r2i forum

A quick question for Desi or Bob (or anyone else for that matter),

One issue I have had with my AAP was that I had left funds in VIPSX in my IRA account. Given my ROR status now, I will be paying taxes on accruals there-in.

I am probably better off taking a hit on April 1, by selling my VIPSX holding and instead buying equity in my IRA. I will end up paying taxes on the sale to GOI for 08-09, but will be a relief beyond 08-09. The amount of gain would almost be the same as projected accruals during 2008, so the GOI tax view is even-stevens!

As part of the annual re-balancing of my AAP, I am now presented with an option to direct all proceeds from VIPSX holdings to international equity. This will bring my AAP balance to where it needs to be for 2008 as well.

I have also been seeing that VFWIX is being recommended for International equity. As part of my AAP, I had invested in VGTSX. For the above investment into international, I would hence like to go for VFWIX.

Now to my questions:
- Looks like VEU is the ETF version of VFWIX, as far as I can tell, behaves identically--except
that because it is bought on the open market, there is no purchase fee. In addition, its expense ratio is 0.25%/year, as opposed to 0.4%. Of course, I may need to pay commissions to buy-it. It is better to go for VEU or VFWIX?

- Since the amount of funds I will be moving would be around $36K should I do a DCA over a 4-6 month period?

regards
Submarine

Submarine,

The .25% fee on purchase is of no consequence to holders as it is not a load but rather adds to assets of the fund and as other buyers enter, their .25% adds to your value because that goes to assets of fund. So I would ignore the 0.25%.

The VEU is created in creation units of 300,000 shares and the broker dealer who buys the creation units also pays $22000 as up front fees.

The VEU are just a class of shares of VFWIX rather than an entirely separate ETF. However I have not looked into detail why and how this 0.15% expense difference shows up. The 0.15% difference in your case would be $54 per year on 36K investment. You of course will incur bid / ask difference on overall transaction if VEU is purchased and pay some $10 or so broker commisions for each trade.

Given that Vanguard Vipers are a bit different than ETFs and just a different class of shares of the open ended corresponding funds, I would just go with VFWIX.

Given that this is a world index, I would not extend the DCA too long but just do that over a period of couple months tops.

Desi;86002Submarine,

The .25% fee on purchase is of no consequence to holders as it is not a load but rather adds to assets of the fund and as other buyers enter, their .25% adds to your value because that goes to assets of fund. So I would ignore the 0.25%.

The VEU is created in creation units of 300,000 shares and the broker dealer who buys the creation units also pays $22000 as up front fees.

The VEU are just a class of shares of VFWIX rather than an entirely separate ETF. However I have not looked into detail why and how this 0.15% expense difference shows up. The 0.15% difference in your case would be $54 per year on 36K investment. You of course will incur bid / ask difference on overall transaction if VEU is purchased and pay some $10 or so broker commisions for each trade.

Given that Vanguard Vipers are a bit different than ETFs and just a different class of shares of the open ended corresponding funds, I would just go with VFWIX.

Given that this is a world index, I would not extend the DCA too long but just do that over a period of couple months tops.

Desi, thanks for your response. I will stick with VFWIX and DCA over two months tops.
regards