Just Made Vanguard Account -- Need help buying VTI

[josh4trunks]

Hi everyone,
I just registered for Vanguard last night and started a withdrawal of $5,500 from my bank account as my 2016 traditional IRA contribution. Once I get through this process I plan to do the same for my wife.
I see this will go into some type of Money Market Fund, what sounds like a holding spot for leftover funds. I'm still waiting for the funds to be available and had some questions.


I will only have $5,500 so not enough for VTSAX. I plan on using VTI instead but am a bit confused about what I do to buy ETFs.
I browsed to the page to "Trade an ETF or stock", and am trying to figure out what to put for 'Order type' & 'Duration'. I just want to make sure I don't screw things up.
* I see the current value is $119.93, what should I put for 'Order Type' and 'Duration'
* What should I do with leftover funds (around $100)
* If I added another $5,500 in Roth IRA funds for 2017 (as I won't qualify for the deduction in 2017) can I combine these with my tax deferred amount to buy VTSAX?

Thanks for the help!

[neo von retorch]

Actually you can just buy VTSMX. It's the same as VTSAX, but with a little higher expense ratio. However, at which point that you reach $10,000 in total invested in VTSMX, it will actually get upgraded to VTSAX shares automatically.

You can pretty much put the whole $5500 into the fund, rather than worry about rounding issues with VTI.

You cannot own shares across accounts, though. So it does seem like, for now, the $5500 in your tIRA will remain VTSMX, and initially the $5500 in your new Roth IRA will be VTSMX. (I do not think Vanguard "adds up" the collective VTSMX shares and upgrades you.)

[josh4trunks]

Actually you can just buy VTSMX. It's the same as VTSAX, but with a little higher expense ratio. However, at which point that you reach $10,000 in total invested in VTSMX, it will actually get upgraded to VTSAX shares automatically.

Ohh sweet, didn't know about VTSMX. Ok, I'll probably go with that.

So I guess I'm still wondering if my traditional balance is separate from my Roth balance or if those are combined? If they are combined maybe I'll hurry up and fund $4500 in Roth.

[Proud Foot]

If you are wanting to get purchased right now then chose "Market Order" for the market type.  You won't need to select a duration then.  With $5,500 and a current price of $119.93 you will want to chose to by 45 shares and then the rest will be left in the money market fund. With those funds you will need to either find another ETF with a price less than what you have left over, or just leave it in the money market.

For the $5,500 for 2017 you cannot combine the two to purchase VTSAX as the $10,000 threshold for the Admiral shares is per account. Do you know if you will still be eligible for the Roth in 2018?  If so I would suggest VTSMX which will convert to VTSAX after you make your 2018 contribution and invest in VTSMX. (Obviously this assumes the market doesn't tank by that time and your contributions will make the total value greater than $10,000)

[josh4trunks]

If you are wanting to get purchased right now then chose "Market Order" for the market type.  You won't need to select a duration then.  With $5,500 and a current price of $119.93 you will want to chose to by 45 shares and then the rest will be left in the money market fund. With those funds you will need to either find another ETF with a price less than what you have left over, or just leave it in the money market.

For the $5,500 for 2017 you cannot combine the two to purchase VTSAX as the $10,000 threshold for the Admiral shares is per account. Do you know if you will still be eligible for the Roth in 2018?  If so I would suggest VTSMX which will convert to VTSAX after you make your 2018 contribution and invest in VTSMX. (Obviously this assumes the market doesn't tank by that time and your contributions will make the total value greater than $10,000)

I don't ever plan on making more than the Roth limit, lol. I may be eligible for the traditional deduction again in the future if my wife and I take time off (like for child birth), but otherwise we make too much.
Ok so I'll think I'll weigh my options a bit and decide once the money is available.

[NoStacheOhio]

Do you have retirement plans at work? What do those look like?

[josh4trunks]

Do you have retirement plans at work? What do those look like?

I have a 457b and 401k, also a government pension that takes about 7%.
My wife has a 403b with a 1/4 match of first 6%.

I plan on maxing all of these this year.

[josh4trunks]

wow, I think my funds transfer is still pending but I think I was able to buy VTI.
The balance went up $5 in the few minutes since I refreshed the page. My plan at my work only updates once a day on weekdays, this is a bit scary lol.

[Aggie1999]

Yep, Vanguard will buy the shares even with the bank transfer pending. Note that you are saving some money on ER with the individual ETF shares vs the fund. Probably not enough to worry about assuming you are going to get to admiral level in a year but if it interest you then no reason not to buy the ETF shares.

[josh4trunks]

Yep, Vanguard will buy the shares even with the bank transfer pending. Note that you are saving some money on ER with the individual ETF shares vs the fund. Probably not enough to worry about assuming you are going to get to admiral level in a year but if it interest you then no reason not to buy the ETF shares.

Makes sense. I went ahead and bought VTI, then a single share of VB. If I do get another deductible opportunity to contribute to my traditional IRA I'll do that, and move all the funds over to VTSAX. Thanks for everyone's help, glad to know VTSMX was an option even though I didn't go with it today.

[Pipboy]

Yep, Vanguard will buy the shares even with the bank transfer pending. Note that you are saving some money on ER with the individual ETF shares vs the fund. Probably not enough to worry about assuming you are going to get to admiral level in a year but if it interest you then no reason not to buy the ETF shares.

Makes sense. I went ahead and bought VTI, then a single share of VB. If I do get another deductible opportunity to contribute to my traditional IRA I'll do that, and move all the funds over to VTSAX. Thanks for everyone's help, glad to know VTSMX was an option even though I didn't go with it today.

Be advised that you can't move VTI over to VTSAX. You have to sell VTI, which will be a taxable event, then buy VTSAX. You can't just convert an ETF into its mutual fund equivalent (though Vanguard does let you do the reverse). In your situation I would stay with the mutual fund and not deal with the ETF version.

[neo von retorch]

Actually, inside a tIRA, he can sell VTI without any taxable event. But he couldn't get the admiral shares without getting his tIRA balance to $10k. Maybe at some point in the future, i.e. rolls over a 401k from a previous employer, or qualifies for tIRA contributions again somehow.

[Pipboy]

Good point, I missed the tIRA part.

[BiotechGuy]

Most people who trade a lot would never buy with a market order. Use a limit order to pick your price. It guarantees purchase at your specified price.  If it's 119.93 at that moment while the market is open, use a limit order of 119.85 or 119.75 that expires end of day and you can more often than not grab a price lower than the closing price the suckers buying mutual funds have to accept :-)

[seattlecyclone]

Use a limit order to pick your price. It guarantees purchase at your specified price.

More precisely, a limit order ensures that your order will not execute lower than the specified price. There is no guarantee that the limit order will execute at all, and you may wish to monitor market conditions throughout the day to ensure that your limit price is still reasonable and likely to be hit before the end of the trading day.

In practice, a market order is probably fine for anything with as high of a trading volume as VTI. Limit orders become more important with individual stocks, especially smaller companies, where trading volumes are lower and market orders thus have a higher likelihood of executing at an unreasonably low price.