VWIGX or VGTSX - Which would you choose?

[disneysteve]

Assume that you want to add to the international portion of your portfolio and these are your only two choices. Which would you choose and why?

VWIGX - Vanguard International Growth Fund is an actively managed fund with an ER of 0.51%

VGTSX - Vanguard Total International Stock Index is an index fund with an ER of 0.27%

[sweeps]

VGTSX. I prefer index funds over managed funds.

[Broken Arrow]

This is just my own personal opinion, so please take it for what it's worth.

I think this could be yet another example of proving John Bogle's point that, over time, most actively-managed funds won't beat index funds. Or at least that, over time, it shows that passive index funds can be just as effective as actively-managed ones.

I'm sure you know this already, but VGTSX is a fund of funds comprising of Vanguard's Pacific, European, and Emerging market index funds. Contrast this with VWIGX, comprising of a total of 6 fund managers picking a diverse range of foreign companies that include Korean shipbuilding (Daewoo), Brazilian energy (Petroleo Brasileiro), and German engineering (Siemens).

From what very little I can tell, they aren't bad picks, and yet, the past performance will show that not only is the index fund keeping up with the actively-managed one, but more recently, it's actually out-pacing it! Look:



Also notice that the trend lines are similar, which suggests that the fund managers haven't really made too much of an impact into the fund's overall performance (besides the small but compounding gap in slightly under-performing)....

Of course, past performance is no guarantee of future performance, but as a simple comparison between an actively-managed fund versus its index cousin, the result is still hard to ignore.... This is especially so when you consider that we haven't even factored in the (relatively low) ERs yet!

Again, this is just my personal opinion, but given the choice between these two funds, I'd sleep very soundly at night going with the index fund.

[m3racer]

Nice analysis.

[Ima saver]

I would go with the Index fund also.

[disneysteve]

Good lesson in the value of indexing, huh. For the record, I already invest in VGTSX and was just exploring the options before investing some new money. I'll stick with the index.

[kv968]

I think that VWIGX will slightly outperform VGTSX for a bit in the near future due to it's holdings, but the outperformance, if any, would be miniscule and I think VGTSX is the way to go. I have in it my 401k and it's been great for me.

[ThriftoRama]

I have money invested in VGTSX. I have been happy so far...

[aida2003]

Good lesson in the value of indexing, huh. For the record, I already invest in VGTSX and was just exploring the options before investing some new money. I'll stick with the index.

I'm nosy now:
Is it in a taxable account? How long have you been investing in it? Since you are not allowed to claim a foreign tax credit for it, I'm curious if you've had lots of distributions from this fund?

[disneysteve]

I'm nosy now:
Is it in a taxable account? How long have you been investing in it? Since you are not allowed to claim a foreign tax credit for it, I'm curious if you've had lots of distributions from this fund?

It is in an IRA account so no tax issues.

[LuxLiving]

"Fiduciaries should strongly consider index funds
as an alternative to actively managed funds. Index
funds incur about 80% less in transaction costs than actively managed funds…long-term returns for actively managed funds trail their respective indexes."

Michael C. Keenan, “The Elephant in the Living Room”, Financial Advisor Magazine, May 2008.