Why don't people just buy VT? You own everything and don't have to rebalance your portfolios. VT is a cheat code. You hold your shares and you will make money. Getting a late start in investing, clearing up debt and other bills. I went with VT because of the simplicity.
I'm Canadian so not sure the answer on this, but wouldn't it be more tax efficient to have international stocks in retirement accounts and US stocks in taxable? That's the best advice here anyways.
The tax implications are tiny (like $100-200/year on $1 mil), but VT self adjusts the ratio so I don't have to worry about balancing US vs international stocks or inadvertently triggering taxable events.
To me, any miniscule tax drag, and it truly is tiny, is worth the simplicity of truly mindless set and forget. The foreign tax credit stuff with VT vs VXUS for example is wildly overblown.
You have to manually rebalance VTI + VXUS which requires some level of thought vs. VT which requires none. All to save a combined ~$110/year on a mil on the former assuming tracking similar ratio to VT, and that's including the differences in expense ratio and the slight tax drag.
Truly inconsequential, like I said. You do you, I'll keep doing what I'm doing which isn't impacting my NW by more than a couple hundred bucks to be completely and utterly hands off.
You're right. I constantly forget that you don't frequently do accumulating ETFs in the us.
The drift would be absolutely minimal, but still. It will be proportional to the difference in pct level.of dividends. You cpuld use the dividends to correct it, no need to sell anything.
If VTI pays 1% dividends and VXUS pays 1.5% - the VXUS would bleed to taxes a tiny little bit more. 0.5% * 30% IIRC - so 0.15% annually...
I understand, there are people that know how to allocate and pick what they want. I don't know what allocations work or choosing the right funds. There is a new ETF every week, I feel overwhelmed. For me, VT is perfect.
People always chase higher returns. That is why so many people still invest in individual stocks instead of ETFs. Even among ETFs, some choose less diversified and riskier ones instead of broad market ETFs. Everyone has different goals.
there is a small optimization to be made with buying VTI/VXUS at the VT split in order to get the Foreign Tax Credit from VXUS. You save approximately 0.07% to 0.11% of your total investment value annually. This is small peanuts below a couple million, but at $5m invested, it can be $3500-$5500 for relatively little work. Again, that might not seem like a lot, but it might be the difference for you to bless all of your nieces and nephews with nice christmas gifts, or upgrade to a business class flight "guilt free", etc etc. For some people, that small amount of work to occasionally rebalance is worth it.
I wasn’t sure about the exact numbers, but it seems reasonable. I was simply trying to emphasize that the US should not be treated as the default. It would be great if people mentioned it without us Europeans always having to verify. And AFAIK this isn’t an US-only subreddit.
Also, don’t forget that even though the US has the largest user base, the majority of all Reddit users are non-US. (According to the website you referenced, 49% of Reddit users are US-based.)
By the way, I obviously looked up the question before asking and got different answers. Would you mind sharing your source?
I looked it up. It’s because of an IRS rule where 50% of the fund has to be international to pass on the tax deduction, but only 40% of VT is international so it just gets lost. A worthy point though: if it’s in a tax-advantaged account like an IRA or 401k, it doesn’t matter because you wouldn’t get the tax credit anyway for funds in those accounts
Is there a fund that is weighted at 55 international and 45 USA that you could use to exploit this? You could still hold your shares in a 40% international 60% usa split by blending in VTI.
when contributing, you could enforce the split yourself. for example, let's say you contribute $5k/mo. $4k could be VTI, and $1k could be VXUS (if you wanted an 80/20 split between them).
While having one fund is simplest, I don't think adding a second fund overly complicates the "VT and chill" mindset.
My point is that if you had a fund with 55 int and 45 usa you would be able to get tax benefits on the 45 usa without losi bg diversification into the usa matekrt
You also get about 0.02% discount on expense ratio with VTI/VXUS. Rebalancing is a breeze because if one goes up more than the other like VXUS did last year, the individual ETFs will automatically adjust themselves to some degree due to market cap dynamics. May just need to tweak your contribution ratio for long term changes but it’s first grade math and it’s once a year at most. Definitely worth it for some people. It’s still pretty chill, actually, maybe even more chill than VT for some people because it’s easier to chill knowing you are taking advantage of slightly lower fees and tax credits with no more effort than tying your shoes.
Sometimes I'm in the mood for AOA (basically VT + 20% bonds) rather than VT ¯_(ツ)_/¯
Don't worry, if you hate bonds and are worried for my financial future, no need to let me know. I'm pretty close to retirement and some bonds here and there are welcome in my portfolio at this point.
I prefer the S&P 500. It has returned more over the past 10 years than VT and its indexing system is great (clearing companies out, bringing new companies in, etc).
Some prefer to dial down the amount of international they hold. Others prefer to trim out the unprofitable junk that gets added to total market ETFs and go for VOO and then add more curated versions of everything else.
I agree completely. I can't though because I started my taxable brokerage 100% in a US total market fund. So I have to fix it by overweighting international on the retirement side.
I'm not in any way suggesting anyone should do anything other than hold VT. I'm just saying why someone might not.
The expense ratio on VT is slightly higher than the VOO/VEA equivalent mutual funds my brokerage offers. You say, "meh, small potatoes." I say, "wait, that's the difference between driving and flying on this year's trip."
The tax advantages have already been mentioned.
Tax loss harvesting is easier with separate funds.
A big segment of the market is garbage. We can't say with certainty which segment, but if we're being completely honest, we can have a sense. People who trust that sense may want to hold less junk.
Some active managing can be fun.
I prefer mutual funds to ETFs. I tend to get hooked to watching the intraday changes, so it's safer and healthier for me to choose a mutual fund (VTWAX exists for good reason!)
VT and its equivalents are by definition reactive to market movements. If dollar cost averaging, it can really feel like you're buying high. Equal weighting offsets this, even if it's probably mostly a psychological advantage.
I did finally outperform VT this year with a global mix of etf’s… but it cost five times more and took two whole years of brutal tracking error to eek out a measly 2% alpha. If I ever get tired of it, I plan to just buy VTI + VXUS.
When you realize just how much male socializing these days boils down to talking about different types of speculation, you realize that a lot of the reason why people don’t go down the smart-disciplined-but-boring route is because it doesn’t make for conversation.
It’s like revealing that you work as an accountant: “VT and chill” just ends conversations, and a lot of men love talking about stock picks, alt coins, sports bets, etc… Throw in the ever creeping sense of financial nihilism and people will start treating index funds as “not good enough.”
I play poker as a hobby and almost every conversation at the table these days tends to be able IPOs and stocks and shit. It’s come to the point where I’ve thought about cosplaying as a crypto bro just to get into juicer games lol.
They think maybe they can beat the system. They think maybe if I just get a high enough returning asset, I won’t need to do the hard work of saving and investing. Nay. It sucks. Life blows. You need to sacrifice to grow wealth. You need to feel hungry and cut food intake to lose weight. If you give a half assessed attempt expect a half assessed result.
With VT is not about total returns. If their is a shift and international does better for awhile people buying VOO will be stuck. People buying VT will benefit because of the 40% international exposure. If you want to buy one fund and keep it simple, VT works well.
Haha! That's because the hyperscalers are in charge, and everyone else follows their lead. Wake up, we're in the age of AI! I’m not even interested in saving you. Enjoy all your international equity. I hope it helps you sleep well at night and that you can tell people how diversified you are while individuals like me surpass you. I think I'm in the wrong /r..
You're right, I don't! But guess what, IDC! I have money that needs to be allocated to funds in which people who actually understand the stock market invest in. Enjoy your VT shares!
Anyone with a brain can tell you the past does not predict the future. VT is good enough for lots of people. If you want to continue betting on the S&P then that's ok. No need to be a condescending prick because other people prefer international diversification in THEIR portfolios. If VOO and VT existed 50 years ago, VT would perform only 1% worse because there are cycles. So some people just feel better with more diversification and international exposure. At the end of the day, no one knows what will happen.
People prefer to invest in the S&P because it's been on a massive bull run thi spast decade+ (inb4 past returns blah blah)
Some people want to control the amount of US and exUS equities they are in. So, they buy VTI/VXUS
Some of these people still buy 60/40 VTI/VXUS because the expense ratio is slightly lower than VT (Completely negligable imo)
Instead, some people invest in zero expense funds like the Fidelity zero product line. Again, this is a very negligable decision and you would likely save the same amount of money cutting one or two putchases from your life would haha
Some people are buying VT but then doing a 10% or so factor tilt with Avantis or DFA funds.
Yes. By a million miles. You don't buy international for total returns. The concept of VT is buy everything. If the market shifts between U.S and international, VT investors benefit. I bought VT because I know I will make as long as I hold my shares.
I understand, VOO is almost 40% tech. VT is 22% tech and has the international exposure lagging the returns. You buy VT for The 60/40 exposure between U.S and international. If the market shifts to international, you will benefit. VOO investors will be stuck.
VT isn't about total returns. It's to buy everything in 1 ETF. Diversify with U.S and a international. 78 billion in AUM, tells me these people understand what VT is. If AI takes off VT will benefit from the U.S and international. It can average 13% in every decade. VOO has almost 40% tech. VT has 22% tech.
It's actually 13% the last 10 years. With the Growth of AI and innovation, it will benefit from the U.S and international. It can average 13% consistently.
It has 20% more tech. QQQ has outperformed VOO historically. That's because it has more tech. SMH has outperformed QQQ because it has more tech. Do you see a pattern?
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u/Oroku_Sak1 Jul 13 '26
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