There’s A New Standard In Low-Cost International Funds

For many years, the Vanguard Total International Stock Index Fund (VGTSX) was pretty much the only game in town if you wanted broad exposure to foreign markets, including emerging economies. It was a great fund from the beginning but it always had a few major drawbacks.  For starters, it was a fund-of-funds and so didn’t qualify for the foreign tax credit.  And due to a quirk in the index the fund tracked, it completely lacked exposure to one of the richest nations on the planet, Canada. But it was still a pretty good fund.

And Then There Were Two

Instead of doing the obvious and fix the Total International Fund, which they eventually did, Vanguard decided to introduce yet another international index fund. The new fund qualified for the foreign tax credit but it was significantly more expensive,  yielding the advantage to the old Total International fund. Still, the FTSE All-World EX US index fund (VFWIX) was a decent fund for a taxable account so its redundancy can be forgiven somewhat.

Finally, Admiral And ETF Share Classes!

I was ecstatic about the recent changes to the index that the Total International fund tracked (it includes Canada!), but apparently Vanguard wasn’t quite done. Earlier this week, Vanguard announced new admiral and ETF share classes of the Total International fund, but sporting an extremely attractive expense ratio of 0.20%, by far the lowest-cost fund of its kind available to retail investors with only a modest $10,000 to invest. I will be exchanging the FTSE fund for the new low-cost Total International fund in my IRA when I do my January re-balancing and, unless you are investing in a taxable account and have a large unrealized capital gain, I suggest most of you consider doing the same.

Vanguard probably should have done all this 5 years ago, but better late than never I suppose.