Aug 17, 2023 5:36 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by zachlovescoffee »

Sorry to resurrect the topic. Is VT better than VTI/VUSX? My marginal tax bracket is over 30% and I live in a LCOL. Always trying to reduce my tax liability as possible. I have municipal bond funds and US treasuries funds to offset gains lost to state tax. I don’t want to make it more complicated if VT gets it done but if VSUX can yield higher tax credit I’ll go that route.
international001
Posts: 2748
Joined: Thu Feb 15, 2018 6:31 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by international001 »

YEs. that was the whole point of the thread. You can optimize in taxable
learnbehumble
Posts: 57
Joined: Mon Sep 04, 2023 10:52 am

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by learnbehumble »

My takeaway is that if you want to invest according to global market-cap weights - which is roughly 60% US and 40% non-US - then just buy VT. Easy, done.

If you want to tilt away from 60% US then go ahead with VTI + VXUS or VTI + VEA + VWO.

Picking one's US/non-US allocation is more important than optimizing for taxes, where the difference is typically <20 bps.
international001
Posts: 2748
Joined: Thu Feb 15, 2018 6:31 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by international001 »

learnbehumble wrote: Sat Sep 09, 2023 6:09 am My takeaway is that if you want to invest according to global market-cap weights - which is roughly 60% US and 40% non-US - then just buy VT. Easy, done.

If you want to tilt away from 60% US then go ahead with VTI + VXUS or VTI + VEA + VWO.

Picking one's US/non-US allocation is more important than optimizing for taxes, where the difference is typically <20 bps.
Why not doing both? You really need very little sophistication for it
Ma bogleheads would not switch to an ETF with 0.2% higher fees
User avatar
Cocoa Beach Bum
Posts: 429
Joined: Thu Jan 12, 2023 12:47 pm
Location: Florida

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Cocoa Beach Bum »

VT has another advantage over the combination of VTI+VXUS. VT includes some relatively large publicly listed stocks that are excluded from VTI+VXUS, namely stocks of foreign companies whose primary listing is in the US. Examples include MercadoLibre (MELI), ICON plc (ICLR) and Nu Holdings Ltd (NU).
“How did you go bankrupt?" "Two ways. Gradually, then suddenly.”
Tamalak
Posts: 1989
Joined: Fri May 06, 2016 2:29 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Tamalak »

But VTI and VXUS combined have a lot MORE stocks than VT does.

VTI has 3839
VXUS has 7990
VT has 9572

So you pay less effective ER and get more diversity
User avatar
Cocoa Beach Bum
Posts: 429
Joined: Thu Jan 12, 2023 12:47 pm
Location: Florida

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Cocoa Beach Bum »

Tamalak wrote: Mon Sep 18, 2023 3:10 pm But VTI and VXUS combined have a lot MORE stocks than VT does.
...
So you pay less effective ER and get more diversity
But that "more diversity" consists almost entirely of US microcap stocks and it excludes some substantial fast-growing foreign stocks.

But, everyone has their preferences, and I respect that.
“How did you go bankrupt?" "Two ways. Gradually, then suddenly.”
international001
Posts: 2748
Joined: Thu Feb 15, 2018 6:31 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by international001 »

MELI is $60M cap. really worth worrying about?

It seems 50/50 for VTI/VXUS is what matches better VT

https://www.portfoliovisualizer.com/bac ... tion3_3=50
User avatar
Cocoa Beach Bum
Posts: 429
Joined: Thu Jan 12, 2023 12:47 pm
Location: Florida

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by Cocoa Beach Bum »

international001 wrote: Tue Sep 26, 2023 5:31 pm MELI is $60M cap. really worth worrying about?
,,,
MELI market cap is actually $63.7B. BTW, in my earlier post I neglected to mention Spotify Technology (SPOT) as another notable stock found in VT but excluded from VTI+VXUS.
“How did you go bankrupt?" "Two ways. Gradually, then suddenly.”
international001
Posts: 2748
Joined: Thu Feb 15, 2018 6:31 pm

Re: VT/VTWAX (Vanguard Total World Stock) is maligned for its lack of foreign tax credit. I think that's unfair.

Post by international001 »

My bad

FTSE Global All Cap ex US Index is supposed to use the bigger market cap companies outside the US, no?
IS there a complete list of component stocks of this indices somewhere?
Post Reply