Author Topic: VSTMX or VTI  (Read 2801 times)

Derrian

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VSTMX or VTI
« on: April 18, 2015, 02:06:44 PM »
I'm interested in switching away from betterment and putting my funds into vanguards total stock market fund. I'm confused by the difference between Vanguard's total stock market index (VSTMX) and its EFT version (VTI).Since I won't meet the minimum, the expense ratio of VSTMX is 0.17 while the expense ratio of the ETF version is 0.05. My question is, if the product is the same, is there any reason to go with VTSMX and not VTI?

Indexer

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Re: VSTMX or VTI
« Reply #1 on: April 18, 2015, 02:48:13 PM »
To answer your question, yes, they are all the same thing.  Vanguard index funds are available in three ways to retail investors.

Investor shares:  VTSMX.  Exp ratio 0.17%.  Minimum investment: 3,000
Admiral shares: VTSAX.  Exp ratio 0.05%.  Minimum investment: 10,000
ETFs:  VTI  Exp ratio 0.05%.  Minimum investment: 1 share.

If you can meet the minimum you want VTSAX, the admiral share.  The admiral share and the ETF will have the same expense ratio, but with the ETF there is a spread since it trades on the exchange.  So all in costs the admiral share is likely going to be the best bet. 

JetBlast

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Re: VSTMX or VTI
« Reply #2 on: April 18, 2015, 10:51:31 PM »
The advantages to VTSMX would be not having to worry about the bid/ask spread, and the ability to purchase fractional shares. When you place an order to buy VTSMX (or VTSAX) you will get a price equivalent to the net asset value of the fund at the end of the trading day. All of the money will be invested.

With VTI you bid for shares like any regular stock, and the price you get is whatever you and the seller agree to. Depending on the price, this might or might not use up all your money. For example, if you want to invest $500 into VTI, but the price of a share is $60, you will buy 8 shares (8x60=$480) and have $20 cash left in your account. The advantage to VTI is the lower expense ratio.

The most you'd pay in extra fees in VTSMX is $12 per year, until you cross the $10,000 mark and convert to VTSAX.

Derrian

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Re: VSTMX or VTI
« Reply #3 on: April 19, 2015, 05:30:28 AM »
Awesome, this is exactly the info I was looking for. Thank you!