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Clyatt's Sandwich Portfolio and VINEX
Old 01-25-2009, 07:20 PM   #1
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Clyatt's Sandwich Portfolio and VINEX

One of the funds recommended in Clyatt's Sandwich Portfolio is Vanguard International Explorer - VINEX (Vanguard International Explorer Report (VINEX) | Snapshot).

The fund was closed but has recently reopened. We'd like to get in on it, but the min investment is $25K. We can save enough cash to purchase it in our taxable account, but I'm not so sure this fund is very tax-efficient. The tax analysis tab on M* is greek to me (Vanguard International Explorer Report (VINEX) | Tax Analysis). Can I get opinions of what people think of holding this in a taxable account? I'm concerned since it is small caps, and in general I thought those should be held in tax-deferred accounts.

We have a rollover IRA with Vanguard, but the funds we'd be willing to sell to get VINEX don't add up to $25K.
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Old 01-25-2009, 08:04 PM   #2
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According to the Bogleheads Wiki it is very tax inefficient: Vanguard International Explorer Fund - Bogleheads

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Old 01-25-2009, 08:58 PM   #3
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Vanguard has announced a new int'l SC fund, which will have fund and ETF versions. This reduces the likelihood of capital gains and makes the fund more tax efficient.

See here https://personal.vanguard.com/us/Van...112008_ALL.jsp

Quote:
Vanguard to offer International Small-Cap Index Fund

Vanguard has filed a registration statement with the Securities and Exchange Commission for its first passively managed international small-cap index fund. The new Vanguard FTSE All-World ex-US Small-Cap Index Fund will offer 3 share classes (Investor Shares, Institutional Shares, and ETF Shares) and is expected to be available in the first quarter of 2009.
The target benchmark for the fund is the FTSE Global Small Cap ex US Index, a market-capitalization-weighted index of small-capitalization stocks traded on markets outside the United States. The fund will invest in a broadly diversified sampling of securities from the benchmark, which comprises more than 3,300 stocks of companies in 47 countries.
"Vanguard's current lineup of international and global index funds provides exposure to large- and mid-cap stocks. The new small-cap fund will enable investors to further diversify their portfolios to gain complete exposure to international markets via a passively managed vehicle," said Vanguard Chief Investment Officer Gus Sauter.
The fund's ETF Shares have an estimated expense ratio of 0.38%. The Investor Shares, which will require a $3,000 minimum initial investment, have an estimated expense ratio of 0.60%. The Institutional Shares have an estimated expense ratio of 0.35% and a $5 million minimum initial investment requirement. To help defray the transaction costs associated with investing in small-cap international stocks, the fund will assess a 0.75% purchase and redemption fee on all non-ETF share purchases and redemptions.
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Old 01-25-2009, 10:20 PM   #4
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This is a case where it's better not to blindly follow some book recommendation, but instead to understand the principle behind the recommendation.

There are better small cap foreign funds than VINEX. Have you looked at GWX and DLS? The new Vanguard ETF will have to compete with these guys.
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Old 01-26-2009, 04:32 PM   #5
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Have you looked at GWX and DLS? The new Vanguard ETF will have to compete with these guys.
I don't think Vanguard will have any trouble with these guys. GWX and DLS have ERs of .58% and .59%, The new Vanguard small cap ETF will ave an ER of .38%. The actively-managed International Explorer mutual fund has an ER of only .35%

Because I'm a fan of indexing, I'd go with the new Vanguard fund when it is available, but Vanguard Intl Explorer is also a good choice. It's very rare that an actively managed fund has an expense ratio lower than index funds, but Explorer manages to do it.
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Old 01-26-2009, 04:59 PM   #6
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It ain't always about expense ratio. For instance, daily trading volume matters more to many folks. I think SCZ has a lower er than GWX and DLS, but it doesn't have the volume.

And VINEX is not tax-efficient, so taxes blow away any differences with er in a taxable account.

That said, I'm sure the Vanguard ETF will do well, but it has to gain some traction by being available for a year. I have losses in GWX that I am waiting to harvest after I see how the new etf does.
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Old 01-26-2009, 07:02 PM   #7
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Quote:
Originally Posted by MichaelB View Post
Vanguard has announced a new int'l SC fund, which will have fund and ETF versions. This reduces the likelihood of capital gains and makes the fund more tax efficient.

See here https://personal.vanguard.com/us/Van...112008_ALL.jsp



Michael
Thank you very much Michael. I was unaware that a new fund was opening up.
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Old 01-27-2009, 12:26 PM   #8
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Originally Posted by simple girl View Post
Thank you very much Michael. I was unaware that a new fund was opening up.
You are quite welcome, Simple Girl. There is a useful discussion over at bogleheads which you can see here Bogleheads :: View topic - Vanguard to offer International Small-Cap Index Fund

In addition, the new Vanguard ISC offering, like VINEX, will include equities from both developed and emerging markets, different from DLS/GWX/SCV, which include developed counties only. Although they all seem to track very closely with each other, I prefer Vanguard ETFs over others when given the option. The bogleheads seemed quite exited as well, FWIW

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Old 02-05-2009, 12:27 AM   #9
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btw, I just did the math on the Sandwich portfolio for 2008 and the portfolio overall lost 20.3%. Nobody was a hero in 2008.

And yes, some interesting alternatives to VINEX, which had been closed for awhile anyway. I am personally now leaning toward ETFs whenever possible, because of the taxable capgains distributions issue, as well as the panicky-fellow-fundholders-forcing-your-fundmanager-to sell-into-sinking-markets issue. I think ETF's proved themselves nicely through this latest market ruckus. Will definitely give them more coverage in the next edition (not due for a couple years thankfully)
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Old 02-09-2009, 12:26 PM   #10
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-20.3% in 2008 ain't bad! Nothing to apologize about at all.

My account is down about 35% for the same time period. Not making any changes, however, except continuing to build my 5-year CD ladder later this year.
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