Confused about Vanguard fund types!

[SwordGuy]

Hi!

Thanks in advance for the assistance, I'm reading like crazy to understand investing in stocks and bonds.

Here's something I'm confused on.

Here are 3 Vanguard funds that appear to be variations on a theme.  But I don't understand the nature of the variation.

• VTI        Total Stock Market Exchange Traded Fund
  VTSAX   Total Stock Market Index Fund Admiral Shares
  VTSMX   Total Stock Market Index Fund Investor Shares

As far as I can tell, VTSAX and VTSMX are the same except I pay lower costs and they require a higher mininum starting balance.  If there is more, I'm not seeing it.

But I really don't understand the difference between an ETF and an Index Fund.

The ETFs have this verbiage on them that an net asset value when selling.
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I'm sure I'm not the only one who is confused.  And even if I am, I'm hoping to fix that shortly!

[KingCoin]

http://www.investopedia.com/ask/answers/09/mutual-fund-etf.asp#axzz2DONR3kQn

The practical difference for long term holders is going to be small.

[SwordGuy]

http://www.investopedia.com/ask/answers/09/mutual-fund-etf.asp#axzz2DONR3kQn

The practical difference for long term holders is going to be small.

I read the article, thanks!

I figured out how to tell which Vanguard funds are ETFs or Mutual Funds.   I haven't figured out how to tell which of the subtypes (in the article) that they are.

Or what that verbiage on the ETFs means...

[iamlindoro]

I read the article, thanks!

I figured out how to tell which Vanguard funds are ETFs or Mutual Funds.   I haven't figured out how to tell which of the subtypes (in the article) that they are.

Or what that verbiage on the ETFs means...

VTI, VTSMX and VTSAX are effectively the same fund (or perhaps more accurately, are different classes of the same underlying investment pool)-- They are holdings of the entire US Stock Market.  The difference between VTSMX and VTSAX are minimum investment and expense ratio.  VTSMX requires $3,000 to start, VTSAX requires a $10,000 investment.  VTSMX has a .18% expense ratio, VTSAX has a .06% expense ratio.  Lower is better and translates to substantially more money in your pocket over the course of 20-30 years of holding a fund.  So effectively, your reward for leaving more money in the fund is better returns because lower fees are collected.  VTI is a version of the fund offered through other brokers.  It's expense ratio is relatively low but you lose some of the advantages of getting VTSMX/VTSAX because you pay to make purchases (something you don't do on Vanguard Funds through Vanguard).

This thread may help you with the VTI-versus-VMSAX/VTSAX distinction:  http://gyroscopicinvesting.com/forum/index.php?PHPSESSID=d6ef0da5538c6d5e158c5a7b4a494ae0&topic=243.msg1871#msg1871

A good way to begin if you don't have the minimum to qualify for Admiral Funds is to get the Investor Shares (VTSMX) and when you hit $10K, you can switch to Admiral Shares with about two clicks on the Vanguard web site (assuming you use Vanguard to purchase your Vanguard Funds).

If you have specific verbiage questions we can probably help on that too.

[Kriegsspiel]

(assuming you use Vanguard to purchase your Vanguard Funds).

Which is a good idea.  Vanguard lets you trade their stuff commission free.