There has been several posts about best funds to use in taxable account. I tried to put together a summary that captures the differences between the funds with respect to a 100k investment in a taxable account below. Most important factors for a taxable international holding of course are:
1. Find the lowest dividend international fund.
2. With the highest amount of qualified dividends.
3. And the lowest fees.
Again, the emerging market funds have the lowest amount of qualified dividends and high yields (VMO has yield of 3.1%), making them particularly ill-suited for a taxable account. Conversely, the highest percentage of qualified dividends are found with developed market index funds. I am finding the best strategy is likely to find places in HSA or Roth to hold emerging market stocks separately given their tax inefficiency and high growth potential. Then place the other 75% of your international holdings in taxable if needed within a developed market index fund (total international fund is 25% emerging markets).
Example using 100k investment below compares the funds. Just from the numbers it appears VIGI is the winner in taxable by a significant amount due to low dividend yield. Would love to hear commentary on this choice.
Taxable International Funds:
Assuming 100k investment, 2023 QDI data
Fed+State = 39.5% tax rate
Cap Gains = 23.8% tax rate
Total International Funds
iShares Total International ETF (IXUS)
Yield: 3.07%
QDI: 73.13%
Nonqualified: 26.87%
Fee: 0.07%
Qualified: $2245 x 0.238 = $534
Nonqualified: $825 x 0.395 = $226
Total tax: $860
Fidelity Total International Index Fund (FTIHX)
Yield: 2.73%
QDI: 74%
Nonqualified: 26%
Fee: 0.06%
Qualified: $2020 x 0.238 = $480
Nonqualified: $710 x 0.395 = $280
Total Tax: $760
Vanguard Total International ETF (VXUS)
Yield: 3.09
QDI: 59%
Nonqualified: 41%
Fee: 0.08%
Qualified: $1823 x 0.238 = $434
Nonqualified: $1267 x 0.395 = $500
Total Tax: $934
International Developed Market Funds
iShares Core MSCI EAFE ETF (IEFA)
Yield: 3.16%
QDI: 89.57%
Nonqualified: 10.43%
Fee: 0.07%
Qualified: $2830 x 0.238 = $674
Nonqualified: $330 x 0.395 = $130
Total Tax: $804
iShares Core MSCI International Developed (IDEV)
Yield: 3.06%
QDI: 88%
Nonqualified: 12%
Fee: 0.04%
Qualified: $2693x 0.238 = $641
Nonqualified: $367x 0.395 = $145
Total Tax: $786
Schwab International Equity ETF (SCHF)
Yield: 2.81%
QDI: 85%%
Nonqualified: 15%
Fee: 0.06%
Qualified: $2389x 0.238 = $569
Nonqualified: $422x 0.395 = $166
Total Tax: $735
Vanguard Intl Dividend Appreciation ETF (VIGI)
Yield: 1.86%
QDI: 78%
Nonqualified: 22%
Fee: 0.15%
FTC: 11.52%
Qualified: $1451x 0.238 = $345
Nonqualified: $409x 0.395 = $162
Total Tax: $507
Schwab Intel Dividend Equity ETF (SCHY)
Yield: 4.85%
QDI: 93.67%
Nonqualified: 6.33%
Fee: 0.14%
Qualified: $4542x 0.238 = $1081
Nonqualified: $307x 0.395 = $121
Total Tax: $1202
Vanguard FTSE Developed Markets ETF (VEA)
Yield: 3.41%
QDI: 73%
Nonqualified: 27%
Fee: 0.06%
FTC: 6.5%
Qualified: $2489x 0.238 = $592
Nonqualified: $921x 0.395 = $364
Total Tax: $956
1. Find the lowest dividend international fund.
2. With the highest amount of qualified dividends.
3. And the lowest fees.
Again, the emerging market funds have the lowest amount of qualified dividends and high yields (VMO has yield of 3.1%), making them particularly ill-suited for a taxable account. Conversely, the highest percentage of qualified dividends are found with developed market index funds. I am finding the best strategy is likely to find places in HSA or Roth to hold emerging market stocks separately given their tax inefficiency and high growth potential. Then place the other 75% of your international holdings in taxable if needed within a developed market index fund (total international fund is 25% emerging markets).
Example using 100k investment below compares the funds. Just from the numbers it appears VIGI is the winner in taxable by a significant amount due to low dividend yield. Would love to hear commentary on this choice.
Taxable International Funds:
Assuming 100k investment, 2023 QDI data
Fed+State = 39.5% tax rate
Cap Gains = 23.8% tax rate
Total International Funds
iShares Total International ETF (IXUS)
Yield: 3.07%
QDI: 73.13%
Nonqualified: 26.87%
Fee: 0.07%
Qualified: $2245 x 0.238 = $534
Nonqualified: $825 x 0.395 = $226
Total tax: $860
Fidelity Total International Index Fund (FTIHX)
Yield: 2.73%
QDI: 74%
Nonqualified: 26%
Fee: 0.06%
Qualified: $2020 x 0.238 = $480
Nonqualified: $710 x 0.395 = $280
Total Tax: $760
Vanguard Total International ETF (VXUS)
Yield: 3.09
QDI: 59%
Nonqualified: 41%
Fee: 0.08%
Qualified: $1823 x 0.238 = $434
Nonqualified: $1267 x 0.395 = $500
Total Tax: $934
International Developed Market Funds
iShares Core MSCI EAFE ETF (IEFA)
Yield: 3.16%
QDI: 89.57%
Nonqualified: 10.43%
Fee: 0.07%
Qualified: $2830 x 0.238 = $674
Nonqualified: $330 x 0.395 = $130
Total Tax: $804
iShares Core MSCI International Developed (IDEV)
Yield: 3.06%
QDI: 88%
Nonqualified: 12%
Fee: 0.04%
Qualified: $2693x 0.238 = $641
Nonqualified: $367x 0.395 = $145
Total Tax: $786
Schwab International Equity ETF (SCHF)
Yield: 2.81%
QDI: 85%%
Nonqualified: 15%
Fee: 0.06%
Qualified: $2389x 0.238 = $569
Nonqualified: $422x 0.395 = $166
Total Tax: $735
Vanguard Intl Dividend Appreciation ETF (VIGI)
Yield: 1.86%
QDI: 78%
Nonqualified: 22%
Fee: 0.15%
FTC: 11.52%
Qualified: $1451x 0.238 = $345
Nonqualified: $409x 0.395 = $162
Total Tax: $507
Schwab Intel Dividend Equity ETF (SCHY)
Yield: 4.85%
QDI: 93.67%
Nonqualified: 6.33%
Fee: 0.14%
Qualified: $4542x 0.238 = $1081
Nonqualified: $307x 0.395 = $121
Total Tax: $1202
Vanguard FTSE Developed Markets ETF (VEA)
Yield: 3.41%
QDI: 73%
Nonqualified: 27%
Fee: 0.06%
FTC: 6.5%
Qualified: $2489x 0.238 = $592
Nonqualified: $921x 0.395 = $364
Total Tax: $956
Statistics: Posted by DesertInvestor — Tue Aug 20, 2024 10:44 am — Replies 10 — Views 292