WHY DOES JtB USE VANGUARDS INTERNATIONAL GROWTH FUND RATHER THAN ITS INTERNATIONAL STOCK INDEX FUND?
The Total International Stock Index (VGTSX) fund tracks the Total International Composite Index. As such, it typically invests 50% in the European region, 28% in the Pacific region, and 22% in Emerging Markets. Even though its annual returns have sometimes exceeded those of Vanguard’s International Growth Fund, the growth fund has performed better over time. The explanation is that International Growth enjoys greater flexibilty to invest in whatever regions the manager finds most attractive at any given time, rather than being locked into a fixed regional mix. Until the index can demonstrate that its approach is preferable, we’ll continue to stick with International Growth.
