Own it all
Now you can own everything in two simple steps: CWI and TMW. The CWI is the SPDR® MSCI ACWI (All Country World Index) ex-US ETF (AMEX: CWI) which includes developed and emerging markets stocks outside the United States. The CWI ETF is the first of its kind to offer comprehensive international exposure to both of these markets. More detail at TheStreet.com.
The TMW is the SPDR® DJ Wilshire Total Market ETF (AMEX: TMW) which would be your US stock portion.
CWI + TMW. Set it and forget it.
Update 3/13/07: Check out Vanguards new FTSE ALL-WORLD EX-US ETF (ticker symbol VEU) instead of the CWI. It’s expense ratio is cheaper.
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Paul,
Last year you had a very successful portfolio based on several Vanguard funds, how would you balance these with those? Woud you continue the 10% with VTI at 20% or would you have changed the selection based on these new options?
The ETF Portfolio from 2006 was more heavily weighted toward small cap stocks and also REITs. It was a slightly more complicated portfolio to assemble for the lazy investor.
For the person of ultimate laziness, the CWI and TMW portfolio would have you covered. Alternatvely, with mutual funds use the Vanguard Total Stock Market and Total International Stock Market indexes.
Or for supreme laziness, use IFA and go play.
Hi Paul,
Just joined the gang. I’ve been listening to your podcast for a while. Totally awesome! Best podcast ever!
What is the advantage/disadvantage buying ETF over mutual find?
I am still a newbie in this investing thing. So sorry for asking such a dumb question
Let’s talk about two exactly similar funds: Vanguard’s Total Stock Market Index mutual fund (VTSMX) and Vanguard’s Total Stock Market ETF (VTI)
First, how do you buy one of these? For VTSWX you need an account somewhere, preferably at Vanguard itself. Then to buy it you just send them money. No fee is charged to buy it. For VTI, you need a stock-trading brokerage account like at AmeriTrade or Schwab or Fidelity or whatever. To buy some shares, you must pay a commission each time, typically between $4 at the very low end up to $25 or more at the high end. (Mine is $8 per trade.)
What price do you get when you buy one of these? For VTSMX you get the day’s closing price at 4:00 PM EST. For VTI, you get whatever the price was when you make the trade when the market is open between 9:30 and 4:00 EST. For VTI you can play all the tricks you can with stocks like limit orders.
What are the expenses internal to the fund? According to Morningstar.com, VTSMX is 0.19% while VTI is 0.07%.
What about taxes? Since VTSMX is a passively-managed index, there is low turnover of stocks within the fund. Therefore, the capital gains taxes you must pay each year are low. Some other mutual funds have higher turnover and make you pay more taxes. ETFs are usually structured in a way that the turnover is hidden and you don’t pay capital gains taxes until you sell. (I think… any help on this anyone?)
Dividends: same treatment on both funds.
Selling: When you sell VTSMX you get that day’s closing price of the fund. When you sell VTI you get the market price during the trading day and you pay the trading commission.
Bottom line: If you are adding money frequently and plan to take it out in installments, the mutual fund is the way to go. If you don’t have a brokerage account, the mutual fund is the way to go. And a further benefit of mutual funds: You are not enticed to make trades like you might be in an ETF.
But if you already have a brokerage account and are investing large plops of money, an ETF is worth investigating.
Thanks for listening!
Thanks Paul.
I bought some VGTSX through TDameritrade a while ago. They charged me like 50 bucks…. so guess I just got ripped off….
OUCH!