Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

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SHB
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Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

Post by SHB »

Say you were starting from an all cash position, mix of tax advantaged and taxable accounts with fidelity. If I had access I would do Vanguard mutual funds but being that the accounts are with fidelity I just have access to the Vanguard ETF's. I do have access to commission free Spartan mutual funds by Fidelity as a mutual fund alternative.

The portfolio would be a collection of indexed funds. It comes down to the following:

[VOO] VANGUARD INDEX FDS S&P 500 ETF vs Spartan® 500 Index Fund - Fidelity Advantage Class
[VWO] VANGUARD INTL EQUITY INDEX FDS MSCI EMERGING vs Spartan® Emerging Markets Index Fund - Fidelity Advantage Class
[VEA] VANGUARD FTSE DEVELOPED MARKET ETF vs Spartan® International Index Fund - Fidelity Advantage Class

Plus some others but you get the picture.

Expense ratios are very similar but the ETF's do edge it out by .01% on average. My worry is that I can buy an ETF that is "overvalued" by at the very least .1% (could be much more) just by random market volatility.

The biggest difference is the domestic funds track different indexes for the mid/small cap and total market. Anyone have any insight on CRSP indexes?
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nisiprius
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Re: Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

Post by nisiprius »

Let me label them a, b, and c.

a) [VOO] VANGUARD INDEX FDS S&P 500 ETF vs Spartan® 500 Index Fund - Fidelity Advantage Class
b) [VWO] VANGUARD INTL EQUITY INDEX FDS MSCI EMERGING vs Spartan® Emerging Markets Index Fund - Fidelity Advantage Class
c) [VEA] VANGUARD FTSE DEVELOPED MARKET ETF vs Spartan® International Index Fund - Fidelity Advantage Clas

1) You probably should take a look at the Bogleheads wiki article, Fidelity.

2) I don't know why you chose the three indexes/and funds you chose. For pair (a) I would have compared Vanguard Total Stock Market Index, VTI, and Fidelity Spartan Total Market Index Fund (Advantage class)(FSTVX). It's not like it's a great big deal, and the differences between the S&P 500 and the total market are often exaggerated, but still, the total market is the total market--do you have a reason for restricting it to the S&P 500?

3) I don't know why you chose a pair of international funds when both companies offer total international funds that include both developed and emerging markets according to their global weighting. That is, instead of (b) and (c), why not Vanguard Total International (VT) versus Fidelity Spartan Global ex US index Advantage, (FSGDX)

4) I don't think it makes sense to fuss about the differences between different providers of indexes that cover the same asset class. Definitely not for something like a U.S. total market or broad market index. There is more difference between international indexes, but I don't think it's enough to worry about.

5) You probably should take a look at the Bogleheads wiki article, ETFs versus Mutual Funds. It is very hard to say that there is any more to it than person taste, Mac versus PC kind of thing. Personally, ETFs creep me out. I hate dealing with them. I don't buy or sell them often enough to know the ropes. I hate that you (usually?) can't get automatic purchases or withdrawals or exchanges. And I hate it that when I look them up on Morningstar, I get a FIVE DAY price chart by default, versus TEN YEARS for a mutual fund; Morningstar knows what ETF investors want to see by default. But, that's just me.

6) I really think Vanguard might have a little secret sauce in its index funds. They track the index awfully well and William J. Bernstein crunched some numbers and convinced himself that Vanguard has superior "transactional skill." But it's not enough to overcome even the tiniest of other factors. Plus, although it seems silly to start worrying about star managers in index funds, but the secret sauce might be the personal touch of chef Gus Sauter, who recently retired from Vanguard.

7) If it is convenient to you to stay at Fidelity, and if you just dislike ETFs, I think a sane person could go with the flow and use the Spartan funds and never give it another thought.

8) On expense ratios, you should always do the math, Don't obsess over direction, higher, lower. Actually take the size of your investment and multiply it by the difference in expense ratios and see just how much money you're talking about. What counts is the difference between expense ratio numbers, not their ratio. The difference between 1.00% and 0.50% is big. The difference between 0.10% and 0.05% is small.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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retiredjg
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Re: Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

Post by retiredjg »

Your worry should be that Fido will charge you transaction fees to buy Vanguard ETFs. That makes the question moot - Spartan mutual funds win by a landslide. If for some reason you would not have to pay transaction fees, pick mutual fund vs ETF by which you prefer to work with.

The differences in expense ratios is a few pennies a year.
stlutz
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Re: Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

Post by stlutz »

You should also consider iShares ETFs which you can trade for free at Fidelity.

One not-commonly mentioned advantage of ETFs is that they are more easily transferred to another broker than proprietary mutual funds are. In other words, if you get mad at Fidelity and decide to switch to Schwab or TD Ameritrade 5 years down the road, life would be easier with ETFs than with the Fido funds.
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Kevin M
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Re: Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

Post by Kevin M »

You can easily move everything outside of employer sponsored retirement plans to Vanguard, so that's one option. However, the Spartan funds are fine. I would not choose the ones you listed. I would start with the Total US stock market fund and the all-world ex-US fund for stocks. Outside of a 401k/403b, you have the choice.

Your concerns about ETFs are valid, and for most investors I don't think it's worth the extra hassles. I personally own some ETFs, so it's not that I'm opposed to them for those who understand the pros/cons and are willing to deal with the extra complexities.

I have most of my stock and bond fund assets at Vanguard, but I did swap into a couple of the Spartan funds at Fidelity for tax loss harvesting purposes a few years ago. They are fine.

Kevin
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Sammy_M
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Re: Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

Post by Sammy_M »

stlutz wrote:One not-commonly mentioned advantage of ETFs is that they are more easily transferred to another broker than proprietary mutual funds are. In other words, if you get mad at Fidelity and decide to switch to Schwab or TD Ameritrade 5 years down the road, life would be easier with ETFs than with the Fido funds.
Excellent point, with respect to taxable accounts
Topic Author
SHB
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Re: Thoughts on Vanguard ETF's vs Fidelity Spartan Funds

Post by SHB »

Thanks for the feedback so far. The most interesting comment has been about the ability to transfer brokerages if it ever became a necessity, something I hadn't (and wouldn't have) considered.

Just the clearify the funds I typed out where not the only funds I am considering comparing. Those are actually just part of a slice 'n dice portfolio I'm considering. I was just too lazy to type them all out and thought yall would get the picture anyhow.
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