Are you serious? Mixing up the tickers? And we should discuss which one is better? Lol I’m out. It’s the other way round, bro. VT (the US one) includes small caps, VWRL does not. In general, the European products of Vanguard are inferior to the US ones, when it comes to the number of constituents etc.
??? Is this not the point? Take two seemingly identical products from US & EU and compare the difference. I said the difference is something like 0.2-0.3%, which may seem small, but once your portfolio is $1’000’000, that’s possible $3’000 lost each year.
So, instead of deciding between IE vs US, wouldn’t it be better to go for both? I’m thinking of the VTI + VXUS mix, but “just” change VXUS for a IE domiciled version.
So you would profit from 0% witholding tax on VTI and better tax treaties for the ireland equivalent of VXUS.
Only thing is there doesn’t seem to be an ireland equivalent of VXUS, or atleast I can’t find one.
I think it doesn’t matter much, once you compare multiple data points. I’m largely with TeaCup on this one. I also tried to estimate it from the ICTAX figures a while ago (even posted it on the forum), and estimated the difference between VT and VWRL to about 1% every six years or so.
While true, isn’t it a bit pointless?
Realistically, an investor that wants to keep things very simple will choose between VT or VWRL (such as thread title suggest). Whatever little nuances in index composition.
I’ll shout out my opinion:
You’re all getting too hung up on small nuances and overanalysing!
My take is this:
It’s safe to assume that a few small caps aren’t going to make a very substantial difference. So VT and VWRL are reasonable subsitutes.
It’s also safe to assume that a U.S.-domiciled World ETF will be slightly more cost- and tax-efficient (when comparing physically replicating ETFs)
The difference is not going to be huge. It’s reasonable to assume that it’s more than 0.1% but less than 0.3% per year.
As long as costs are all and everything one care about and one feels compelled out the last fraction of a percentage point in performance, he or she absolutely should prefer VT (though beware of the small tax pitfalls).
As long as you’re comfortable to pay a bit more and don’t lose sleep over a fraction of a percentage point in performance, you can just as well buy VWRL and stop worrying. Also makes the tax declaration (slightly) simpler.
I mean is there an example of a third party country where IE is more advantageous wrt L1 withholding, bonus point if it makes a significant fraction of the world market cap (e.g. > 1%).
I disagree with him on the VT vs VWRL part, but I think TeaCup has a point on this: he was pointing out that the comparison is heavily influenced by the index you focus on. For MSCI USA the US domiciled found will always be better because they have 0% L1WT.
Yeah… as pointed out in my first post. I’m trying to figure out if this theoretical difference is real in practice. And if so, is an extra 0.3% annual performance worth the hassle of owning US stock.
As @MrCheese said I think the chances of retroactive liability is very small. If there’s any other mayor change in policy and taxation it should be an easy job to sell the US funds and buy the IE ones. Meanwhile I’m ok with the US domiciled funds and getting the higher returns.
The Difference between VT and VWRL is around 0.3% * (1-your marginal tax rate)
It seems that ICTax does use the dividend after the withholding tax. So you would expect VWRL to perform a few basis points(~6) better than VT in ICTax. However this changes if you take the Withholding taxes(~38 Basis points) into account as they reduce the performance of VT in ICTax.
Everything adds up in the end and the US domiciled funds are around 30 basis points cheaper. You see this in the difference in yield and the performance that is shown the Vanguard product pages. Money that is invested over 30 years, will gain around 9-10% more with VT.
Shouldn’t that impact all ETFs equally? When new things get added, all ETFs following that index will get impacted equally (though I’m curious how they do it in practice, if they all e.g. buy at the closing option they’ll all get impacted equally).
Edit: and if they buy in the open, they don’t actually show how much they are going to buy by just bidding the entire number of shares they want, I don’t think anyone does that (to avoid going far down in the order book and to avoid signaling too much). Something like Dark Ice Algo | Interactive Brokers LLC
Call it an ex-US ETF if you will (the fund providers themselves actually do). But I find the idea that „international“ means „everything but the US“ irritating. Now of course that view of of the world might be prevalent in the US itself. But we as members on this forum neither resident or citizens of the US.
The yield of VTI is around 1.8% over the last 4 years. The US makes up around 57% of VT. So the advantage of VT over VWRL is around 15 basis points because of the withholding taxes(1.8%*15%*57%). The difference in withholding taxes for international stocks is negligible. Then there is the cost difference between 22 and 8 basis points that adds another 14 basis points to the cost difference.
The gross yield difference is around 32 basis points over the last 7 years.
The performance difference as shown by vanguard is also around 35 basis points per year over the last 5 years.
Note that ICTax does use the net dividend of VT, so you can’t really use them for comparison.
Do also note that the difference is before tax because all fees and withholding taxes reduce the taxable income from VWRL, so the practical difference is 0.3% * (1 - marginal tax rate).
A special consideration is also if your marginal tax rate is below 15% or you have a mortgage. This will reduce the amount you will be able to reclaim.
Like you said, if I put 1 million in VT & VWRL, after 30 years I will have 10 million in VT, but only 9 million in VWRL, 1 million lost. Is this a lot? I don’t know, maybe not. Who cares about 1 million if you’ve got 9 million?
To the people mixing up tickers: it’s not VSUX, it’s VXUS. Think about it this way: Vanguard eXcluding United States
VSUX would be a good name for an ETF tracking the worst companies on the market.
Having 10% less money and 0.3% additional fees reduces the save withdrawal rate as well. So you will end up with 15-20% less money you can use per year.
Good one.
BTW I reckon the mixed up Tickers was actually started due to the title, where you speak of “IE vs US” and then swop sequence in “(VT vs VWRL)”. Very confusing.
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