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Emerging Markets..PRMSX vs VEIEX
Old 04-12-2010, 09:29 AM   #1
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Emerging Markets..PRMSX vs VEIEX

It's a tough call... I like T. Rowe (PRMSX) and I like Vanguard...not happy about the "load" that Vanguard charges for the VEIEX fun to discourage the market timers but trying to see in the end if the low cost (otherwise) of it justifies putting $$$ into it, rather than go with T. Rowe.

Kiplinger's likes the new manager for PRMSX as it underperformed a bit recently.

Thoughts?
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Old 04-12-2010, 09:32 AM   #2
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It's a tough call... I like T. Rowe (PRMSX) and I like Vanguard...not happy about the "load" that Vanguard charges for the VEIEX fun to discourage the market timers
This always bugged me. If the real motivation is simply to stop market timers, *all* of the sales charges should be imposed on the sell side, and only for positions held less than (say) 6 to 12 months.
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Old 04-12-2010, 09:48 AM   #3
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The fees (from Vanguard) actually for this "index" fund cannot be ignored...since they charge 0.50 for the purchase of the funds...and then it's another 0.25 for redemptions. So (to me anyway) it's like another 0.75 added to their current expense ratio which no longer makes it that much cheaper than an actively managed fund.

Again, I like Vanguard a lot...it just makes me hesitate to put $$$ in this fund.
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Old 04-12-2010, 09:49 AM   #4
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The fees (from Vanguard) actually for this "index" fund cannot be ignored...since they charge 0.50 for the purchase of the funds...and then it's another 0.25 for redemptions. So (to me anyway) it's like another 0.75 added to their current expense ratio which no longer makes it that much cheaper than an actively managed fund.

Again, I like Vanguard a lot...it just makes me hesitate to put $$$ in this fund.
Yeah. I think the best you could do is try to "predict" how long you'll be in this fund and allocate the fees over that time period in terms of how much that adds to total overall fees.

For example, if you held for three years that would add an effective 0.25% to the expenses per year, and that would give you a better comparison to a fund in the same asset class which has no fees to buy or sell.
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Old 04-12-2010, 10:41 AM   #5
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thanks...

yeah it's definitely a toss up decision... was thinking about allocating some $$$ to the Vanguard Total Bond Index and also the Total Stock Market Index - in addition to some emerging market fund. Will probably do 2 with Vanguard and go T. Rowe on the latter.
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Old 04-12-2010, 11:01 AM   #6
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If you really want VEIEX, but don't want to pay 0.5%, you can always buy VWO, the exchange traded fund for the price of the commission ($8-10 most places). Well, plus 1/2 the bid-ask spread if you want to get technical. And the cost could be more/less if VWO is trading at a premium or discount to NAV.

For a $10,000 purchase, that would set you back roughly 0.09% on the purchase and the same upon sale. Obviously works better if you plan on buying a lot at one time, and holding it for a while.
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Old 04-12-2010, 11:27 AM   #7
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interesting thought FUEGO...but unfortunately I work for a broker-dealer and ETF's are off-limits to me other than of course the ones my company supports/recommends which are crazy expensive and not worth it.... I am allowed however to invest in a "normal" mutual fund since they cannot be actively managed in/out of the market on a daily basis...like an ETF gives you the ability to do...
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Old 04-12-2010, 11:30 AM   #8
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interesting thought FUEGO...but unfortunately I work for a broker-dealer and ETF's are off-limits to me other than of course the ones my company supports/recommends which are crazy expensive and not worth it.... I am allowed however to invest in a "normal" mutual fund since they cannot be actively managed in/out of the market on a daily basis...like an ETF gives you the ability to do...
I can understand the prohibition on individual stocks based on the potential for comflict of interest in providing client advice, but broad-based ETFs? Seems a little excessively CYA. Either that or the rules haven't been updated since exchange-traded securities were pretty much all individual stocks.
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Old 04-12-2010, 11:47 AM   #9
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interesting thought FUEGO...but unfortunately I work for a broker-dealer and ETF's are off-limits to me other than of course the ones my company supports/recommends which are crazy expensive and not worth it.... I am allowed however to invest in a "normal" mutual fund since they cannot be actively managed in/out of the market on a daily basis...like an ETF gives you the ability to do...
I'm in the same boat (DW works for an investment bank which is a member of stock exchanges). But we can open brokerage accounts at the employer's choice of 3 different affiliated investment houses as long as we follow all compliance and disclosure rules (minimum holding period of 30 days being one). We can also hold any mutual funds at the fund sponsor (ie Vanguard).

I guess I don't have any other suggestions as to how to avoid the sales charge at vanguard. Other than to hold it for a really long time, and amortize the 0.5% over many many years. I was "lucky" to load up on VEIEX when the sales charge was mostly 0.25%.
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Old 04-12-2010, 12:16 PM   #10
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Because VEIEX has the ETF class fund VWO it is less likely to have meaningful capital gains distributions in the future. The sales fees are less than the difference between expense ratios. The only reason to prefer PRMSX is to believe the fund mgmt will deliver enough superior performance to compensate for expense ratio and tax on cap gains. Enough risk in the asset class - why take on more with management, expense and tax.
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Old 04-12-2010, 12:54 PM   #11
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I'm not a fan of Emerging Markets Indexes. I prefer to break things down by region like: south america, eastern europe, middle east and africa, etc.

Anyway, I would go with Vanguard and buy the ETF version to avoid the fee.
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Old 04-13-2010, 08:39 AM   #12
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I like EEM, it's an ETF through IShares. There's a relatively high expense ratio of .72% which isn't terrible for emerging markets. I generally prefer ETF's to mutual funds.
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Old 04-13-2010, 08:44 AM   #13
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I like EEM, it's an ETF through IShares. There's a relatively high expense ratio of .72% which isn't terrible for emerging markets.
Not bad relative to the cost of a typical actively managed emerging markets fund. Just the same, you can do a lot better:

The expense ratio of Vanguard's VWO is 0.27%.

Schwab's new entry, SCHE, has an expense ratio of 0.35% and is traded commission-free for Schwab customers.
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Old 04-13-2010, 08:47 AM   #14
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Because VEIEX has the ETF class fund VWO it is less likely to have meaningful capital gains distributions in the future. The sales fees are less than the difference between expense ratios. The only reason to prefer PRMSX is to believe the fund mgmt will deliver enough superior performance to compensate for expense ratio and tax on cap gains. Enough risk in the asset class - why take on more with management, expense and tax.
definitely weighing the options thanks... PRMSX really needs to outperform VEIEX by about 4-5% to make up for the capital gains taxes, etc cause it's actively managed.

still going back and forth...I just wish Vanguard would just do a blanket 5% redemption fee for anyone who holds VEIEX shares for less than a year...it would do away (I think) with these ticky/tacky sales fees that actually punish people who are in it for the long haul.
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Old 04-13-2010, 10:41 AM   #15
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I own the T Rowe fund... actually wife does in her Roth

all our IRAs are with T Rowe and their customer service is excellent.
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Old 04-13-2010, 06:14 PM   #16
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I owned PRMSX for a couple of years. I sold it all and went into VEIEX.

The reason I sold PRMSX IN 2009 is because they switched managers, made some poor country allocations (tried to time in and out of Russia for instance) and they did more poorly than average in the recent downturn. IMHO you are paying extra fees for a fund that will not be able to beat the low fee, team managed VEIEX index.

The only other EM I hold is LZOEX. At least they are earning their fees by beating the index. Also, most of their country holdings are less correlated to other general EM funds and the EAFE EM index.

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Old 04-15-2010, 04:03 PM   #17
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The Total International Stock index has the EM fund in it. Depending on what you are trying to accomplish... it might be a lower cost alternative.
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