Vanguard index funds - Admiral Shares now?

[Goatee Joe]

For you investing gurus out there, can I get your take on this?  I want to invest in a Vanguard total stock market index fund.  In my case, the choice is fairly simple.  Either:

VTSMX (Total Stock Market Fund, Investor Shares):  $3,000 minimum investment, 0.18% expense ratio
or
VTSAX (Total Stock Market Fund, Admiral Shares):  $10,000 minimum investment, 0.06% expense ratio

Here's my question:  would it be more advantageous if I simply dump $10K from savings into the Admiral Shares fund, in order to immediately take advantage of the lower expenses?  Or do I start with the Investor Shares fund, then add to it over a period of time (maybe 6 months or a year), in order to lessen the potentially bad move of dumping money into an overvalued bull market?  I believe you can convert to the lower expenses Admiral version for no extra charge once you reach $10K mark in the VTSMX account.

Either way has its benefits and drawbacks, as I see it.  Am I framing this correctly?  I've got the $10K in cash sitting here basically wasting away in savings, ready to pull the trigger at any time, and I've narrowed it down to these funds, but I want to think about investing strategy before I go forward with it.

[michaelrecycles]

Don't worry about the lower expenses. The difference is $12 over the course of the year.

The tougher part of this is whether the market is overvalued, and whether that should alter your plan. I struggled with this too. I'm already in Admiral shares, but I am trying to figure out whether I want to invest my full 2013 Roth IRA contribution as soon as possible or throughout the year. All the noise about how well stocks are doing made me nervous about the ASAP approach.

Then I remembered that my time horizon is longer than 30 years, and that timing the market is a fool's errand. I'm going ASAP. That doesn't mean lump sum for me, since I don't have all $5500 ready to go.  I've set weekly automatic buys for a short period of time as the paychecks come in.

Also, the funds pay a quarterly dividend, so that is one more reason to invest sooner.

[icefr]

You have to see these not as separate funds, but the same fund. For example, the expenses on $10,000 at 0.06% is $6. The expenses on $10,000 at 0.18% is $18. That's a $12 difference for one year.

If you are only comfortable with putting $3,000 into the stock market right now, then do that. If it's $10,000, then do that. Or anywhere in between. These funds are the same thing, just one of them is marginally cheaper.

At this point, it's all about managing your risk appetite. Good luck!

[chucklesmcgee]

Odds are that you'll come out ahead putting your money in the market sooner than later.

[Spork]

I believe you can convert to the lower expenses Admiral version for no extra charge once you reach $10K mark in the VTSMX account.

My experience with Vanguard is that the funds automagically convert.  I can't say that always happens with everyone... but it has happened with mine.

[Fyction]

I am in the same boat wondering about investing today vs. waiting for a fallout. I have a small amount of VTSMX already but have a chunk set aside to get into VTSAX. I just can't convince myself to buy now when the market is literally at a 5 year high!

[Spork]

so buy some now and some later.... It's not all-or-nothing.  Even a couple of hundred bucks a month ends up being serious change over the years.  There's no transaction fee.  Dollar cost average that sucker.

[JamesL]

I hate giving advice and then seeing it turn sour, but for me personally, I'm putting in all I can into the stocks, and if I were in your position I'd do it too. But I can leave it in there for 30 years if I need to so it's all dependent on your position.

[grantmeaname]

I am in the same boat wondering about investing today vs. waiting for a fallout. I have a small amount of VTSMX already but have a chunk set aside to get into VTSAX. I just can't convince myself to buy now when the market is literally at a 5 year high!

If you don't think the market is going to go up, don't buy stocks, and good luck retiring. If you think the market is going to go up, buy stocks as soon as possible.

[jrhampt]

Yes, the market is at a 5 year high...but it took 5 years to get back to where it was back in 2008.  So you could argue that it still has 5 years of growth to make up for, I guess.  Regardless, however many months that 10k is sitting around not earning any dividends is something I'd probably be more concerned about.