Broker that allows margin loans of VTSAX and similar funds (not ETFs)

[catccc]

Is there a broker that allows margin loans on Vanguard funds?  I have a taxable account with Vanguard in which I hold primarily VTSAX, some VFIAX, and a few other indexes.  I am interested in moving from Vanguard to a different broker to leverage these assets using margin loans.  I know margin loans can be tricky, but I plan to approach this very conservatively, with the goal of managing tax impact and keeping assets invested.

[MustacheAndaHalf]

Why do you limit yourself to only Vanguard mutual funds?

Vanguard ETFs provide equal or lower expense ratios.  iShares ETFs offer similar selection and expense ratios.

[catccc]

Most of my assets just happen to be in mutual funds, it's just what I started buying years ago, then continued to buy, and there didn't seem to be a compelling reason to change what I was doing.

In my recent limited experience with ETFs, (starting UTMA accounts for my kiddos), I found the ETFs annoying because of the whole share thing.  As soon as I had $3K I switched it over to VTSAX with minimal tax impact because it was just a few months of investing.  Could I get over than annoyance easily if it opens doors to strategic debt use?  Absolutely.

But the fact is in this moment, I hold a bunch of mutual funds.  If I want to switch I'll trigger a tax event, and it would be unfavorable for my tax situation.  LMK if I'm wrong, but you can't just swap VTSAX for VTI.  I can put future investments towards ETFs, but it will take a while to accrue balances I want to have to leverage margin loans.

[dandarc]

I believe you can convert Vanguard mutual funds to ETFs without triggering a tax event (but the reverse is not true). Vanguard has a unique structure where the ETFs are a share class within the same fund as the mutual fund.

In any event, looks to me like interactive brokers allows borrowing against mutual funds if that's your preference.

[dandarc]

details on "convert VTSAX to VTI" - not taxable if you hold shares at Vanguard. I go with VTSAX personally, but VTI is functionally equivalent.

https://investor.vanguard.com/etf/faqs

[catccc]

Thanks @dandarc , this is super helpful!  IDK now exactly how I got it in my head that I had to be in ETFs to move to a brokerage and access lower rate margin loans.

[catccc]

Took this from a bogleheads forum post in Nov 2020 by user the_isao:

Mutual funds are marginable, however:
- You may not be able to initiate a new margin debit immediately after transferring in securities. Transferring margin debt should work OK, however.
- Mutual funds can act as collateral for margin debt, but only 30 days post-purchase. ETFs do not generally have this restriction.
- Due to the above, buying mutual funds on margin is similar to making a cash withdrawal in terms of margin impact during the first 30 days. If you don't understand this, it's possible you could fail to meet maintenance margin and you will be liquidated. IB does not make margin calls and they say so on their website.

If you're going to trade on margin, or carry margin debt for any reason, use ETFs so none of these restrictions impact you. ETFs have several other advantages over mutual funds that I have posted about numerous times if you care to look at my post history.

I have to look into that 3rd statement, I think this doesn't apply to me because I'm not trying to buy securities with the margin loan, just use it for other things.  Anyway, food for thought as I try to exhaust research on margin loans before setting up any new accounts.