Author Topic: have VTSAX - considering VTI  (Read 657 times)

NWOutlier

  • Stubble
  • **
  • Posts: 115
  • Age: 52
  • Location: Seattle Area
have VTSAX - considering VTI
« on: March 13, 2020, 09:33:02 AM »
Hi everyone,

I have VTSAX in my ROTH IRA's and Taxable accounts.  I have been reading that it would be better to have VTI (ETF) in my taxable account.  VTI also offers a .03 expense where VTSAX is .04 expense.

Should I stop buying VTSAX in my taxable (leave what is there alone) and start buying VTI?

does this rule apply for ROTH?

Thanks in advance,

NWOutlier (Steve)

terran

  • Magnum Stache
  • ******
  • Posts: 3006
Re: have VTSAX - considering VTI
« Reply #1 on: March 13, 2020, 10:02:48 AM »
The ETF is better than mutual fund in taxable argument doesn't apply to Vanguard. This is because Vanguard holds a patent that lets it treat VTSAX as a share class of VTI (or something like that) which lets it flush capital gains out from VTSAX through VTI in the same way that other companies flush capital gains out from their ETFs. This means that Vanguard mutual funds and all ETFs tend to have lower (or no) realized capital gains compared to equivalent non-Vanguard mutual funds, which makes them more tax efficient.

The lower expense ratio would still apply, but it's such a small difference that I wouldn't worry about it, and make you decision based on how you want to trade.

NWOutlier

  • Stubble
  • **
  • Posts: 115
  • Age: 52
  • Location: Seattle Area
Re: have VTSAX - considering VTI
« Reply #2 on: March 13, 2020, 10:10:38 AM »
Ah!

I had no idea about that!

Ok - I agree the expense ration should not be a deciding factor, but one thing with this volatility is; the real time view I can get with VTI and possibly the real time buying opportunities I can get.. but I may be splitting hairs... my auto purchases each month seem to do well, and If I see a good price on VTSAX, I just make an order....

I made an order on 3/12/2020 early day recently and thought I would not get 3/12 price of $60.69, I assumed I would get EOB 3/13 price (today)... but I got it.. so the purchase delay sometimes bugs me with the 2-9% swings.

sehr

  • 5 O'Clock Shadow
  • *
  • Posts: 62
Re: have VTSAX - considering VTI
« Reply #3 on: March 13, 2020, 10:44:27 AM »
I've been investing in VTSAX the last week or two and kept catching the upswings so now I'm doing VTI. It's been nice to set a few 60 day limit orders and know that they'll buy automatically if they drop to the price I want.

For our ROTH IRAs, I've been buying a REIT index because of the tax advantages of having them in a ROTH. I'm by no means a great investor, but it's worth researching if you want something besides just stocks.

NWOutlier

  • Stubble
  • **
  • Posts: 115
  • Age: 52
  • Location: Seattle Area
Re: have VTSAX - considering VTI
« Reply #4 on: March 13, 2020, 10:47:38 AM »
I've been investing in VTSAX the last week or two and kept catching the upswings so now I'm doing VTI. It's been nice to set a few 60 day limit orders and know that they'll buy automatically if they drop to the price I want.

For our ROTH IRAs, I've been buying a REIT index because of the tax advantages of having them in a ROTH. I'm by no means a great investor, but it's worth researching if you want something besides just stocks.

I hear ya - I 've been considering buying either the vanguard VGSLX or VNQ (ETF)... in my ROTH... I won't need my ROTH till I'm 70 and keeping taxes simple while I'm old is good :)

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2942
Re: have VTSAX - considering VTI
« Reply #5 on: March 13, 2020, 10:49:58 AM »
If VTI makes you more comfortable with current market volatility, go with the ETF version.  ETFs can trade immediately on the market, and Vanguard's execution is good.  During Monday's open, I sent in limit orders to sell VTI, and it worked.  I even turned around and bought bonds before the market halt was called a few minutes after the open.

One word of caution: Robinhood crashed that day.  Vanguard did not.  Both charge $0/trade any ETF.
https://www.barrons.com/articles/robinhood-trading-app-goes-down-again-amid-stock-selloff-51583766133

Alternatepriorities

  • Pencil Stache
  • ****
  • Posts: 783
  • Age: 39
  • Location: Alaska
  • Engineer, explorer, investor
    • Alternate Priorities
Re: have VTSAX - considering VTI
« Reply #6 on: March 13, 2020, 10:52:00 AM »
The ETF is better than mutual fund in taxable argument doesn't apply to Vanguard. This is because Vanguard holds a patent that lets it treat VTSAX as a share class of VTI (or something like that) which lets it flush capital gains out from VTSAX through VTI in the same way that other companies flush capital gains out from their ETFs. This means that Vanguard mutual funds and all ETFs tend to have lower (or no) realized capital gains compared to equivalent non-Vanguard mutual funds, which makes them more tax efficient.

The lower expense ratio would still apply, but it's such a small difference that I wouldn't worry about it, and make you decision based on how you want to trade.

Thanks for writing our the clearest explanation of this I have seen yet. When I went looking for the answer a few weeks ago it took reading multiple explanations before it finally made sense.

sehr

  • 5 O'Clock Shadow
  • *
  • Posts: 62
Re: have VTSAX - considering VTI
« Reply #7 on: March 13, 2020, 11:10:03 AM »
I've been investing in VTSAX the last week or two and kept catching the upswings so now I'm doing VTI. It's been nice to set a few 60 day limit orders and know that they'll buy automatically if they drop to the price I want.

For our ROTH IRAs, I've been buying a REIT index because of the tax advantages of having them in a ROTH. I'm by no means a great investor, but it's worth researching if you want something besides just stocks.

I hear ya - I 've been considering buying either the vanguard VGSLX or VNQ (ETF)... in my ROTH... I won't need my ROTH till I'm 70 and keeping taxes simple while I'm old is good :)



Yes, I've purchased a few thousand in VGSLX and will probably now do VNQ. I also am appreciating terran's explanation. I learn a lot here.

CrankAddict

  • 5 O'Clock Shadow
  • *
  • Posts: 55
  • Age: 46
Re: have VTSAX - considering VTI
« Reply #8 on: March 13, 2020, 05:14:39 PM »

Should I stop buying VTSAX in my taxable (leave what is there alone) and start buying VTI?


There are some other "usage" considerations besides the return rate.  For example, in an individual 401k account you can only hold VTSAX, not VTI.  In a taxable account you can hold either, but VTSAX can't be sold and re-bought within 30 days whereas VTI can be traded as much as you like.  If both are equally tax efficient, the ETF is slightly lower cost, and it can be traded with less restrictions, it seems like a preferable choice for a taxable account. 

Fwiw, I've also read that if you're with Vanguard directly (not just holding their funds at a different brokerage) you can convert your existing VTSAX to VTI without it triggering a taxable event - it just directly converts over.