Does a "Sell to Buy" transaction on Vanguard incur tax?

[mustachianism_is_aredpill]

Vanguard often has two versions of the same fund that only have different minimum investment amounts. The one with the lower minimum has a higher expense ratio.

If I were to invest in say a fund with a $3k minimum, continue adding money to it monthly, then once I'm over $10k, do "sell to buy" to sell this fund and buy the same fund with a higher minimum ($10k) to get a lower expense ratio, will this transaction have any tax implications?

[jfer_rose]

I'm pretty sure Vanguard switches your funds from investor class to admiral funds automatically once you reach the $10,000 mark.

Check out the Vanguard website: https://personal.vanguard.com/us/insights/article/admiral-questions-112013

[ivyhedge]

I'm pretty sure Vanguard switches your funds from investor class to admiral funds automatically once you reach the $10,000 mark.

Check out the Vanguard website: https://personal.vanguard.com/us/insights/article/admiral-questions-112013

They do, although it can take a 1-2 quarters (varies). If you ring them, they'll queue it for a sooner conversion. It works the same in the other direction: have $12,000, redeem $2,500, switch down can take 1-2 quarters (their delay assumes average fund flows).

[SDREMNGR]

It also depends if the account is an ira acct or a taxable brokerage account.

[FrugalSpendthrift]

I just went through that switching from VFINX to VFIAX.  It was not a taxable transaction and it did not restart the long term / short term gains clock.

[kyleaaa]

Yes, a sell to buy transaction is a taxable event. You should NEVER sell investor shares to buy admiral shares. Instead, Vanguard will CONVERT your investor shares to admiral shares, which is NOT a taxable event. If in doubt, call Vanguard and have them do it for you. Never, ever just hit the sell button. I've heard of people doing this and Vanguard could probably do a better job of making the difference more clear.

Eventually, Vanguard will convert them automatically but it takes a while.

[Sunflower]

Both my Roth and Taxable account reached the $10,000 mark in the last 6 months and both times, the conversion was done within a week. I'm surprised to hear that it's taken much longer for others.

[mustachianism_is_aredpill]

Thanks for all the replies everyone. It really helped. I got started with investor class funds immediately, instead of waiting to build up $10k for the admiral class.

On another I couldn't remember the term "Admiral shares" when I posted the question so thanks for referencing that in your answers, to help future Mustachians.

[ivyhedge]

Our pleasure. Keep chatting up us!

[skyrefuge]

What's this "call Vanguard" stuff people were suggesting? Is it 1987? Everyone is posting to this forum via a web browser, and Vanguard has a website, so just do it via the website. It's likely faster, reduces miscommunication risk, and most importantly, allows us all to make more money (because it keeps Vanguard's costs low if they have to pay for fewer phone operators).

Instructions are here (along with a link to a PDF with screen shots of what to click on!):

https://personal.vanguard.com/us/insights/article/admiral-questions-112013

[kyleaaa]

What's this "call Vanguard" stuff people were suggesting? Is it 1987? Everyone is posting to this forum via a web browser, and Vanguard has a website, so just do it via the website. It's likely faster, reduces miscommunication risk, and most importantly, allows us all to make more money (because it keeps Vanguard's costs low if they have to pay for fewer phone operators).

Instructions are here (along with a link to a PDF with screen shots of what to click on!):

https://personal.vanguard.com/us/insights/article/admiral-questions-112013

I've heard of multiple people messing things up and having to shell out for capital gains taxes trying to do it online. Yeah, I'm shocked too because admiral conversions couldn't be simpler, but it is what it is. Better safe than sorry.