VFWAX vs VTIAX ?

[Gearhead Jim]

A casual look at the data on Vangurd's site makes both funds look quite similar, except for age.

What differences (besides age) do you see, and why would you pick one over the other?

 

[MichaelB]

They are quite similar. Not sure it makes much difference. Both have EFT and fund classes so capital gains are not likely down the road, difference in expense ration is 0.02%.

 

[NW-Bound]

I am not familiar with either, so looked them up for myself. Both are word-wide equity, ex-US. One uses the FTSE index, the other MSCI. Apparently, although these two indices are defined by two different entities, they come fairly close together, hence the same basic performance for the two funds.

I wonder why Vanguard created two different funds which do pretty much the same thing.

 

[Gearhead Jim]

I am not familiar with either, so looked them up for myself. Both are word-wide equity, ex-US. One uses the FTSE index, the other MSCI. Apparently, although these two indices are defined by two different entities, they come fairly close together, hence the same basic performance for the two funds.

I wonder why Vanguard created two different funds which do pretty much the same thing.

Especially since one has been around for many years.

 

[wildcat]

The Total Int'l Index has been reconfigured over the past few years. It used to exclude Canada and I recall it being strictly split between developed mkts index and emerging w/o regard to how much economic weight/GDP or whatever the country really contributed. For ex - at the time China was a small portion of the total fund even though they had a top 5-6 economy in the world.

So at the time, the FTSE rolled out b/c it was a different twist and probably better aligned with true world weightings.

Since both are now so similar, I wonder if VG will offer just 1 fund to capture the total international mkt.

 

[NW-Bound]

I wonder if it could have been a somewhat political decision. Both FTSE and MSCI are investment advisory firms, and Vanguard does not want to be seen as favoring one over the other. Just a guess...

Does Vanguard have to pay fees or royalties to either of these, I wonder?

 

[Shawn]

VTIAX (Total International Index) and VFWAX (FTSE All-World Ex-US Index) are very similar. This includes equity exposure, return, and availability (fund and ETF, investor and admiral shares, expense ratios, etc).

The main difference is that VTIAX has some small-caps, which makes it *slightly* more diversified than VFWAX, which does not have small-caps. This is like the difference between a Total Stock Market Index and an S&P500 Index. Similar returns, but not identical.

VTIAX was originally a fund of funds (European Index, Asian Index, Emerging Market Index), which made it ineligible for the foreign tax credit on dividends. It also didn't have Canada. This made VFWAX a better choice for most people. However, VTIAX changed its index a year or so ago and now includes Canada. Also, it's no longer a fund of funds so is eligible for the foreign tax credit, just like VFWAX. This provides a ~$100 tax credit for every $100K invested. In my opinion, the nod goes to VTIAX because it has small-caps.

I have VFWAX but would change to VTIAX if I could do so with no capital gains taxes. But no big deal either way.