The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: TwistedEther on September 25, 2018, 08:56:44 PM
-
I know VTSAX vs VTI question has often been asked over the interwebs. But the responses are overwhelming me. So I will try to simplify my question. Let's say I have a $100K to invest in a taxable account and I like some flexibility in rebalancing or moving money in and out. Also, I am brand new to Vanguard.
Given that VTI and VTSAX are very similar in performance and cost-wise, why or how would you choose one over the other? I read that VTI may be more tax efficient. On the other hand, I also read that over $10K, Admiral shares (VTSAX) are better. For the amount mentioned above, do you have a suggestion one way or another? I am also open to Schwab funds if that makes better sense.
-
This is all personal preference. But just the fact that you’re here asking, you should choose VTSAX. It’s easier. If you change your mind later, call Vanguard and they can convert your mutual fund shares to ETF shares, without a taxable transaction. The reverse is not possible.
-
someone care to elabroate on why VTSAX would be less tax efficient than VTI?
-
Someone may apply the generalization that mutual funds are less tax efficient due to the way they distribute capital gains. And that’s often true though not a major consideration. But uniquely this is not the case with vanguard mutual funds and ETFs. Because VTI and VTSAX are just different share classes of the same fund. At least that’s my understanding.
-
Picking either one is better than sitting in $100k cash.
That said, I prefer ETFs. If you want to rebalance or tax loss harvest, you can do that in one login instead of two. Let's say I wanted to realize losses from VTI (Vanguard Total Market) and switch to IVV (iShares S&P 500). I could login and sell VTI, and the credit for that sale is immediately available. I can then, immediately, buy an equal amount of IVV. One login, and I've switched investments from VTI to IVV (which is now $0/trade thanks to recent changes at Vanguard).
Mutual fund sales/purchases are handled after the market closes. So you wait the rest of the day before your sale of VTSAX goes through. The next day, when the cash is available (I think?), you can start the purchase of another mutual fund. And you then wait, in cash, until the market closes and you can buy the other mutual fund. ETFs, meanwhile, are sold/bought instantly.
Also, I think Vanguard offers ~1800 ETFs for $0/trade, but only offers it's own mutual funds for $0/trade. So there's more choices (like SCHB, ITOT) available with ETFs.
-
Picking either one is better than sitting in $100k cash.
That said, I prefer ETFs. If you want to rebalance or tax loss harvest, you can do that in one login instead of two. Let's say I wanted to realize losses from VTI (Vanguard Total Market) and switch to IVV (iShares S&P 500). I could login and sell VTI, and the credit for that sale is immediately available. I can then, immediately, buy an equal amount of IVV. One login, and I've switched investments from VTI to IVV (which is now $0/trade thanks to recent changes at Vanguard).
Mutual fund sales/purchases are handled after the market closes. So you wait the rest of the day before your sale of VTSAX goes through. The next day, when the cash is available (I think?), you can start the purchase of another mutual fund. And you then wait, in cash, until the market closes and you can buy the other mutual fund. ETFs, meanwhile, are sold/bought instantly.
Also, I think Vanguard offers ~1800 ETFs for $0/trade, but only offers it's own mutual funds for $0/trade. So there's more choices (like SCHB, ITOT) available with ETFs.
nope you dont have to login in 2x i can login 1x and just say move VTSAX to VTBLX - so its actually less work to do the mutual fund than your transaction b/c you have to sell and then buy the other i can just move the money from one mutual fund to another and it creates the sale and buy at market close that day.
-
I stand corrected - "exchange vanguard funds" let's you do that. Originally they had a 60 day restriction (now 30 days), which caused me to stop using that feature. ETFs have no restrictions.
https://personal.vanguard.com/us/whatweoffer/overview/exchangepolicy
-
the 30 day restriction is reinvestment in the same fund.
I would reiterate my initial point. If one is not certain enough whether they want mutual fund versus etf, such that they're posting here to ask the question, then they should choose the mutual fund