Author Topic: VTSAX or VTI?  (Read 3920 times)

Shane

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VTSAX or VTI?
« on: November 27, 2015, 02:31:49 PM »
What's the difference between owning VTSAX and VTI? VTSAX charges .05% expenses/year. If I put the same amount of money into VTI, I'm assuming I'll still pay the underlying .05% ER of the fund, and then on top of that I'll have to pay whatever buy/sell fees my brokerage charges me. Right?

So, I just want to confirm, its cheaper to own it as VTSAX, though Vanguard, than it would be to buy it as an ETF? That's what I'm assuming. I just want to make sure I understand correctly.

MDM

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Re: VTSAX or VTI?
« Reply #1 on: November 27, 2015, 02:40:23 PM »
What's the difference between owning VTSAX and VTI? VTSAX charges .05% expenses/year. If I put the same amount of money into VTI, I'm assuming I'll still pay the underlying .05% ER of the fund, and then on top of that I'll have to pay whatever buy/sell fees my brokerage charges me. Right?

So, I just want to confirm, its cheaper to own it as VTSAX, though Vanguard, than it would be to buy it as an ETF? That's what I'm assuming. I just want to make sure I understand correctly.

Always good to check assumptions.  In this case the above assumption is not true.  See https://www.bogleheads.org/forum/viewtopic.php?f=1&t=116581 and https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds.

Shane

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Re: VTSAX or VTI?
« Reply #2 on: November 27, 2015, 10:35:25 PM »
Thanks MDM. The ETF vs. MF Wiki linked in the BHs thread was especially helpful.

jim555

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Re: VTSAX or VTI?
« Reply #3 on: November 28, 2015, 12:33:08 AM »
I like ETFs over open ended funds because they allow intra day trading not just end of day pricing.

aj76er

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Re: VTSAX or VTI?
« Reply #4 on: November 30, 2015, 12:00:19 AM »
Just a few subtle points (which you may have already discovered from bogleheads):
1. You pay the bid/ask spread when buying/selling ETF's.  Thus, there is an extra "hidden" fee to trading ETF's that doesn't exist with Mutual Funds.  For heavily traded ETF's (i.e. those with high daily volumes), the bid/ask spreads are very small; but be careful of ETF's with low volumes.  VTI should be fine.  Then again, you could think of this "hidden" fee as what you pay for more flexible buy/sell features (e.g. limit orders, market orders, etc..).
2. Depending on your broker, you may not be able to do automatic, periodic purchases of ETFs.  Thus, mutual funds may provide an easier time for establishing a "set and forget" automatic contribution (for DCA strategy).
3. Along the same lines as #2, you may not be able to automatically deposit dividends into an external account (but instead only a "sweep" account, like a money market fund).  Perhaps that's okay, but perhaps not what you want :).
4. With Vanguard, you can convert an admiral class mutual fund (like VTSAX) into it's ETF equivalent (like VTI). Note, you may have to have your funds invested directly with Vanguard to be able to do this.

So, the bottom line is ... go with ETFs if:
1. you want the extra flexibility around buying/selling (i.e. the ability to do intra trading-day orders, instead of only end-of-day order at NAV)
2. you are investing a lump sum and don't have enough for admiral class shares (since ETFs give you admiral class fees at any quantity).

Otherwise, you should probably go with Mutual funds.  If you are using Vanguard directly, and you change your mind later, then you can always convert existing funds you own into ETF equivalents.

If you are unsure about any of the above points, just go with the Mutual funds :)

Shane

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Re: VTSAX or VTI?
« Reply #5 on: December 01, 2015, 12:16:34 AM »
Just a few subtle points (which you may have already discovered from bogleheads):
1. You pay the bid/ask spread when buying/selling ETF's.  Thus, there is an extra "hidden" fee to trading ETF's that doesn't exist with Mutual Funds.  For heavily traded ETF's (i.e. those with high daily volumes), the bid/ask spreads are very small; but be careful of ETF's with low volumes.  VTI should be fine.  Then again, you could think of this "hidden" fee as what you pay for more flexible buy/sell features (e.g. limit orders, market orders, etc..).
2. Depending on your broker, you may not be able to do automatic, periodic purchases of ETFs.  Thus, mutual funds may provide an easier time for establishing a "set and forget" automatic contribution (for DCA strategy).
3. Along the same lines as #2, you may not be able to automatically deposit dividends into an external account (but instead only a "sweep" account, like a money market fund).  Perhaps that's okay, but perhaps not what you want :).
4. With Vanguard, you can convert an admiral class mutual fund (like VTSAX) into it's ETF equivalent (like VTI). Note, you may have to have your funds invested directly with Vanguard to be able to do this.

So, the bottom line is ... go with ETFs if:
1. you want the extra flexibility around buying/selling (i.e. the ability to do intra trading-day orders, instead of only end-of-day order at NAV)
2. you are investing a lump sum and don't have enough for admiral class shares (since ETFs give you admiral class fees at any quantity).

Otherwise, you should probably go with Mutual funds.  If you are using Vanguard directly, and you change your mind later, then you can always convert existing funds you own into ETF equivalents.

If you are unsure about any of the above points, just go with the Mutual funds :)

Thanks. That's what we're doing already. I just wanted to be sure that I wasn't missing out on something with ETFs. It sounds like I'm not. In my case, buying the mutual funds directly from Vanguard seems to make the most sense.