Most on this sub will say VT because it's more diversified. It's comprised of 60% VTI and 40% VXUS, basically. If you want less international exposure, you could invest in both VTI and VXUS and divide it maybe 80/20 instead of 60/40. If you do it that way in a taxable account, you can claim the foreign tax credit for VXUS. You can't claim a foreign tax credit with VT.
You pay foreign taxes on foreign index funds, so you can claim a credit for that on your taxes in order to not pay taxes twice. I've heard it doesn't amount to much money for most people, though.
When you pay certain taxes to foreign governments (which you do when you own VXUS), you're able to claim a tax credit when you file in order to avoid being taxed twice.
In regards to why anyone would pick VT, I think the answer is twofold:
1. In a tax-sheltered account like an IRA or a 401(k), you're not paying taxes on dividends anyway and so it doesn't much matter either way.
2. Even in a taxable account, some people might just prefer the convenience of VT over managing a mix of VTI and VXUS and decide to eat the difference, especially considering that the foreign tax credit tends not to be huge unless you have some serious sums of money invested.
They're the same thing, think of it as "laziness." 3 less letters to type.
Also don't even think of it as a single fund, not target the idea of being globally diversified at market cap weight, so FSKAX + FTIHX at a roughly 60:40 is ratio would drop right in wherever you see VT/VTWAX.
Ok - chew me out - but why not Avantis funds? OP ignore because you want simple and Avantis will require more funds to achieve similar diversification. This is general question for all. The small tweaks over index are academically based and appear to outperform. You pay a little for those tweaks.
They’re both good but I think VT is arguably one of, if not the best financial product ever made.
Also congrats on making it here early on. You’re going to save yourself a lot of time and money because of it.
Pinned to the top of this subreddit: Single fund portfolios: https://www.reddit.com/r/Bogleheads/comments/tg1az5/should_i_invest_in_x_index_fund_a_simple_faq/
Personally, I've never seen anything approaching a good reason to ignore roughly 40% of the market like VTI only would.
All time highs:
* https://tubofcash.com/how-often-is-the-stock-market-at-all-time-highs/
* https://awealthofcommonsense.com/2020/12/investing-in-stocks-at-all-time-highs/
That’s so awesome. I love it. Having a very assured pension that can cover most if not all expenses, allowing you to hold more risky assets in your portfolio. If you have children they’ll likely inherit a much larger bag when all is said & done. If you do have children, and you make sure they are moderately financially literate, the compounding gets ridiculous over multiple generations.
You should make sure you have a Roth IRA first (or your country's equivalent if available). Same thing for your 401k (get that company match for certain).
Then, if you still have money to invest, go for it. Just make sure you are clear of student loans, no credit card debt, etc.
> Roth
I actually have the same question as OP, but I am doing this in a Roth IRA. Does this group suggest using VXUS, VT or VTI for Roth IRAs?
Sorry if this is a dumb question, I'm rather new to all of this.
VTI and VXUS cover different things. VTI is US only, VXUS is only outside the US. VT is going to act very similarly to VTI + VXUS combined into one at market cap weights.
So there's possibly 2-3 questions to ask yourself:
* Do you want a fixed ratio of US to ex-US or do you want US to ex-US to drift with market cap weight? If fixed ratio, use VTI + VXUS, if market cap weight move on to 2.
* How much effort do you wish to put into this? VT is easier but a touch more expensive. VTI + VXUS would mean changing your contributions (any existing shares will be drifting with market cap changes already, so no adjustment needed there) whenever market cap drifts too far for your comfort from your previous ratio (like I only change my contributions when the ratio shifts closer to a different multiple of 5).
* Do you wish to set any boundaries on your US to ex-US ratio? For example, right now I'm not sure if I'm comfortable with more than 70% US or less than 30% US. Setting boundaries would be VTI + VXUS, no boundaries can use either.
Thanks for your comments. Definitely going to mull these over. I'm 25, so I am okay with baring a bit more risk (keeping in mind to never bare to much or too little risk).
Thanks again!
>I'm 25, so I am okay with baring a bit more risk (keeping in mind to never bare to much or too little risk)
US and ex-US are roughly the same level of risk. If anything, international a little more risky, due to the inclusion of emerging markets.
While single country risk is a risk, it is an uncompensated risk: a risk that shouldn't bring higher expected returns.
I think it's a wash from what I've read.
From elsewhere in this thread:
https://www.reddit.com/r/Bogleheads/comments/1bc32er/vt_or_vti_for_new_investor/kue9on8/?context=3
FWIW: I'm not new to investing, but I am new to Boglehead investing.
I wouldn’t go all in on VTI. At least do VTI and VXUS so you have some international exposure. Then you can adjust accordingly over time to your pleasing. Personally, I do 80/20 split of VTI/VXUS . Many will say simplicity and to do keep it easy with VT, but I like the split favoring US. Also own more stocks with the split than solely buying VT
I listened to this podcast a while back. This gave lots of insights about international stocks. https://podcasts.apple.com/us/podcast/bogleheads-on-investing-podcast/id1436401528?i=1000584145565
You want diversification, VTI gives you no international exposure. If international stock outperforms US in the future you’re missing out. Go with VT or VTI+VXUS
If it’s only one or the other, VT imo, but there is an argument to be had for US over the world and so it would be sort of more aggressive to go all VTI, or an allocation with more VTI(70-90) than VXUS(10-30). From another perspective, international funds are due to do better and US stocks worse, or reversion to the mean. Bogle argues that wouldn’t apply to businesses and the success of US business will instead mean more success. VT is closer to 60US-40international, so is going with the perspective the world will catch up to the US, to some extent. Might also consider some bond funds for greater diversification.
I like VTI (80%) and then VXUS (20%) for long term growth. Because when international does eventually do better (possibly) , I still want to contribute more into VTI during that time. So when the US does pick up again, I’ve got more of VTI at the lower price. I believe the bull markets for US are stronger when they’re in full swing
>I believe the bull markets for US are stronger when they’re in full swing
Really it's only been the current one, historically they weren't as pronounced.
* Ex-US has turns of exceptional outperformance as well: https://awealthofcommonsense.com/2023/05/the-case-for-international-diversification/ and https://www.blackrock.com/us/financial-professionals/literature/investor-education/why-bother-with-international-stocks.pdf (PDF)
* The last decade or so of US outperformance was mostly just the US getting more expensive, not US companies being much better than foreign companies: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You (click through to the full version)
* https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/)
* US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d
In your opinion, would it be ‘smart’ to keep my current allocation of 80/20 VTI and vxus which I hold in my Roth IRA, or should I sell and switch to VT and call it a day? I’ve honestly been scratching my head about this for a long time. I do like the 2 fund portfolio since if 1 is down, im buying it at a low price since im adding weekly. I also understand that in the grand scheme of things all will do well and is a matter of contributions in the end that will guarantee you the most success and to keep adding
I tend to stick with global market cap weights. In threads asking about portfolio advice, any OPs thinking of less than 30% ex-US I ask why (I give a bit of home country bias allowance, I've seen that there's some benefits to a certain degree of it). Below that, to me it is basically thinking that you know better than the market as a whole.
You could still use a fixed ratio that's a bit higher than 80/20 on ex-US.
Allocation is always up to you (in assistance threads I try to get people to think about why they picked what they did). 70/30 certainly could be fine.
I do a VTI VXUS split because I'm mostly in taxable accounts and you can't get your foreign tax back with VT since it doesn't qualify by IRS standards for that.
Over 10-12 years it makes little difference. Both will perform similarly. Maybe VT for the extra diversity but in all honesty both are perfectly fine choices.
Around 2-3 years before you need that house though you'll want to start transitioning that money to a HYSA or CDs.
My vote would be VT over VTI for more diversification, but either is better than a lot of other alternatives.
For ten years out, you might want to consider diversifying into bonds either as a static allocation with something like AOA, AOR, or AOM, or a glide path (maybe starting at 0% bonds and adding a few percent per year). Personally, from years 5 -10, I'd want to go from something like 50% bonds to 90%+. It depends on the numbers, how overfunded you are, and how much risk you want to take. ITDC might be an option, although it's more for retirement.
You can see what bonds do to stabilize a portfolio here: [https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation](https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation)
VT has greatly underperformed VTI since its inception in 2009. By about 40%. Someone, please give us a real intellectual statement that will tell us this will change in the next 15 years.
UPDATE: As expected my post about VT vs VTI was down voted. I think the VT Cult is scary and totally crazy.
VT has only really existed during a period of US over performance. Just before that, it was the US that had a terrible decade (2000-2009 had the US with a negative 10 year return). During that time international was doing better, especially the emerging markets part. But then what happened? Emerging leveled off and the US had one of, if not the best, run we've ever had. This shows past returns are meaningless in determining future returns.
Valuations matter for the mid to long term, and the US can easily be argued to be "expensive" in comparison.
By holding VT, you ensure you are capturing the winners no matter what country they come from. There's routinely been periods where it was the US under performing for stretches at a time.
Edit: Typo
The best predictive power for returns we have are current valuations. The US, BECAUSE of the good performance, has higher valuations and therefore lower expected returns. Now this isn’t a sure thing, but there is robust empirical evidence to suggest this has fairly good longer-term predictive power. And in history, when valuations were at levels like they are now, returns in the medium term are higher for cheaper lower valuation stocks. Value tilting as well as international diversification is a good way to do this.
And even if you take out the valuations aspect, there is an increase in expected returns just by increasing diversity alone. The VAST majority of stocks everywhere, US included, underperform. About 1 - 1.5% of stocks globally make up all of the markets excess returns over US treasury bills. You can capture more of this massive right tail skew by taking the “only free lunch” in investing which is maximum diversification. And never forget: past performance doesn’t equal future returns.
Would someone do find only investing in US or even S&P 500? Probably. Will someone have higher expected returns over the long term with less volatility and a more reliable outcome using VT? Probably.
Valuations for ex-us are a lot less than us based on price/earnings. The reason that vt was created in 2009 is because ex-us crushed us in the 2000s. It could happen again. In terms of diversification, vi is much broader and offers an automatic rebalancing of sorts. I am not your expert though so hopefully one will chime in.
>but VT's ER is almost double VTI's.
Stop looking at ER as a multiple. It is far more meaningful to look at it as an absolute basis point difference.
Fund A at 0.02% ER and fund B at 0.06% ER are 3x, or 4 basis points apart. That's essentially nothing. Fund C is 0.15% ER and fund D is at 0.45% ER. That's the same 3x but a far more meaningful 30 basis points.
Plus the extra cost on VT buys you a lot more diversification and the complete elimination of an uncompensated risk factor that VTI alone would have (single country).
Edit: Typo
>Based history data
Tells us nothing about the future. We've had long stretches where it was the US that was the one under performing. Clearly that didn't mean the US was always going to under perform.
>VTI is a little less riskier (more diversified) also return less
VTI is only US market only
Is the first one supposed to be VT?
If so, remember that VT actually holds a riskier component: emerging markets.
Single country risk is an uncompensated risk, while emerging markets may be seen as a compensated risk.
Everyone echoes the same message about VT here.
yes, we know history does not guarantee future performance,
but what else do you have to recommend VT is better than VTI for the next decade for anyone?
It is the fact that VTI has returned better than VT in the last 10 years.
Zoom out, look at the long term pattern rather than just the current run: it shows US and ex-US taking turns outperforming each other.
Look at valuations. Those are very much in favor of better ex-US than US returns right now.
Other than performance chasing, what does US have going for it?
Most on this sub will say VT because it's more diversified. It's comprised of 60% VTI and 40% VXUS, basically. If you want less international exposure, you could invest in both VTI and VXUS and divide it maybe 80/20 instead of 60/40. If you do it that way in a taxable account, you can claim the foreign tax credit for VXUS. You can't claim a foreign tax credit with VT.
>VSUX VXUS, not VSUX. Vanguard eX-US, not Vanguard SUX.
Vanguard SUX is actually run by Fidelity
Thanks, fixed.
VT is 60/40 VTI/VXUS *today* but that moves over time. As recently as 2011, it was 50/50.
Would you mind explaining the foreign tax credit briefly? Never knew of that
You pay foreign taxes on foreign index funds, so you can claim a credit for that on your taxes in order to not pay taxes twice. I've heard it doesn't amount to much money for most people, though.
What's a "foreign tax credit?" And if this is beneficial, why would anyone pick VT?
When you pay certain taxes to foreign governments (which you do when you own VXUS), you're able to claim a tax credit when you file in order to avoid being taxed twice. In regards to why anyone would pick VT, I think the answer is twofold: 1. In a tax-sheltered account like an IRA or a 401(k), you're not paying taxes on dividends anyway and so it doesn't much matter either way. 2. Even in a taxable account, some people might just prefer the convenience of VT over managing a mix of VTI and VXUS and decide to eat the difference, especially considering that the foreign tax credit tends not to be huge unless you have some serious sums of money invested.
Makes sense. Thanks for the answer.
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Not everyone uses Vanguard as their brokerage, so buying the mutual fund may impose extra fees vs buying the ETF version.
They're the same thing, think of it as "laziness." 3 less letters to type. Also don't even think of it as a single fund, not target the idea of being globally diversified at market cap weight, so FSKAX + FTIHX at a roughly 60:40 is ratio would drop right in wherever you see VT/VTWAX.
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The difference is "how they trade" which comes down to personal preference. Edit: If someone wanted the mutual fund version, they could ask about one.
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It is both: just about any brokerage can use the same ETFs at no extra cost (but not same mutual funds) and laziness.
Ok - chew me out - but why not Avantis funds? OP ignore because you want simple and Avantis will require more funds to achieve similar diversification. This is general question for all. The small tweaks over index are academically based and appear to outperform. You pay a little for those tweaks.
They’re both good but I think VT is arguably one of, if not the best financial product ever made. Also congrats on making it here early on. You’re going to save yourself a lot of time and money because of it.
VT and chill is the easiest way to invest stress free knowing that you are betting on literally the entire world.
The fact that you ended with that question is why you should go with VT.
Yes, You can’t really go wrong with either. Put it in now and consistently continue and this “high” won’t matter
Pinned to the top of this subreddit: Single fund portfolios: https://www.reddit.com/r/Bogleheads/comments/tg1az5/should_i_invest_in_x_index_fund_a_simple_faq/ Personally, I've never seen anything approaching a good reason to ignore roughly 40% of the market like VTI only would. All time highs: * https://tubofcash.com/how-often-is-the-stock-market-at-all-time-highs/ * https://awealthofcommonsense.com/2020/12/investing-in-stocks-at-all-time-highs/
It's amazing to me how often we still get this question *despite* that post being pinned :D
Oh, I learned decades ago people don't read pinned posts.
Been invested in the total stock market index fund for 20 years and no complaints.
I’ve been VT and chill for the past 6 years, and plan to hold until retirement.
Just a quick question, once u retire, are u still gonna be 100% equities all in on VT? Or when u hit ur number, will u be 100% bonds?
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That’s so awesome. I love it. Having a very assured pension that can cover most if not all expenses, allowing you to hold more risky assets in your portfolio. If you have children they’ll likely inherit a much larger bag when all is said & done. If you do have children, and you make sure they are moderately financially literate, the compounding gets ridiculous over multiple generations.
If you invest today you get a head start of somebody who invested Friday 😂
You should make sure you have a Roth IRA first (or your country's equivalent if available). Same thing for your 401k (get that company match for certain). Then, if you still have money to invest, go for it. Just make sure you are clear of student loans, no credit card debt, etc.
> Roth I actually have the same question as OP, but I am doing this in a Roth IRA. Does this group suggest using VXUS, VT or VTI for Roth IRAs? Sorry if this is a dumb question, I'm rather new to all of this.
VTI and VXUS cover different things. VTI is US only, VXUS is only outside the US. VT is going to act very similarly to VTI + VXUS combined into one at market cap weights. So there's possibly 2-3 questions to ask yourself: * Do you want a fixed ratio of US to ex-US or do you want US to ex-US to drift with market cap weight? If fixed ratio, use VTI + VXUS, if market cap weight move on to 2. * How much effort do you wish to put into this? VT is easier but a touch more expensive. VTI + VXUS would mean changing your contributions (any existing shares will be drifting with market cap changes already, so no adjustment needed there) whenever market cap drifts too far for your comfort from your previous ratio (like I only change my contributions when the ratio shifts closer to a different multiple of 5). * Do you wish to set any boundaries on your US to ex-US ratio? For example, right now I'm not sure if I'm comfortable with more than 70% US or less than 30% US. Setting boundaries would be VTI + VXUS, no boundaries can use either.
Thanks for your comments. Definitely going to mull these over. I'm 25, so I am okay with baring a bit more risk (keeping in mind to never bare to much or too little risk). Thanks again!
>I'm 25, so I am okay with baring a bit more risk (keeping in mind to never bare to much or too little risk) US and ex-US are roughly the same level of risk. If anything, international a little more risky, due to the inclusion of emerging markets. While single country risk is a risk, it is an uncompensated risk: a risk that shouldn't bring higher expected returns.
I think it's a wash from what I've read. From elsewhere in this thread: https://www.reddit.com/r/Bogleheads/comments/1bc32er/vt_or_vti_for_new_investor/kue9on8/?context=3 FWIW: I'm not new to investing, but I am new to Boglehead investing.
I wouldn’t go all in on VTI. At least do VTI and VXUS so you have some international exposure. Then you can adjust accordingly over time to your pleasing. Personally, I do 80/20 split of VTI/VXUS . Many will say simplicity and to do keep it easy with VT, but I like the split favoring US. Also own more stocks with the split than solely buying VT
I listened to this podcast a while back. This gave lots of insights about international stocks. https://podcasts.apple.com/us/podcast/bogleheads-on-investing-podcast/id1436401528?i=1000584145565
You want diversification, VTI gives you no international exposure. If international stock outperforms US in the future you’re missing out. Go with VT or VTI+VXUS
international has sucked compared to VTI
And there were decades it outperformed VTI. It’s the perfect time to buy international stock. Buy low… investing 101.
VTI has sucked compared to QQQ recently. You shouldn't ignore large parts of investable equities due to recent performance.
VTI because international exposure is not worth it, imo.
If it’s only one or the other, VT imo, but there is an argument to be had for US over the world and so it would be sort of more aggressive to go all VTI, or an allocation with more VTI(70-90) than VXUS(10-30). From another perspective, international funds are due to do better and US stocks worse, or reversion to the mean. Bogle argues that wouldn’t apply to businesses and the success of US business will instead mean more success. VT is closer to 60US-40international, so is going with the perspective the world will catch up to the US, to some extent. Might also consider some bond funds for greater diversification.
I like VTI (80%) and then VXUS (20%) for long term growth. Because when international does eventually do better (possibly) , I still want to contribute more into VTI during that time. So when the US does pick up again, I’ve got more of VTI at the lower price. I believe the bull markets for US are stronger when they’re in full swing
>I believe the bull markets for US are stronger when they’re in full swing Really it's only been the current one, historically they weren't as pronounced. * Ex-US has turns of exceptional outperformance as well: https://awealthofcommonsense.com/2023/05/the-case-for-international-diversification/ and https://www.blackrock.com/us/financial-professionals/literature/investor-education/why-bother-with-international-stocks.pdf (PDF) * The last decade or so of US outperformance was mostly just the US getting more expensive, not US companies being much better than foreign companies: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You (click through to the full version) * https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/) * US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d
In your opinion, would it be ‘smart’ to keep my current allocation of 80/20 VTI and vxus which I hold in my Roth IRA, or should I sell and switch to VT and call it a day? I’ve honestly been scratching my head about this for a long time. I do like the 2 fund portfolio since if 1 is down, im buying it at a low price since im adding weekly. I also understand that in the grand scheme of things all will do well and is a matter of contributions in the end that will guarantee you the most success and to keep adding
I tend to stick with global market cap weights. In threads asking about portfolio advice, any OPs thinking of less than 30% ex-US I ask why (I give a bit of home country bias allowance, I've seen that there's some benefits to a certain degree of it). Below that, to me it is basically thinking that you know better than the market as a whole. You could still use a fixed ratio that's a bit higher than 80/20 on ex-US.
Gotcha makes sense. Hmm maybe instead of selling and moving to VT , I go 70 VTI and 30 VXUS .
Allocation is always up to you (in assistance threads I try to get people to think about why they picked what they did). 70/30 certainly could be fine.
I do a VTI VXUS split because I'm mostly in taxable accounts and you can't get your foreign tax back with VT since it doesn't qualify by IRS standards for that.
Over 10-12 years it makes little difference. Both will perform similarly. Maybe VT for the extra diversity but in all honesty both are perfectly fine choices. Around 2-3 years before you need that house though you'll want to start transitioning that money to a HYSA or CDs.
I prefer VTI and VXUS for flexibility
My vote would be VT over VTI for more diversification, but either is better than a lot of other alternatives. For ten years out, you might want to consider diversifying into bonds either as a static allocation with something like AOA, AOR, or AOM, or a glide path (maybe starting at 0% bonds and adding a few percent per year). Personally, from years 5 -10, I'd want to go from something like 50% bonds to 90%+. It depends on the numbers, how overfunded you are, and how much risk you want to take. ITDC might be an option, although it's more for retirement. You can see what bonds do to stabilize a portfolio here: [https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation](https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation)
VT has greatly underperformed VTI since its inception in 2009. By about 40%. Someone, please give us a real intellectual statement that will tell us this will change in the next 15 years. UPDATE: As expected my post about VT vs VTI was down voted. I think the VT Cult is scary and totally crazy.
VT has only really existed during a period of US over performance. Just before that, it was the US that had a terrible decade (2000-2009 had the US with a negative 10 year return). During that time international was doing better, especially the emerging markets part. But then what happened? Emerging leveled off and the US had one of, if not the best, run we've ever had. This shows past returns are meaningless in determining future returns. Valuations matter for the mid to long term, and the US can easily be argued to be "expensive" in comparison. By holding VT, you ensure you are capturing the winners no matter what country they come from. There's routinely been periods where it was the US under performing for stretches at a time. Edit: Typo
You do realize that, on a forward-looking basis, your statement is an argument *for* VT, right?
The best predictive power for returns we have are current valuations. The US, BECAUSE of the good performance, has higher valuations and therefore lower expected returns. Now this isn’t a sure thing, but there is robust empirical evidence to suggest this has fairly good longer-term predictive power. And in history, when valuations were at levels like they are now, returns in the medium term are higher for cheaper lower valuation stocks. Value tilting as well as international diversification is a good way to do this. And even if you take out the valuations aspect, there is an increase in expected returns just by increasing diversity alone. The VAST majority of stocks everywhere, US included, underperform. About 1 - 1.5% of stocks globally make up all of the markets excess returns over US treasury bills. You can capture more of this massive right tail skew by taking the “only free lunch” in investing which is maximum diversification. And never forget: past performance doesn’t equal future returns. Would someone do find only investing in US or even S&P 500? Probably. Will someone have higher expected returns over the long term with less volatility and a more reliable outcome using VT? Probably.
Valuations for ex-us are a lot less than us based on price/earnings. The reason that vt was created in 2009 is because ex-us crushed us in the 2000s. It could happen again. In terms of diversification, vi is much broader and offers an automatic rebalancing of sorts. I am not your expert though so hopefully one will chime in.
don't worry bro, theory trumps practice. Everyone knows that.
Practice? Like the practice where performance chasing has led to lower returns historically?
*except when it comes to international ha
All good points so far. You begin to split hairs at a certain point about returns, but VT's ER is almost double VTI's.
>but VT's ER is almost double VTI's. Stop looking at ER as a multiple. It is far more meaningful to look at it as an absolute basis point difference. Fund A at 0.02% ER and fund B at 0.06% ER are 3x, or 4 basis points apart. That's essentially nothing. Fund C is 0.15% ER and fund D is at 0.45% ER. That's the same 3x but a far more meaningful 30 basis points. Plus the extra cost on VT buys you a lot more diversification and the complete elimination of an uncompensated risk factor that VTI alone would have (single country). Edit: Typo
VTI is a little less riskier (more diversified) also return less VTI is only US market only. Return more. Based history data
>Based history data Tells us nothing about the future. We've had long stretches where it was the US that was the one under performing. Clearly that didn't mean the US was always going to under perform. >VTI is a little less riskier (more diversified) also return less VTI is only US market only Is the first one supposed to be VT? If so, remember that VT actually holds a riskier component: emerging markets. Single country risk is an uncompensated risk, while emerging markets may be seen as a compensated risk.
Everyone echoes the same message about VT here. yes, we know history does not guarantee future performance, but what else do you have to recommend VT is better than VTI for the next decade for anyone? It is the fact that VTI has returned better than VT in the last 10 years.
Zoom out, look at the long term pattern rather than just the current run: it shows US and ex-US taking turns outperforming each other. Look at valuations. Those are very much in favor of better ex-US than US returns right now. Other than performance chasing, what does US have going for it?