This applies to a FV discussion in the "Playing the I-Fund" thread. Basic thesis is that the Vanguard Total International Index Fund (VGTSX) isn't as aggressive in applying FV as the I-Fund:
VGTSX is set to track an "index" described as "Total International Composite Index*", with the note that:
"*Consists of the MSCI Europe Index, the MSCI Pacific Index, and the MSCI Emerging Markets Index."
Presumably, the constituent indexes are used in proportion to the holdings of the 3 funds making up VGTSX.
That said, my plots of both the I-Fund and VGTSX performance for 2006 track each other very closely. Both finished around +26% for the year. Any day-to-day variation may be from the Emerging Markets portion of VGTSX, other differnces in holdings....or possibly differences in FV calculations. The plots show that when they diverge for a few days, they eventually merge again later. (i.e., there really isn't much difference between the two in actual returns). Assumption we can jump to is that they aren't much different, and FV influence probably aren't that different either.
As for FV, today a healthy +14 cent FV was applied to the I-fund, while if we assume the MSCI EAFE applied to both (which is a big assumption as noted), VGTSX had more like an FV of +4 cents.
Again, much of the difference in FV may be due to other rules and penalty fees that apply to VGTSX that prevent frequent trading, and probably reimburse the fund for any losses from trades that do occur.
Only interesting if you REALLY enjoy the concept of FV, or own both indexes. (Few of us qualify).
