Author Topic: Question on ETF vs MF  (Read 1393 times)

dnmccoy

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Question on ETF vs MF
« on: February 10, 2020, 01:17:09 PM »
Hi all. New to the group. Ended up here after questioning some of Dave Ramsey's investing advice.

Question is this. Looking at pretty much starting out with passive investing in vanguards total stock market funds.

I have a Roth through TD Ameritrade and had looked into VTSAX. Its a no load fund with 3k minimum startup(thats fine) but TD Ameritrade would charge me $49.99 every time I want to buy into it?

So that has me looking at the ETF version VTI. Other than not being able to dump little amounts here and there, is there any downside to the ETF version vs the mutual fund?

EvenSteven

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Re: Question on ETF vs MF
« Reply #1 on: February 10, 2020, 02:37:03 PM »
A good overview of the differences between ETFs and Mutual Funds:

https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds


I don't care about any of the differences, so I treat them as equivalent. You may or may not. If you do, you can always open a Roth at Vanguard and buy the mutual fund without the fee. Or at Fidelity or Schwab and use their in-house total market funds.

Davnasty

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Re: Question on ETF vs MF
« Reply #2 on: February 10, 2020, 02:58:50 PM »
I'll second setting up a Vanguard account.

What benefit does TD Ameritrade provide if you buy through them?

dnmccoy

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Re: Question on ETF vs MF
« Reply #3 on: February 10, 2020, 03:17:49 PM »
I thought about it, but I have some large cap stocks that Ive had for awhile.

Buffaloski Boris

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Re: Question on ETF vs MF
« Reply #4 on: February 10, 2020, 04:50:56 PM »
I thought about it, but I have some large cap stocks that Ive had for awhile.

Iím not understanding. If you sell those stocks within a Roth IRA, you wouldn't pay any capital gains as its tax sheltered.

dnmccoy

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Re: Question on ETF vs MF
« Reply #5 on: February 10, 2020, 06:43:16 PM »
Really the only important one are shares in companies that give me discounts when I use their product/service

ie: I have a couple hundred shares of CCL and receive an onboard credit everytime we sail, plus a decent dividend

jeroly

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Re: Question on ETF vs MF
« Reply #6 on: February 10, 2020, 07:20:22 PM »
Really the only important one are shares in companies that give me discounts when I use their product/service

ie: I have a couple hundred shares of CCL and receive an onboard credit everytime we sail, plus a decent dividend
You can just transfer your whole account over to Vanguard or any other broker without selling the shares. I did that with a whole slew of individual stocks about fifteen years ago and it was really easy.

dnmccoy

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Re: Question on ETF vs MF
« Reply #7 on: February 10, 2020, 07:23:05 PM »
Well thatís a game changer. Can I purchase others stocks or funds through the vanguard account?

jeroly

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Re: Question on ETF vs MF
« Reply #8 on: February 10, 2020, 09:06:54 PM »
Well thatís a game changer. Can I purchase others stocks or funds through the vanguard account?
Yes. The price for trades will depend on your account balances and number of trades, but will range from free to reasonable.

vand

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Re: Question on ETF vs MF
« Reply #9 on: February 11, 2020, 09:01:27 AM »
The real advantage of ETF is for investors who want exposure to certain sectors. There is an ETF for just about everything these days.

Obviously if you are following the Bogleheads formula for wealth accumulation then there is not going to be much of an upside to ETFs, but neither is there going to be much downside. You're buying the S&P; it's going to be competitive whatever instrument you choose.

I like Dave Ramsey but take his investment nous with a large pinch of salt. His "growth stock mutual fund" catchall doesn't actually exist. There are no investment vehicles can guarantee to outperform world stock markets on a consistent basis, or if there were then the likes of you and I certainly wouldn't be able to get a piece of the pie.

MustacheAndaHalf

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Re: Question on ETF vs MF
« Reply #10 on: February 11, 2020, 09:50:15 AM »
Note some people like Dave Ramsey are good at helping people escape debt, but they're out of their element when it comes to investing.  So for investing, you might read something like "A Random Walk Down Wall Street", which is a classic book that is now in it's 12th edition.  It's been at every library I've visited, so you can read it for free.

In your position, I would first get allocated to Vanguard Total Stock Market, and then decide on the move to Vanguard.

At TD Ameritrade, you pay $0/trade for most ETFs.  So you can buy "VTI" for $0.  To see that "VTI" and "VTSAX" are equivalent, search for "VTSAX" and follow the link to vanguard's website.  Near the top, there should be a link for the "ETF equivalent"... click that, and you should be looking at the page for "VTI", again still on Vanguard's website.  So Vanguard will tell you they're equivalent, and Vanguard runs both of them.

I would suggest selling your single company pick and buying VTI.  Putting your entire retirement on the back of one company lacks diversification.  What if the coronavirus hit a Carnival cruise ship, instead of a Princess Cruises ship?  What if it got out of control, and the company was to blame?  Owning just one company means any risk to that company translates directly to your retirement portfolio.

That's why it's better to diversify, and buy the total stock market (like VTI).  VTI holds about 3,500 public companies, with more money allocated to the companies that have more weight in the stock market.  And if VTI goes down, you know the entire U.S. stock market dropped.  Everyone will go through the same thing you're going through, which may also make it more tolerable.

I would switch to VTI first.  Later, you can decide about transferring to Vanguard, or staying at TD Ameritrade with $0/trade (same at Vanguard).  Diversifying seems more important, and then decide if you want to move the account to Vanguard.

PDXTabs

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Re: Question on ETF vs MF
« Reply #11 on: February 11, 2020, 09:55:52 AM »
Note some people like Dave Ramsey are good at helping people escape debt, but they're out of their element when it comes to investing.

Yes, The Simple Path to Wealth by J L Collins is pretty popular around here.

JetBlast

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Re: Question on ETF vs MF
« Reply #12 on: February 11, 2020, 10:48:09 AM »

I would suggest selling your single company pick and buying VTI.  Putting your entire retirement on the back of one company lacks diversification.  What if the coronavirus hit a Carnival cruise ship, instead of a Princess Cruises ship?  What if it got out of control, and the company was to blame?  Owning just one company means any risk to that company translates directly to your retirement portfolio.


I didnít read it as they only have one stock. I read it as an example of a stock they own for the shareholder discount that is offered. It sounded like they have others. Berkshire Hathaway is another that offers discounts to shareholders.

Also, Carnival Corp. owns Princess so theyíve already been hit by Coronavirus. That Holland America ship, MS Westerdam, that got turned away from three ports before finally docking in Thailand? Carnival owns that too, along with several other brands worldwide like Seabourn, Costa, and P&O.

Aggie1999

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Re: Question on ETF vs MF
« Reply #13 on: February 11, 2020, 12:34:42 PM »
If you are happy with TD Ameritrade then just leave that Roth account alone. Then open up another Roth account with Vanguard and buy VTSAX there. Or just buy VTI in the TD Ameritrade account as long as there are no trading fees. Either way is fine. If you have TD Ameritrade offices near you, it can be nice to have a local branch to take checks into instead of having to mail them to Vanguard (thinking things like a 401k to IRA, etc).

MustacheAndaHalf

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Re: Question on ETF vs MF
« Reply #14 on: February 12, 2020, 07:30:49 AM »

I would suggest selling your single company pick and buying VTI.  Putting your entire retirement on the back of one company lacks diversification.  What if the coronavirus hit a Carnival cruise ship, instead of a Princess Cruises ship?  What if it got out of control, and the company was to blame?  Owning just one company means any risk to that company translates directly to your retirement portfolio.


I didnít read it as they only have one stock. I read it as an example of a stock they own for the shareholder discount that is offered. It sounded like they have others. Berkshire Hathaway is another that offers discounts to shareholders.

Also, Carnival Corp. owns Princess so theyíve already been hit by Coronavirus. That Holland America ship, MS Westerdam, that got turned away from three ports before finally docking in Thailand? Carnival owns that too, along with several other brands worldwide like Seabourn, Costa, and P&O.
Oh, you're right - agreed on both points.  I assume it's not enough stocks to be diversified, though, especially compared to the ~3500 stocks in VTSAX / VTI.

Speaking of individual stocks, Carnival is now warning of a possible material impact if cruises in Asia are impacted until end of quarter.
https://www.prnewswire.com/news-releases/carnival-corporation--plc-update-on-financial-impact-of-coronavirus-301003693.html

dnmccoy

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Re: Question on ETF vs MF
« Reply #15 on: February 12, 2020, 11:47:04 AM »



Speaking of individual stocks, Carnival is now warning of a possible material impact if cruises in Asia are impacted until end of quarter.
https://www.prnewswire.com/news-releases/carnival-corporation--plc-update-on-financial-impact-of-coronavirus-301003693.html


Yeah Ive been watching. Im in for the long haul. My total market cost is right around $42 a share so Im not too worried yet. Since Ive owned it Ive cashed in over $300 in onboard credits and have 3 more sailings booked as of this moment. 25 years to retire so Ill hold it long for now
« Last Edit: February 12, 2020, 12:45:31 PM by dnmccoy »

JetBlast

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Re: Question on ETF vs MF
« Reply #16 on: February 12, 2020, 03:05:51 PM »



Speaking of individual stocks, Carnival is now warning of a possible material impact if cruises in Asia are impacted until end of quarter.
https://www.prnewswire.com/news-releases/carnival-corporation--plc-update-on-financial-impact-of-coronavirus-301003693.html


Yeah Ive been watching. Im in for the long haul. My total market cost is right around $42 a share so Im not too worried yet. Since Ive owned it Ive cashed in over $300 in onboard credits and have 3 more sailings booked as of this moment. 25 years to retire so Ill hold it long for now

Iíve been watching too. Weíve been on CCL lines three times and have a two week cruise booked for 2021 so the onboard credit would be nice. But the cruise business isnít a great one due to the cap ex requirements in buying and refurbishing ships, so itís got to be a great price for me to buy it over a company in an easier business. Even down here, CCL has to drop significantly for me to put in an order.

dnmccoy

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Re: Question on ETF vs MF
« Reply #17 on: February 12, 2020, 03:26:52 PM »
1st Qtr earnings are expected 3/24 and Imagine till drop some if/when they announce a loss due to the corona virus stuff. If it goes back down into the mid-low 30's Id be a buyer again. You dont have to own the stock until like a month away from sailing so youd have time for 2021. It has a nice dividend but there was talk they may lower it if the earnings arent good

MustacheAndaHalf

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Re: Question on ETF vs MF
« Reply #18 on: February 13, 2020, 11:25:36 PM »
In the last 12 months CCL lost -20% while the S&P 500 gained +25%.  That's the most dramatic, but over 3yr and 5yr time frames CCL has lost against the S&P 500.
https://www.morningstar.com/stocks/xnys/ccl/trailing-returns
https://www.morningstar.com/etfs/arcx/voo/quote

I hope you limit CCL's portion of your portfolio, because it's the opposite of diversification.