Vanguard Mutual Funds to Sell

Sell these Vanguard mutual funds if you ever want to profit

Aug 10, 2010, 3:00 pm EST | By Dan Wiener, Editor, The Independent Adviser for Vanguard Investors

#6 – Tax-Managed International (VTMGX)

Tax-Managed International (VTMGX) is a straight-out, diversified foreign stock fund wrapped in the Tax-Managed package. But it comes with a price: a high investment minimum of $10,000 and a back-end load (“redemption fee”) of 1% for shares held less than five years.

Unlike an international fund of funds (which Total International was until Vanguard changed its investment policies in late 2008), this fund lets you take advantage of the foreign tax credit, but unless you plan to stay in the fund a long time, the loads will eat into your return. And the foreign tax credit won’t amount to much — maybe $15 on every $10,000 you have invested, so I wouldn’t let that sway you one way or the other.

But more importantly, you have to be really committed to international indexing to find this fund appealing. It matches the EAFE index very closely, but that’s not such a good thing given how poorly the index performs compared to many active managers.

Finally, it has no significant investments in emerging markets. If you still want to invest in this fund, a better choice might be the Europe Pacific ETF (VEA), which is a share-class of this fund and, because it trades like a stock, has no fees other than the brokerage cost to buy or sell. But why bother?