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 canât 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 donât know, maybe not. Who cares about 1 million if youâve got 9 million?
To the people mixing up tickers: itâs not VSUX, itâs 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 âIE vs USâ and then swop sequence in â(VT vs VWRL)â. Very confusing.
While I donât have VT myself and can compare to actual dividend payouts, they are, to my knowledge, indicating the gross dividend (as also confirmed by my other U.S.-domiciled stock holdings).
Indicating the net dividend doesnât make sense - since we know that not everyone or everybody is eligible for a refund of withholding tax.
VT includes small caps, which have underperformed large and mid caps in the last years. So that overperformance from VWRL comes from that. Taking this logic to the extreme, I could have told you that TSLA is even better, because it outperformed both by miles.
The inclusion of small caps in VT is an advantage, but in recent years they dragged VT down relative to VWRL. Once small caps have their moment, you should see significant outperformance of VT over VWRL. If youâre trying to measure the tax loss of VWRL relative to VT, youâre not going to achieve it this wayâŠ
However small cap performed worse than large cap in the last 5 years. The yield difference is quite close to the expected yield difference because of the cost and tax losses you get with VWRL.
As you said: Thatâd be (unwarrantedly) taking the logic to its extreme.
VWRL is a reasonable, albeit not perfect substitute for VT. TSLA is not. So why shouldnât we compare them head-to-head? As the popular saying goes: Nobody knows what (perpetual under- or overperformance of small caps) the future holds anyway.
Small caps seem to have underperformed by about 2.5% in total over the last five years in developed markets (yes, VT isnât only developed markets, but it doesnât make a substantial difference).
Top 10 largest constituents make up 13.7% of VT and 14.52% of VWRL.
So the share of small caps is small. As will bethe overall difference they make.
You will have small random deviations, especially if you look at a really short timeframe. So no, you should not base the decision on that.
Does the fund track what you want?
What are the fees?
What are the tax implications?
How good is the implementation?
In the first 3 points VT seems to be better if you want a cap weighted index that covers the entire world. I donât really see a difference in the implementation.
The only time when performance over a short term is a good indicator is if you compare two funds that track the same index. But even then, you need to be careful about the start and end price.
I have a heavy tilt towards small, value and profitability with a screen for equities that have negative exposure to conservative investment or momentum factors.
There is simply not a convincing product with a good methodology to implement that and is IE based.
So how much is the relevant share of small caps in VT?
Something like 5% overall?
With an underperformance of 2.5% over the last five years (on these 5% small caps)?
Simple answer: I donât.
More complicated answer: VT doesnât cover the âentireâ world in a reasonable way either.
It covers exchange-listed stocks only. If jurisdiction X makes it very easy to do an IPO and get listed on the stock exchanges and country Y makes it harder, there will (likely) be many more small cap companies listed from country X. That in and of itself does not represent any real-world economics. It merely represents the difference in IPO law and regulations. I donât strive to invest in - or based on - differences of IPO law, regulations or their implementation.
What I would be looking for - and comparing - would be well-diversified international equity funds. VT and VWRL are very similar in that regard.
âŠor, of course, deliberately take a position in something else.
So I wasted 3h to fetch the historical prices & dividends. In my spreadsheet, I pay out the full dividend and instantly reinvest it. This approach would of course not work for US ETFs, because some months pass between withholding tax being charged and it being reimbursed. But for the sake of simplicity we can assume that you invest it immediately.
I compared VOO with VUSD.L, both tracking S&P 500 in USD. Then I put rolling return from the last 5 years. You can see that VUSD is trailing VOO by a fairly constant margin.
I am confused⊠VWRD is in USD and VWRL is in CHF (I guess we are talking about the CHF one, and not the EUR or GBP). So I would understand someone in Switzerland prefer to invest in VWRL (CHF) to avoid FX conversion, but I cannot understand why invest on VWRD (USD) instead of VT (USD), only for the political and legal environment?
I invest in VT and was wondering as well since a few weeks that might be good to move to VWRL (CHF) instead of VT but after your post I am confused now with VWRD
I am on the fence on this issue and thatâs why created this thread. I wanted to test what is the real performance loss of IE and get the feeling or the real risk in investing in the US.
I donât think I have proven the obvious, because please explain to me why VOO delivers exactly 0.20% higher returns? Whereâs the TER and the WTAX in that? So it was still worth checking.
I agree with you that if the advantage is only around 0.1%, then it is better to stick with IE. Still the majority of forum members here go with the US, as the poll shows. Thatâs why I think this thread was needed.
By comparing the share of the 10 largest constituents that I quoted above, a quick back-of-the-envelope calculation would suggest the difference in small caps is less than 10%, more like 6%.
âThe FTSE All-World Index is a market-capitalisation weighted index representing the performance of the large and mid cap stocks from the FTSE Global Equity Index Series and covers 90-95% of the investable market capitalisationâ
In any case, I think we are kind of agreeing that it doesnât make much of a difference.
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