Author Topic: VTSAX - The unknown purchase price  (Read 1828 times)

Getmeouttahere

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VTSAX - The unknown purchase price
« on: March 16, 2020, 09:59:36 AM »
All, why would I ever not choose an ETF like VTI over a mutual fund like VTSAX? I know almost exatcly what my purchase price/share is with VTI when VTSAX I am essentially buying blindly, hoping it tracks the days activity from the market? Doesnt that leave a huge risk if you bought VTSAX early in the day and by the end of the day the market recovered lets say half of its loses? What am I missing? Thanks

dandarc

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Re: VTSAX - The unknown purchase price
« Reply #1 on: March 16, 2020, 10:03:09 AM »
Long term, the price of any one purchase does not matter much at all. So I wouldn't characterize it as a "huge risk" at all to be buying at the end of the day.

thd7t

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Re: VTSAX - The unknown purchase price
« Reply #2 on: March 16, 2020, 10:09:46 AM »
You are always buying blind.  The timeline is the only variable.  Based on your posting history, you started investing pretty recently (at least in any active fashion).  The level of volatility that you're seeing is unusual.  Even money invested yesterday (before today's drop) isn't going to be a big part of your portfolio for long.

frugalnacho

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Re: VTSAX - The unknown purchase price
« Reply #3 on: March 16, 2020, 10:11:18 AM »
Doesn't this cut both ways?  Perhaps you just locked in a very expensive price with your ETF, where as if you waited until the end of the day your mutual fund would have been much cheaper.

dandarc

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Re: VTSAX - The unknown purchase price
« Reply #4 on: March 16, 2020, 10:12:36 AM »
Doesn't this cut both ways?  Perhaps you just locked in a very expensive price with your ETF, where as if you waited until the end of the day your mutual fund would have been much cheaper.
Yeah - on a daily basis it is only like 50.5% / 49.5% to be up. Maybe less than that.

Getmeouttahere

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Re: VTSAX - The unknown purchase price
« Reply #5 on: March 16, 2020, 10:37:50 AM »
All, thanks for the replies I understand just about all the points made here. I think even if the reverse occurred, I could at least come to terms with knowing what price I decided to buy in at. Even if its psychological, it does make me feel more in control. The other worry would be a massive exconomic collapse in which I could sell my VTI shares as I would any stock. Not sure if a total collopase would ever be feasible for a days occurrence, just spit balling now lol.

JetBlast

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Re: VTSAX - The unknown purchase price
« Reply #6 on: March 16, 2020, 10:39:46 AM »
All, why would I ever not choose an ETF like VTI over a mutual fund like VTSAX? I know almost exatcly what my purchase price/share is with VTI when VTSAX I am essentially buying blindly, hoping it tracks the days activity from the market? Doesnt that leave a huge risk if you bought VTSAX early in the day and by the end of the day the market recovered lets say half of its loses? What am I missing? Thanks

Previously you'd buy VTSAX so you can purchase fractional shares.  Instead of having a bit of cash sitting around when it isn't enough to add up to a whole share of VTI, you just buy a dollar amount of VTSAX and are fully invested.  With brokerages like Fidelity and Schwab now allowing fractional shares on stocks and ETFs this is quickly changing.


dandarc

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Re: VTSAX - The unknown purchase price
« Reply #7 on: March 16, 2020, 10:44:12 AM »
Worrying about the exact price paid is thinking you need to get out of your mind for your long-term well being, both financially and psychologically.

Is knowing the exact price you paid really going to help you if say, tomorrow the market is down another 10%? Plus, you don't know the exact price you paid - I'm seeing several percentage point moves over minutes lately. Suppose you could use limit orders, but what's to say you couldn't have done even better than the limit you chose?

Sanitary Engineer

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Re: VTSAX - The unknown purchase price
« Reply #8 on: March 16, 2020, 10:56:24 AM »
I think the reverse of OPs thought is why I haven't been attracted to ETFs.  I am not going to be buying or selling based on the price of stocks, so why do I need the ability to make trades throughout the day versus at the end of the day.

Getmeouttahere

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Re: VTSAX - The unknown purchase price
« Reply #9 on: March 16, 2020, 11:05:33 AM »
Thanks this all makes a lot more sense. Is there a better type (ETF or MF) to buy into one versus the other in my taxable account?

vand

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Re: VTSAX - The unknown purchase price
« Reply #10 on: March 16, 2020, 12:03:18 PM »
All, why would I ever not choose an ETF like VTI over a mutual fund like VTSAX? I know almost exatcly what my purchase price/share is with VTI when VTSAX I am essentially buying blindly, hoping it tracks the days activity from the market? Doesnt that leave a huge risk if you bought VTSAX early in the day and by the end of the day the market recovered lets say half of its loses? What am I missing? Thanks

ETFs incur a bid/offer spread, and (in my country at least) a 0.5% stamp duty charge.

Funds trades are settled once a day. Half the time the price will go against you compared to if you had gone the ETF route, but half the time it will also go in your favour.

MustacheAndaHalf

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Re: VTSAX - The unknown purchase price
« Reply #11 on: March 16, 2020, 09:55:29 PM »
There is no bid-ask spread with VTI.  If you see bid and ask prices one penny apart, you will buy and sell in the middle. Seeing 120.32 - 120.33 means everyone buys/sells at 120.325 - halfway between.  That isn't true of all ETFs, but it's true of the 4th largest ETF in the world (VTI).

Normally events are spread evenly over the day.  But since the outbreak hit the U.S., President Trump has repeatedly held news conferences 30 min before the market closes.  One time, he declared a national emergency and stocks gained +5%.  The other times, his comments resulted in a drop of -3% or more.  Overall, there's a higher chance of markets dropping right before the closing bell, like they did yesterday (Mon, Mar 16).

Steeze

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Re: VTSAX - The unknown purchase price
« Reply #12 on: March 16, 2020, 10:19:30 PM »
I use vtsax (and othe mutual funds) because I can easily buy using automated investments without ever logging in. Every week I buy $1000 worth and I never even log in, just set and forget. I find it much better than having to buy each time, much less stressful. I just log in once a month and check the balance so I can update my spreadsheet. Also, with the fractional shares all of that $1000 makes it into the market, no leftovers.

JetBlast

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Re: VTSAX - The unknown purchase price
« Reply #13 on: March 17, 2020, 08:34:59 AM »
Thanks this all makes a lot more sense. Is there a better type (ETF or MF) to buy into one versus the other in my taxable account?

VTI versus VTSAX? Virtually no difference.

Non-vanguard ETFs are more tax efficient than mutual funds. Vanguard has a patented structure that allows them to almost always eliminate capital gains in mutual funds with attached ETFs. In a couple years that patent expires and other fund providers will quickly copy the structure.

hope2retire

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Re: VTSAX - The unknown purchase price
« Reply #14 on: March 17, 2020, 05:13:26 PM »
Basic question, how do you buy vtsax in vangurd intraday? They always give price EOD. I lost quite a bit of money. Want to know so I avoid.

H2R

dandarc

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Re: VTSAX - The unknown purchase price
« Reply #15 on: March 17, 2020, 05:18:27 PM »
Basic question, how do you buy vtsax in vangurd intraday? They always give price EOD. I lost quite a bit of money. Want to know so I avoid.

H2R
VTSAX is a mutual fund. Mutual funds always give you EOD pricing.

If you really want to trade in the middle of the day, use VTI.

However, if you're asking this question, you probably have more research to do before investing in anything.

MustacheAndaHalf

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Re: VTSAX - The unknown purchase price
« Reply #16 on: March 17, 2020, 11:08:36 PM »
Mutual funds deal with buying and selling by themselves, off the stock market.  You must deal with the actual fund, in order to purchase shares.  With an ETF (Exchange Traded Fund), anyone can buy the ETF on the open market - it's just sitting there, with a ticker symbol, like any other company.

I'll give you a concrete example - someone has  a Fidelity account, and wants to buy either a Vanguard mutual fund (VTSAX) or a Vanguard ETF (VTI).  When they try to "transaction Fee non-Fidelity funds" like VTSAX, the cost is $49.95, which is probably shocking, so here's the link:
https://www.fidelity.com/trading/commissions-margin-rates

What happens if you buy the ETF version, instead?  VTI trades on the open market.  If you check that same link, above, you'll see "ETFs ... All online ETF trades" costs $0.  Fidelity is already linked to the stock exchange - but they have to make a special effort to do a mutual fund transaction with Vanguard.  That's why they charge more, and it's a good example of how an ETF differs from a mutual fund.

If you buy VTSAX at Vanguard, it's $0.  Vanguard is setup to handle it's own mutual funds.  At Fidelity, you can buy Fidelity mutual funds for $0.  But once you buy mutual funds of another company, it can be expensive.

Getmeouttahere

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Re: VTSAX - The unknown purchase price
« Reply #17 on: March 18, 2020, 10:42:32 AM »
MustacheAndaHalf, great feedback. Thank you much.

hope2retire

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Re: VTSAX - The unknown purchase price
« Reply #18 on: March 19, 2020, 07:31:29 PM »
Thanks dandarc and mustacheandhlf for taking the time to clarify. Now I got it.

Regards
H2R

tooqk4u22

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Re: VTSAX - The unknown purchase price
« Reply #19 on: March 20, 2020, 08:18:18 AM »
All, why would I ever not choose an ETF like VTI over a mutual fund like VTSAX? I know almost exatcly what my purchase price/share is with VTI when VTSAX I am essentially buying blindly, hoping it tracks the days activity from the market? Doesnt that leave a huge risk if you bought VTSAX early in the day and by the end of the day the market recovered lets say half of its loses? What am I missing? Thanks
Basic question, how do you buy vtsax in vangurd intraday? They always give price EOD. I lost quite a bit of money. Want to know so I avoid.

H2R
VTSAX is a mutual fund. Mutual funds always give you EOD pricing.

If you really want to trade in the middle of the day, use VTI.

However, if you're asking this question, you probably have more research to do before investing in anything.

I totally get what the OP is saying and always have known it is EoD pricing.    This hit me again the other day when I did some rebalancing in my vanguard funds.   Started doing it with 10-15 minutes left in the day and markets were down 8%, while putting in the various orders the markets recovered to about down 5%.   That 15 minutes cost me 3% of those funds.  I still would have made the transfer but ya know 3%.   

That is the main disadvantage of funds vs. ETFs.  Over the long run it won't matter much.  And in less volatile times its negligible, it is only in times like these when its really an issue. 

dandarc

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Re: VTSAX - The unknown purchase price
« Reply #20 on: March 20, 2020, 08:46:11 AM »
Would be interesting to look at if bid-ask spread and premium - discount items increase in times of high volatility.

Normally bid-ask on VTI is a penny, but these are not normal times. How tight to NAV are the arbs actually keeping things?

You basically lost a coin-flip there tooqk4u22. Could have gone the other way. I happened to rebalance on Monday, and actually got the orders in before the market even opened - that one worked out pretty good for me. Aside from some confusion I had because the trade confirmations came in a full day after the fact - after close on Tuesday. I did get the end of Monday pricing I was expecting, and now I know that about exchange orders at e-Trade for Schwab mutual funds. Let's not talk about the timing of my "re-mortgage the house and invest over $100K in one shot (ok, technically 2 shots - neither is looking so good right now)" move though.

Fuzz

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Re: VTSAX - The unknown purchase price
« Reply #21 on: March 20, 2020, 01:30:04 PM »
I share OP's frustration. I am tempted by an ETF instead too.