Author Topic: Vanguard Funds when Admirals aren't available  (Read 2892 times)

TooMuchGlass

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Vanguard Funds when Admirals aren't available
« on: March 06, 2017, 06:40:13 PM »
My wife (27) and I (28) just set up our 2016 tIRAs through Vanguard! Naturally, we feel amazing.

As soon as our money clears, we want to drop the 5500 each into a fund or 2 and let it ride. We plan to FIRE in like 10 years. I'm looking for the best fund for that. As I understand it, Admirals aren't available until later in the year, once we reach over 10k in an account.

So, while we plan to put another 5500 in around October, what should we have our money in until then?

Thanks all.

tarheeldan

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Re: Vanguard Funds when Admirals aren't available
« Reply #1 on: March 06, 2017, 06:50:20 PM »
You could start with Investor shares and then convert to Admiral when the balance is high enough

Agg97

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Re: Vanguard Funds when Admirals aren't available
« Reply #2 on: March 06, 2017, 06:55:17 PM »
You could start with Investor shares and then convert to Admiral when the balance is high enough
Or just buy the equivalent ETFs.  They have similar expense ratios as the Admiral Funds, and similar returns.


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tarheeldan

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Re: Vanguard Funds when Admirals aren't available
« Reply #3 on: March 06, 2017, 06:57:00 PM »
You could start with Investor shares and then convert to Admiral when the balance is high enough
Or just buy the equivalent ETFs.  They have similar expense ratios as the Admiral Funds, and similar returns.


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That's true, since it's an IRA there's no concern about taxes when later selling the ETFs and buying Admiral shares.

secondcor521

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Re: Vanguard Funds when Admirals aren't available
« Reply #4 on: March 06, 2017, 07:04:52 PM »
As you note, since it's in an IRA in this case it doesn't matter, but just as an FYI, the conversion from investor shares to admiral shares is both zero transaction cost and no tax impact, even in a taxable account.

Also FYI, they'll convert you to admiral shares automatically once you reach the required investment amount, although they do it in a lazy fashion.  So if you want to be OCD about it and call up or go on the website you'll get it done more quickly that way.

Indexer

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Re: Vanguard Funds when Admirals aren't available
« Reply #5 on: March 07, 2017, 05:34:46 AM »
As it has been said, just use the ETFs for now and then switch in the future. They cost the same thing as the admiral shares.

Riff

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Re: Vanguard Funds when Admirals aren't available
« Reply #6 on: March 07, 2017, 07:29:32 AM »
When we started, we just did the investor shares: VTSMX.  Switched them over to VTSAX after we hit $10k.

SeattleCPA

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Re: Vanguard Funds when Admirals aren't available
« Reply #7 on: March 07, 2017, 07:46:30 AM »
It might also be helpful to consider the "extra" expense you're paying because you're in investor class rather than admiral class shares...

Isn't it around $2 a year on that $5500? (E.g., .05% vs. 09%)

This may be, as others note, a problem that goes away before it becomes significant.

TooMuchGlass

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Re: Vanguard Funds when Admirals aren't available
« Reply #8 on: March 07, 2017, 04:38:04 PM »
The more responses I read, the more i realize my question was a bit unclear. Thanks all for chiming in.

What I really was after was what one or two names of funds should I dump our money into. I know VTSAX, because everyone references it constantly as the best decision for just riding the market. I want to know what fund that is available to me would do the same thing.

Riff, your response was actually what I was looking for. Others, thanks so much. I learned stuff I didn't know I didn't know.

TooMuchGlass

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Re: Vanguard Funds when Admirals aren't available
« Reply #9 on: March 07, 2017, 04:40:17 PM »
I guess I should ask it this way:

What one fund should I put my money into for now, I really don't mind lots of risk because I think it will do well, Admiral is right around the corner, and this is not enough money that losing it would break us.

jinga nation

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Re: Vanguard Funds when Admirals aren't available
« Reply #10 on: March 08, 2017, 07:38:30 AM »
The more responses I read, the more i realize my question was a bit unclear. Thanks all for chiming in.

What I really was after was what one or two names of funds should I dump our money into. I know VTSAX, because everyone references it constantly as the best decision for just riding the market. I want to know what fund that is available to me would do the same thing.

Riff, your response was actually what I was looking for. Others, thanks so much. I learned stuff I didn't know I didn't know.

If you go to https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT

At the top you'll see links for the equivalent Investor Shares (VTSMX) and ETF (VTI).

When your VTSMX holdings go over $10,000, Vanguard converts it to VTSAX so you don't have to do anything else except keep on contributing. :-)
(At least that's what they do to any of my Investor series fund holdings.)

Car Jack

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Re: Vanguard Funds when Admirals aren't available
« Reply #11 on: March 08, 2017, 07:38:39 AM »
Just put it into VTI (ETF) and leave it there.  There's no advantage to having a mutual fund over an ETF.  The lower cost of an ETF at a low investment amount is an advantage.

Cycling Stache

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Re: Vanguard Funds when Admirals aren't available
« Reply #12 on: March 08, 2017, 10:17:06 AM »
Just put it into VTI (ETF) and leave it there.  There's no advantage to having a mutual fund over an ETF.  The lower cost of an ETF at a low investment amount is an advantage.

Or really, buy VTSMX until you get to $10,000, at which point you switch (or it automatically switches) to VTSAX.

Sometimes, a little math is needed.  The expense ratio is .16% versus .05%.  On a $5,000 balance, that's a difference of . . . wait for it . . . $5.50.

If you're saving a lot, you're going to pay the extra $5.50 for a year or so.  And if it takes you several years of paying the $5.50 before you get to VTSAX, then the question of how your investing your money is not all that significant to your overall financial picture.   

Proud Foot

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Re: Vanguard Funds when Admirals aren't available
« Reply #13 on: March 08, 2017, 12:23:32 PM »
Just put it into VTI (ETF) and leave it there.  There's no advantage to having a mutual fund over an ETF.  The lower cost of an ETF at a low investment amount is an advantage.

Or really, buy VTSMX until you get to $10,000, at which point you switch (or it automatically switches) to VTSAX.

Sometimes, a little math is needed.  The expense ratio is .16% versus .05%.  On a $5,000 balance, that's a difference of . . . wait for it . . . $5.50.

If you're saving a lot, you're going to pay the extra $5.50 for a year or so.  And if it takes you several years of paying the $5.50 before you get to VTSAX, then the question of how your investing your money is not all that significant to your overall financial picture.

Second what Cycling Stache said.  The difference in the ER is minimal if you are planning on continuing to contribute and will reach $10,000 in a short time period.  In addition to the math on the ER he mentioned, there will also be a difference on total returns.  Since you cannot purchase fractions of shares of an ETF your $5,500 will end up only being $5,479.65 invested (45 shares @ 121.77 when I looked) whereas VTSMX will be $5,500 invested.  Results in a small difference of returns in the short term but will more than make up the difference in ER over a longer term.