Vanguard All-World/Taxable Account

[Belphegor]

I am maxing out my IRA for the year and will have additional funds that I would still like to invest leaving me with just the option of investing in a taxable general account. I am looking at investing in the Vanguard All-World ex-US Index Fund to add greater diversification from what I have in my IRA. From my research, it seems international funds are not the most tax efficient. My question is simply, is this a bad fund to have in a taxable account, and if so, what other types of funds should I consider? If it makes a difference, I am only 21 and plan on holding the fund for a very long period of time.

Thanks,

Belphegor

[punkass]

Does this fund pay out any dividends?

[spider]

Dividend yield on EFA (the iShares analog of what you are talking about) is a little under 2%, which is similar to S&P500, for example. I think you'll be looking at something like that for any of the standard index funds.

If you want to cut down on dividends beyond that, you'd have to move to a fund that specifically aims to manage taxes generated. Also, growth funds should have lower dividends (talking about the underlying stocks of course, you could still have taxes to pay based on any churning by a particular fund manager).

General comment which you probably already know: in general, passive funds based on indices are going to have less churning (Vanguard among others is good in this respect). Also, some say ETFs have tax advantages over mutual funds (which I personally agree with but the arguments here get really complicated).

[gull]

If you want foreign diversification, I would suggest VEA. It's offered by Vanguard, and extremely cheap and divserified. It's a share class of Vanguard Tax-Managed International Fund.

In general, minimizing taxes is a good thing, but don't worry about minimizing taxes so much that your hurt your risk-adjusted returns.