A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

EXCHANGE TRADED FUNDS (ETFS)
Ticker Expense Ratio
Total U.S. Stock Market
Vanguard Total Stock Market
VTI
0.07%
iShares Russell 3000
IWV
0.20%
Developed Markets (EAFE)
Vanguard Europe Pacific
VEA
0.15%
iShares MSCI EAFE
EFA
0.35%
Emerging Markets

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Vanguard Emerging Markets
VWO
0.27%
iShares MSCI Emerging Markets
EEM
0.72%
Total World Ex-U.S.
Vanguard FTSE All World (EX U.S.) VEU
0.25%
SPDR MSCI ACWI (EX U.S.)
CWI
0.34%
Total World Including U.S.
Vanguard Total World
VT
0.30%
iShares MSCI ACWI
ACWI
0.35%
Total Bond Market U.S.
Vanguard Total Bond Market
BND
0.12%
iShares Barclays Aggregate
AGG
0.20%
Another alternative for the tax-conscious investor is the
Vanguard Tax-Managed Fund: Growth and Income Portfolio.
Despite the portfolio designation, which is not totally
revealing, this is an S&P 500 index fund that minimizes taxes
by deferring capital gains realizations. Here’s an illustration
of how it works.
The fund is able to defer capital gains by the following

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techniques. First, the portfolio is indexed to the S&P 500, so
there is no active management that tends to realize gains.
Second, when securities do have to be sold (to meet
redemptions, for example), the fund sells the highest-cost
securities first. Such forced sales from liquidations should be
minimized, however, by the assessment of redemption fees if
fund shares are held only a short period of time. Third, the
fund offsets unavoidable gains by judiciously selling other
securities on which there is a loss. As a result, the fund may
not perfectly track the benchmark index, but it should come
very close.
Vanguard has two additional tax-managed funds. One, the
Capital Appreciation Portfolio, is identical to the income and
growth (S&P 500) portfolio except that the index used is the
Russell 1000 Index, which includes many smaller companies
with lower dividend yields. This portfolio is even more
effective in minimizing taxes, because it distributes less
dividend income. A third portfolio, the Balanced Portfolio, is
composed of roughly equal parts of the capital-appreciation
(Russell 1000 Index) portfolio and a group of intermediate-
term tax-exempt bonds. These low-cost index-oriented funds
should prove very advantageous for wealthy individuals with

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long-term investment horizons where the stocks are held
outside of a tax-advantaged retirement plan. They are