Author Topic: VTI, VTSMX, VTSAX  (Read 14590 times)

Kjmiller1984

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VTI, VTSMX, VTSAX
« on: May 15, 2015, 10:44:22 AM »
I am pretty aware of the differences between the different options here,

VTI = ETF, no minimum .05% fees
VTSMX = mutual fund, 3k minimum, .17% fees
VTSAX = mutual fund admiral shares, 10k minimum, .05% fees.

My questions are
1. Right now i dont have 10 or even 3k to invest all at one time. Should i start buying VTI and just run with it, or should i wait, save up the money in a savings account and then buy vtsmx when i have 3k?
2. If i buy VTI can i set it up through Vanguard to have the dividends automatically re-invested?
3. If i buy VIT when i hit 3k or 10k can i transfer it to VTSMX or VTAX without any penalties?

I really need some help figuring out where to go, I feel like im losing ground in investing by not doing anything.

Pooplips

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Re: VTI, VTSMX, VTSAX
« Reply #1 on: May 15, 2015, 10:52:07 AM »
1)Buy VTI
2)Yes you can. Thats what I do.
3)Yes, through Vanguard its free.

tdogz

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Re: VTI, VTSMX, VTSAX
« Reply #2 on: May 15, 2015, 10:57:16 AM »
I believe that Vanguard has a minimum deposit to open a brokerage account (needed to buy/sell ETFs). I'm not sure what the minimum is though.

An important thing to keep in mind is that you can only buy whole shares of an ETF, not fractional shares. So, if you don't have enough to meet the $3,000 mutual fund minimum, then your shares of VTI aren't going to produce enough dividends to be reinvested, so that money will just sit in your money market fund until you have enough to buy another share of VTI.

I would recommend buying into the 2060 Target Date Fund (or whichever you prefer). Minimum buy-in is $1,000 to start and you can automatically reinvest the dividends and capital gains. When you reach $3,000 or $10,000, you can then think of investing in other funds. With the small amount of money you are currently investing, the difference between the .05 ER of VTI and the .18 ER of a Target Date fund is $1.30/yr (on $1,000).

Interest Compound

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Re: VTI, VTSMX, VTSAX
« Reply #3 on: May 15, 2015, 11:59:10 AM »
1)Buy VTI
2)Yes you can. Thats what I do.
3)Yes, through Vanguard its free.

Regarding #3.  Vanguard might not charge if you sell VTI and buy VTSMX, but the gains will still be taxed.  Besides that, this advice is spot on.  Buy VTI, and keep buying until you have $3k, then either convert (paying taxes on the gains), or stick with VTI for the long haul.  Personally, I'd convert, since mutual funds are much less hassle.

Interest Compound

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Re: VTI, VTSMX, VTSAX
« Reply #4 on: May 15, 2015, 12:00:57 PM »
I would recommend buying into the 2060 Target Date Fund (or whichever you prefer).

This is probably the best way forward for most people.  Put your money in a Target Date fund, based on your age.  You won't have to worry about making any decisions, so you can focus on what matters, increasing your savings rate, and earning more money.

boognish

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Re: VTI, VTSMX, VTSAX
« Reply #5 on: May 15, 2015, 12:26:26 PM »
1)Buy VTI
2)Yes you can. Thats what I do.
3)Yes, through Vanguard its free.

Regarding #3.  Vanguard might not charge if you sell VTI and buy VTSMX, but the gains will still be taxed.  Besides that, this advice is spot on.  Buy VTI, and keep buying until you have $3k, then either convert (paying taxes on the gains), or stick with VTI for the long haul.  Personally, I'd convert, since mutual funds are much less hassle.
How so? Taxes?

I'm in a similar boat as OP and recently bought a few ETF shares.

rugorak

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Re: VTI, VTSMX, VTSAX
« Reply #6 on: May 15, 2015, 12:38:46 PM »
I did VTI with my taxable investment for the reason that I didn't have 10k. You need 3k to open a brokerage account with Vanguard. So since you stated you don't have 3k you would need to do savings for the time being or do like one other poster suggested and put into a fund that has a 1k minimum. If you wait until you have 3k then the choice is just on how you like to work. If you don't mind having to buy full shares go with VTI for the lower expense ratio. If you prefer to purchase in fixed amounts of money then go with the mutual fund and convert to VTSAX as soon as you can.

Personally I preferred to wait until I had 3k+ and went into VTI. I like to buy in amount of shares for ease of personally knowing my gains on shares. But they keep track of that for tax purposes now (they didn't used to) so it really is all personal preference.

And given you don't have that much right now I wouldn't be too overly concerned with investing. How much can you save a month? And how much of an emergency fund do you have? I do like the 3-6 months in cash (high yield savings account) until your investments are large enough you could afford to sell them in a down market without worry.

zataks

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Re: VTI, VTSMX, VTSAX
« Reply #7 on: May 15, 2015, 12:46:33 PM »
I started a Vanguard account with $1000 and bought 9 shares of VTI in January.  I'm partial to the ETF for the lower expense ratio with no minimum investment. 

I think VXUS might be next for me.

forummm

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Re: VTI, VTSMX, VTSAX
« Reply #8 on: May 15, 2015, 12:47:01 PM »
Vanguard says you need $3k to open a brokerage account (needed for ETF purchases). Someone on the forum said that they recently opened one with only $1k. So who knows what will happen if you try to open one with less than $3k.

You can't "convert" VTI to VTSAX. You have to sell VTI and then buy VTSAX. And you will get a capital gain/loss when you do that. You can convert VTSAX to VTI without a taxable event, but not the other way around.

zataks

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Re: VTI, VTSMX, VTSAX
« Reply #9 on: May 15, 2015, 12:51:12 PM »
https://investor.vanguard.com/investing/why-vanguard

See "Costs, fees, & minimums"

$1000 is the stated required amount to open an account.  I say "stated" because I'm suspect of what would happen if you tried starting with less.

tb43

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Re: VTI, VTSMX, VTSAX
« Reply #10 on: May 15, 2015, 12:52:13 PM »
Similar question for me...the admiral shares are appealing to me since I can set up auto investing and have the same expense ratio as the etf.

I will be investing in a taxable account also, and may need to access the money every few years. What's the deal with the selling/buying restrictions? It seems like the mutual fund was a better choice until I read that I can't rebuy the fund for 60 days. So if you use 10k for a car let's say, you can't contribute to that fund until 2 months pass by?

In that case ETFs may be a good choice for any money not being used for retirement?

tdogz

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Re: VTI, VTSMX, VTSAX
« Reply #11 on: May 15, 2015, 01:01:09 PM »
... It seems like the mutual fund was a better choice until I read that I can't rebuy the fund for 60 days. So if you use 10k for a car let's say, you can't contribute to that fund until 2 months pass by? ...
If I remember correctly there is a loophole. Something like you can't buy again within 60 days by internet or phone, but you can mail a check. Something like that.
An alternative is to invest new money in a highly correlated fund for those 60 days (like S&P500 v. Total Market), then transfer it on day 61.

forummm

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Re: VTI, VTSMX, VTSAX
« Reply #12 on: May 15, 2015, 02:38:27 PM »
... It seems like the mutual fund was a better choice until I read that I can't rebuy the fund for 60 days. So if you use 10k for a car let's say, you can't contribute to that fund until 2 months pass by? ...
If I remember correctly there is a loophole. Something like you can't buy again within 60 days by internet or phone, but you can mail a check. Something like that.
An alternative is to invest new money in a highly correlated fund for those 60 days (like S&P500 v. Total Market), then transfer it on day 61.

Yes, there are workarounds. You could also just buy VTI and then sell it for VTSAX after 60 days. You could also buy 80% VFIAX and 20% VEXAX (=100% VTSAX) instead.

Jack

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Re: VTI, VTSMX, VTSAX
« Reply #13 on: May 15, 2015, 02:50:27 PM »
Personally, I'd convert, since mutual funds are much less hassle.
How so? Taxes?

I'm in a similar boat as OP and recently bought a few ETF shares.

I'm curious about this too. I bought VTSMX (and then eventually converted to VTSAX) back when I started investing because I thought it was better than VTI for some reason, but for the life of me I can't remember what that reason was.

Did there used to be fees for Vanguard brokerage accounts, or something?
Did VTI used to have a higher expense ratio?
Did I (incomprehensibly) care so much about wanting to be able to buy fractional shares that I was willing to accept the higher expense ratio of VTSMX?

I have no idea.

At this point, as far as I can tell, VTI vs VTSAX seems like a wash. Since I already have VTSAX, is there any reason to convert to VTI?

zataks

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Re: VTI, VTSMX, VTSAX
« Reply #14 on: May 15, 2015, 03:11:17 PM »

Interest Compound

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Re: VTI, VTSMX, VTSAX
« Reply #15 on: May 15, 2015, 03:25:34 PM »
1)Buy VTI
2)Yes you can. Thats what I do.
3)Yes, through Vanguard its free.

Regarding #3.  Vanguard might not charge if you sell VTI and buy VTSMX, but the gains will still be taxed.  Besides that, this advice is spot on.  Buy VTI, and keep buying until you have $3k, then either convert (paying taxes on the gains), or stick with VTI for the long haul.  Personally, I'd convert, since mutual funds are much less hassle.
How so? Taxes?

I'm in a similar boat as OP and recently bought a few ETF shares.

My apologies, my use of the term "convert" was very loose.  As Forummm said above, you can't "convert".  You can sell VTI, pay taxes on the gains, then buy VTSMX.

tdogz

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Re: VTI, VTSMX, VTSAX
« Reply #16 on: May 15, 2015, 03:37:41 PM »
1)Buy VTI
2)Yes you can. Thats what I do.
3)Yes, through Vanguard its free.

Regarding #3.  Vanguard might not charge if you sell VTI and buy VTSMX, but the gains will still be taxed.  Besides that, this advice is spot on.  Buy VTI, and keep buying until you have $3k, then either convert (paying taxes on the gains), or stick with VTI for the long haul.  Personally, I'd convert, since mutual funds are much less hassle.
How so? Taxes?

I'm in a similar boat as OP and recently bought a few ETF shares.

My apologies, my use of the term "convert" was very loose.  As Forummm said above, you can't "convert".  You can sell VTI, pay taxes on the gains, then buy VTSMX.

Also, if this is a tax-advantaged account, then you don't need to worry about the tax consequences of selling one fund or ETF to buy another. I didn't see anything to specify if it is going to be in a taxable account or not.

Kjmiller1984

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Re: VTI, VTSMX, VTSAX
« Reply #17 on: May 15, 2015, 10:27:24 PM »
This would be going into a traditional IRA. Since it is going into a traditional IRA can I switch from vti to vtsax without any taxes to pay or is that still a no go?

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Re: VTI, VTSMX, VTSAX
« Reply #18 on: May 15, 2015, 10:30:17 PM »
This would be going into a traditional IRA. Since it is going into a traditional IRA can I switch from vti to vtsax without any taxes to pay or is that still a no go?

Yes, if it's in an IRA you won't pay taxes on anything unless you withdraw the money from the IRA.  Switching investments inside your IRA is not a taxable event.

Kjmiller1984

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Re: VTI, VTSMX, VTSAX
« Reply #19 on: May 15, 2015, 10:42:35 PM »
Ok so should I open an account with someone like Schwabb or td ameritrade who lower initial requirements and then switch to vanguard once I have the 3k minimum they require for an account

forummm

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Re: VTI, VTSMX, VTSAX
« Reply #20 on: May 16, 2015, 07:50:08 AM »
Ok so should I open an account with someone like Schwabb or td ameritrade who lower initial requirements and then switch to vanguard once I have the 3k minimum they require for an account

This sounds like a lot of hassle and unnecessary. Vanguard's IRA initial balance requirements are smaller ($1k) for Target Retirement Funds. I recommend you just open an IRA with Vanguard and put your money in the Target Retirement 2060 Fund. It's 90% stock and mostly VTSAX. Keep adding to it until you get to $10k. If you still want to put your money into VTSAX, then you can move all your money to that fund. Inside an IRA there is no tax consequence to selling funds. When you get to $3k you could move it to VTSMX if you wanted, and then to VTSAX when you get to $10k.

The expense ratios for all of these funds are incredibly low and really not worth thinking about at your very low level of investment. If it takes you one year to save up the $10k ($800/month), during that time the 2060 fund would have cost you less than $5 more for the whole year than VTSAX would have.

https://personal.vanguard.com/us/funds/snapshot?FundId=1691&FundIntExt=INT
https://investor.vanguard.com/ira/how-to-open-an-ira