VT vs VXUS + VTI
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VT vs VXUS + VTI
I was wondering if it makes sense for me to sell my VTI and VXUS holdings and replace it with VT. I have a long investment horizon and don't want to deal with buying two ETFs and trying to maintain correct ratios. If I do this, my portfolio will be greatly simplified with VT in RRSP and VAB (and maybe some VCN) in TFSA.
Any thoughts/comments are appreciated. Thank you!
Any thoughts/comments are appreciated. Thank you!
Re: VT vs VXUS + VTI
My thought is: entirely up to you. You can do a bit better by saving on taxes and enhancing performance through rebalancing if you split the world but if simplicity is important then VT is a great approach,
Re: VT vs VXUS + VTI
I don't think it much matters. Personally, I use a three-fund portfolio of VTI, VEA and VWO. I have uncrystallised capital gains and see no reason to switch.
George
George
The juice is worth the squeeze
Re: VT vs VXUS + VTI
Keep the VTI and VXUS that you have and put new funds into VT.
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Re: VT vs VXUS + VTI
Thanks for all the responses. The general consensus seems to be that it doesn't make much difference (apart from a slightly higher MER).
What is the benefit of doing this? The funds are being held in an RRSP account so there are no capital gains to be reported.
Re: VT vs VXUS + VTI
I would keep VTI and VXUS. If VTI goes into a bubble territory, your allocation rules should force you to rebalance from VTI to VXUS. This rebalancing opportunity doesn't exist if you replace two ETFs with VT.
Re: VT vs VXUS + VTI
To save on transaction costs. I guess they are minimal anyway so you are right, there is not much benefit.MortgageSlayer wrote: ↑22 Mar 2017 08:30 What is the benefit of doing this? The funds are being held in an RRSP account so there are no capital gains to be reported.
You may find what Jim Otar has to say about re-balancing in his book "Unveiling The Retirement Myth - Advanced Retirement Planning Based on Market History" interesting. Specifically in Chapter 6.
http://www.flip4u.org/docs/Unveiling%20 ... 20Myth.pdf
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Re: VT vs VXUS + VTI
leoc2, thanks for the link, I'll read chapter 6 shortly.
That's an interesting point, so far I haven't had the need to rebalance as I buy whatever is out of band using new deposits (still a small portfolio).
Re: VT vs VXUS + VTI
That's absolutely rebalancing. There is no need to sell any asset to make it rebalancing, the fact you aren't blindly buying in proportion of your initial AA but rather constantly taking into account current market values to determine which asset to buy in order to maintain your chosen AA is rebalancing.MortgageSlayer wrote: ↑22 Mar 2017 09:48so far I haven't had the need to rebalance as I buy whatever is out of band using new deposits (still a small portfolio).
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Re: VT vs VXUS + VTI
Right, but you can only do that on smaller portfolios. You can't depend on rebalancing with new money in a RRSP account that's 750k+ because the annual limit is so low (~26k). Right now it works well since it's a small portfolio.gsp_ wrote: ↑22 Mar 2017 15:01That's absolutely rebalancing. There is no need to sell any asset to make it rebalancing, the fact you aren't blindly buying in proportion of your initial AA but rather constantly taking into account current market values to determine which asset to buy in order to maintain your chosen AA is rebalancing.MortgageSlayer wrote: ↑22 Mar 2017 09:48so far I haven't had the need to rebalance as I buy whatever is out of band using new deposits (still a small portfolio).
Re: VT vs VXUS + VTI
There are no cap gains taxes triggered in an RRSP, so re-balancing by selling and buying is hardly a hardship.
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Re: VT vs VXUS + VTI
I'm not sure what your point is. As AR says it's a non issue in RRSPs.MortgageSlayer wrote: ↑22 Mar 2017 15:24Right, but you can only do that on smaller portfolios. You can't depend on rebalancing with new money in a RRSP account that's 750k+ because the annual limit is so low (~26k). Right now it works well since it's a small portfolio.gsp_ wrote: ↑22 Mar 2017 15:01That's absolutely rebalancing. There is no need to sell any asset to make it rebalancing, the fact you aren't blindly buying in proportion of your initial AA but rather constantly taking into account current market values to determine which asset to buy in order to maintain your chosen AA is rebalancing.MortgageSlayer wrote: ↑22 Mar 2017 09:48so far I haven't had the need to rebalance as I buy whatever is out of band using new deposits (still a small portfolio).
The initial point brought up was that you'd lose the "buy low, sell high" rebalancing benefit by moving to a single global ETF. It remains regardless of how you put your rebalancing plan in action.
No strong opinion on the topic of this thread, it's a personal preference decision IMO. Only replied to try to clear up what seemed like a misunderstanding of what constitutes rebalancing.
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Re: VT vs VXUS + VTI
If you want to hold the world equities in their current market weighings, why would you ever rebalance if holding VT? For example:
If US is 55% of the world equity markets today and on date X it goes up to 70%, VT will account for that.
By holding 45% VXUS and 55% VTI today and then "rebalancing" it on date X (when US equities go up to 70% of total world) wouldn't you be moving away from your original strategy and essentially betting on VXUS to outperform? Isn't that a form of market timing?
Sorry a n00b here trying to understand all of this. Thanks for your help!
If US is 55% of the world equity markets today and on date X it goes up to 70%, VT will account for that.
By holding 45% VXUS and 55% VTI today and then "rebalancing" it on date X (when US equities go up to 70% of total world) wouldn't you be moving away from your original strategy and essentially betting on VXUS to outperform? Isn't that a form of market timing?
Sorry a n00b here trying to understand all of this. Thanks for your help!
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Re: VT vs VXUS + VTI
VT is too heavy in international. If you must, allocate between 15-30% to VXUS.
Warren Buffett and Jack Bogle don't believe in holding any international stocks.
Warren Buffett and Jack Bogle don't believe in holding any international stocks.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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Re: VT vs VXUS + VTI
If it is market cap weighted, how can it be too heavy in international?InvestorNewb wrote: ↑23 Mar 2017 20:04 VT is too heavy in international. If you must, allocate between 15-30% to VXUS.
And they are American, so their viewpoint isn't exactly objective on the matter for those living outside of the US.Warren Buffett and Jack Bogle don't believe in holding any international stocks.
Suggest the OP search the forum for discussion of home country bias.
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Re: VT vs VXUS + VTI
I have researched home country bias and have come to a conclusion that don't need (too much of it) in my portfolio. It seems like it's a good way to reduce diversification and returns... can anyone point me to a resource that talks about how home country bias can be a good thing?Peculiar_Investor wrote: ↑23 Mar 2017 20:08 ...
Suggest the OP search the forum for discussion of home country bias.
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Re: VT vs VXUS + VTI
According to The Stingy Investor Asset Mixer, from 1970 to 2016 (a 47-year period):MortgageSlayer wrote: ↑24 Mar 2017 13:25 I have researched home country bias and have come to a conclusion that don't need (too much of it) in my portfolio. It seems like it's a good way to reduce diversification and returns... can anyone point me to a resource that talks about how home country bias can be a good thing?
- A 100% investment into international stocks (50% S&P500 / 50% MSCI EAFE) had an average geometric annual gain of 10.6% with a standard variation of 17.5%.
- A 100% investment into Canadian stocks (100% TSX Composite) had an average geometric annual gain of 9.3% with a standard variation of 16.7%.
- A 50% investment into international stocks (25% S&P500 / 25% MSCI EAFE) and 50% investment into Canadian stocks (50% TSX Composite) had an average geometric annual gain of 10.1% with a standard variation of 15.4%.
It would seem that, historically, adding some home bias did improve the characteristics of a Canadian portfolio.
Note that past returns do not predict future returns.
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Re: VT vs VXUS + VTI
Thanks for this, I have been looking for something like this for a while. Maybe I'll add some (~10%) XIC into my TFSA although I am not entirely convinced, can't argue with the math though.longinvest wrote: ↑24 Mar 2017 14:16According to The Stingy Investor Asset Mixer, from 1970 to 2016 (a 47-year period):MortgageSlayer wrote: ↑24 Mar 2017 13:25 I have researched home country bias and have come to a conclusion that don't need (too much of it) in my portfolio. It seems like it's a good way to reduce diversification and returns... can anyone point me to a resource that talks about how home country bias can be a good thing?From what I see, the small reduction in returns (0.5%) of the 50/50 international/Canada portfolio, relative to a 100/0 portfolio, was generously rewarded by a 2-points decrease in standard variation. That's a 12% reduction in volatility (2.1/17.5).
- A 100% investment into international stocks (50% S&P500 / 50% MSCI EAFE) had an average geometric annual gain of 10.6% with a standard variation of 17.5%.
- A 100% investment into Canadian stocks (100% TSX Composite) had an average geometric annual gain of 9.3% with a standard variation of 16.7%.
- A 50% investment into international stocks (25% S&P500 / 25% MSCI EAFE) and 50% investment into Canadian stocks (50% TSX Composite) had an average geometric annual gain of 10.1% with a standard variation of 15.4%.
It would seem that, historically, adding some home bias did improve the characteristics of a Canadian portfolio.
Note that past returns do not predict future returns.
Re: VT vs VXUS + VTI
Could it be the case that you are simply measuring the volatility of CAD itself? In other words, perhaps there is nothing intrinsically better in the 50/50 mix other then 1/2 of it is in the same currency the returns are being measured in. The volatility you see in the 100/0 portfolio might be it trying to protect you from the ups and downs of CAD. I haven't looked at the numbers myself but isn't the TSX fairly volatile due to commodities/cyclicals?longinvest wrote: ↑24 Mar 2017 14:16 From what I see, the small reduction in returns (0.5%) of the 50/50 international/Canada portfolio, relative to a 100/0 portfolio, was generously rewarded by a 2-points decrease in standard variation. That's a 12% reduction in volatility (2.1/17.5).
Re: VT vs VXUS + VTI
I see it the same way (CAD volatility mostly) plus spreading it more equally over geographical regions should reduce volatily in itself. Doesn't make it necessarily correct.
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Re: VT vs VXUS + VTI
Do any of you consider holding the Vanguard Canada versions of these to avoid possible US Estate Tax problems?
I've been selling my VTI to buy VFV and VUN. I just can't bite the bullet to get rid of US ETFs and pay the cg tax.
I've been selling my VTI to buy VFV and VUN. I just can't bite the bullet to get rid of US ETFs and pay the cg tax.
I don't intend to offend anyone, that part is just a bonus.
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Re: VT vs VXUS + VTI
My US Vanguard holdings have too much unrealized cap gains to take the hit, but I mitigated the risk the last several years by byying Canadian equivalents. The key is to stay on top of any changes in how US estate law impacts Canadians and do just enough to stay below the radar. Right now, the thresholds are pretty high so not a problem, and unlikely to be for the rest of the current US Administration.
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Re: VT vs VXUS + VTI
Bogle - yes. He is wrong on this one.InvestorNewb wrote: ↑23 Mar 2017 20:04 VT is too heavy in international. If you must, allocate between 15-30% to VXUS.
Warren Buffett and Jack Bogle don't believe in holding any international stocks.
Buffett - no. Buffet routinely buys international stocks from companies outside the US. He has made huge investments in companies all over the world - from Germany to Israel.
Re: VT vs VXUS + VTI
Agree. My holdings are VTI, VEA and VWO. I like the extra liquidity as well. That way I can use market orders. I'm far from the U.S. estate thresholds, and see no need to hold any Canadian wrappers.AltaRed wrote: ↑24 Mar 2017 19:21 My US Vanguard holdings have too much unrealized cap gains to take the hit, but I mitigated the risk the last several years by byying Canadian equivalents. The key is to stay on top of any changes in how US estate law impacts Canadians and do just enough to stay below the radar. Right now, the thresholds are pretty high so not a problem, and unlikely to be for the rest of the current US Administration.
George
The juice is worth the squeeze
Re: VT vs VXUS + VTI
The formula is complicated enough to give folks headaches. An issue is the prorated percentage of US to total worldwide assets.
http://www.taxtips.ca/personaltax/usestatetax.htm
http://www.taxtips.ca/personaltax/usestatetax.htm
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