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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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 Posted: Mon Mar 10, 2008 6:09 pm Post subject: VEIEX to VWO conversion: Do it at premium? |
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I would like to convert my VEIEX fund into the VWO ETF. I remember reading that sometimes VWO sells at a premium to NAV and sometimes it sells at a discount to NAV.
I am trying to figure out which one is better for the conversion. I think that the conversion is done at NAV, and if VWO sells at a premium (VWO > NAV), I would get a larger number of shares, and the total value of the account will become greater (because the number of shares will be multiplied by the VWO price).
Is that correct?
I also recall that this conversion can only be done via telephone and cost $50. Please confirm this too.
Thank you in advance,
Victoria |
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indexfundfan
Joined: 20 Feb 2007
Posts: 608
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| Posted: Mon Mar 10, 2008 6:15 pm Post subject: Re: VEIEX to VWO conversion: Do it at premium? |
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| VictoriaF wrote: | I would like to convert my VEIEX fund into the VWO ETF. I remember reading that sometimes VWO sells at a premium to NAV and sometimes it sells at a discount to NAV.
I am trying to figure out which one is better for the conversion. I think that the conversion is done at NAV, and if VWO sells at a premium (NAV < VWO), I would get a larger number of shares, and the total value of the account will become greater (because the number of shares will be multiplied by the VWO price).
Is that correct?
I also recall that this conversion can only be done via telephone and cost $50. Please confirm this too.
Thank you in advance,
Victoria |
Unless you are selling immediately after the conversion, there is no difference. If you are indeed selling, then yes, it is better when VWO trades at a premium, since you get to buy at NAV and sell at premium prices.
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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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| Posted: Tue Mar 11, 2008 5:05 pm Post subject: Re: VEIEX to VWO conversion: Do it at premium? |
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| indexfundfan wrote: | | Unless you are selling immediately after the conversion, there is no difference. If you are indeed selling, then yes, it is better when VWO trades at a premium, since you get to buy at NAV and sell at premium prices. |
Thank you. If I am not selling, don't I still get more shares of VWO if it trades at a premium?
Also, do I have to do the VEIEX-to-VWO conversion by calling Vanguard?
Do I have to pay $50, if I have the Vanguard Voyager Service?
Victoria |
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SpringMan
Joined: 21 Mar 2007
Posts: 2156
Location: Michigan
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| Posted: Tue Mar 11, 2008 5:58 pm Post subject: |
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Since the ETF syncs up with the open ended mutual fund at the end of the day, it is impossible to know what price it will be at or if it be at premium or discount. If you assume the premium/discount when you check it will still be the same at 4:00 p.m., then you can base your conversion on that but it could change. You are correct about $50 per conversion unless you are a flagship client, then it is free. The conversion is not a taxable event. I have converted funds to ETFs several times and I never worried about the premium/discount. The fund and the ETF should move in lock step over time but there are times when one goes up and the other does not. I never got an adequate answer why this is so from Vanguard. The time stamp on my ETFs when I check is usually around 4:15 p.m., maybe that has something to do with it since mutual funds stop trading at 4:00 pm.
Best wishes,
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stan1
Joined: 08 Oct 2007
Posts: 813
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| Posted: Tue Mar 11, 2008 9:30 pm Post subject: Re: VEIEX to VWO conversion: Do it at premium? |
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| VictoriaF wrote: |
Thank you. If I am not selling, don't I still get more shares of VWO if it trades at a premium?
Also, do I have to do the VEIEX-to-VWO conversion by calling Vanguard?
Do I have to pay $50, if I have the Vanguard Voyager Service?
Victoria |
If you are doing the conversion at Vanguard to VBS:
You need to call the Vanguard Brokerage Services desk, not the mutual fund desk. You cannot initiate it online.
The conversion is a straight forward ratio:
VWO Shares = VEIEX Shares * Closing VEIEX NAV / Closing VWO price
I had the $50 deducted from my money market fund. You have to pay the $50 if you are anything lower than Flagship.
One final note that is a little disturbing. For a few days, BOTH your mutual fund shares and the ETF shares will disappear from the website. After a few days the ETF shares will pop into your VBS account. The phone rep made very certain I understood this. He also made sure I understood that doing the conversion costs more than selling the fund for free and making a trade to buy (unless capital gains are involved).
Went smoothly. |
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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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| Posted: Wed Mar 12, 2008 5:30 am Post subject: |
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| SpringMan wrote: | Since the ETF syncs up with the open ended mutual fund at the end of the day, it is impossible to know what price it will be at or if it be at premium or discount.
...
Best wishes, |
Thank you, SpringMan,
Victoria |
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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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| Posted: Wed Mar 12, 2008 5:35 am Post subject: Re: VEIEX to VWO conversion: Do it at premium? |
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| stan1 wrote: | I had the $50 deducted from my money market fund. You have to pay the $50 if you are anything lower than Flagship.
One final note that is a little disturbing. For a few days, BOTH your mutual fund shares and the ETF shares will disappear from the website. After a few days the ETF shares will pop into your VBS account. The phone rep made very certain I understood this. He also made sure I understood that doing the conversion costs more than selling the fund for free and making a trade to buy (unless capital gains are involved). |
Stan1,
Thank you. This is exactly the information I needed.
What does it mean that "conversion costs more than selling the fund for free and making a trade to buy"? Is this in reference to the $50 fee or something else?
Victoria |
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SpringMan
Joined: 21 Mar 2007
Posts: 2156
Location: Michigan
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| Posted: Wed Mar 12, 2008 7:21 am Post subject: |
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I am not stan1 but I think I can answer the question. It would apply if you were converting inside an IRA. Since taxes don't matter in an IRA, you could sell the fund and buy the ETF the next day. If your brokerage fee was $20, then you have accomplished your goal and saved $30. In a taxable account, you have the added benefit that the conversion is not a taxable event. Of course, if you have losses, it would be better to sell the fund and buy a slightly different ETF to avoid the wash rule, GMM might qualify for a VWO replacement staying with emerging markets. You could sell the fund, wait 31 days in money market then buy it back, but you would be out of the market for 31 days. With the recent market volatility, a lot could happen in 31 days.
Best wishes,
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allenmickers
Joined: 11 Feb 2008
Posts: 427
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| Posted: Wed Mar 12, 2008 7:59 am Post subject: |
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| VEIEX has a 0.5% selling fee. Therefore if you are selling more than $10k or so, you are better off converting for $50 and selling it for $20/$25 rather than selling it at a flat 0.5%. |
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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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| Posted: Wed Mar 12, 2008 8:05 am Post subject: |
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| SpringMan wrote: | I am not stan1 but I think I can answer the question. It would apply if you were converting inside an IRA. Since taxes don't matter in an IRA, you could sell the fund and buy the ETF the next day. If your brokerage fee was $20, then you have accomplished your goal and saved $30. In a taxable account, you have the added benefit that the conversion is not a taxable event. Of course, if you have losses, it would be better to sell the fund and buy a slightly different ETF to avoid the wash rule, GMM might qualify for a VWO replacement staying with emerging markets. You could sell the fund, wait 31 days in money market then buy it back, but you would be out of the market for 31 days. With the recent market volatility, a lot could happen in 31 days.
Best wishes, |
SpringMan,
VEIEX is in my taxable account, and it has net gains. Thus, I am more interested in not trigerring a taxable event than I would be concerned about the wash sale rules.
The reason I contemplate the conversion is that I may want to sell my Emerging Market holdings on a short notice (e.g., to buy a condominium), and VWO would help me avoiding the redemption fee charged by VEIEX.
This brings another question. Should I hold VWO for at least a year to qualify for long-term gains? Or the VWO gains will be tracked back to when I first opened VEIEX?
Thank you so much,
Victoria
Last edited by VictoriaF on Wed Mar 12, 2008 8:13 am; edited 1 time in total |
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allenmickers
Joined: 11 Feb 2008
Posts: 427
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| Posted: Wed Mar 12, 2008 8:08 am Post subject: |
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If you are in the 15% bracket than long term cap gains are 0% for 2008 to 2010. Thank George Bush for that 
You dont know if VWO is going to gain or lose over the next year. So you migh wind up taking a loss. Its extremely volatile. Been up 30% per year annualized for the last 5 years.
Also EM = Emerging Market as in new undeveloped markets, not "Emergency" |
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williamg
Joined: 01 Mar 2007
Posts: 129
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| Posted: Wed Mar 12, 2008 8:26 am Post subject: |
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| I am planning to add emerging markets in my IRA. Have been using only mutual funds, but have a brokerage account for CDs. Seems like like the ETF would be better choice if for no other reason than that annoying extra sales charge on the mutual fund. Am I correct?... thanks! bill |
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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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| Posted: Wed Mar 12, 2008 8:27 am Post subject: |
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| allenmickers wrote: | | If you are in the 15% bracket than long term cap gains are 0% for 2008 to 2010. Thank George Bush for that |
I am in the 28% bracket, but it's not all that bad 
| allenmickers wrote: | | You dont know if VWO is going to gain or lose over the next year. So you migh wind up taking a loss. Its extremely volatile. Been up 30% per year annualized for the last 5 years. |
Right. I could gain or lose over the next year. But if I sell within the year, how will I figure gain/loss? By going to my original purchase of VEIEX or to my conversion to VWO?
| allenmickers wrote: | | Also EM = Emerging Market as in new undeveloped markets, not "Emergency" |
It was a slip of the tongue Actually, I don't look at VEIEX/VWO as an "emergency fund" either. I just want to have funds readily available if I decided to buy something.
Thanks!
Victoria |
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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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| Posted: Wed Mar 12, 2008 8:31 am Post subject: |
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| williamg wrote: | | I am planning to add emerging markets in my IRA. Have been using only mutual funds, but have a brokerage account for CDs. Seems like like the ETF would be better choice if for no other reason than that annoying extra sales charge on the mutual fund. Am I correct?... thanks! bill |
The answer depends on whether you want to contribute money all at once or dollar-cost-average. If you do it at once, the ETF (VWO) is usually cheaper. VEIEX has an upfront fee, redemption fee, and slightly higher annual fee; but there are no brokerage fees to buy or sell it.
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schmoglehead
Joined: 31 Jan 2008
Posts: 34
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| Posted: Sat Mar 15, 2008 10:43 am Post subject: Help moving VWO to VEIEX |
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allenmickers quote is interesting but I don't understand it...
| Quote: | | VEIEX has a 0.5% selling fee. Therefore if you are selling more than $10k or so, you are better off converting for $50 and selling it for $20/$25 rather than selling it at a flat 0.5%. |
How do you minimize the selling fee and also the buying fee?
Our Vanguard retirement account does not allow purchase of ETFs so VWO is not available. I have VWO in a personal account and would like it in a retirement account for the capital gains it produces. However, VEIEX (and the Admiral shares VEMAX) have a .5% buying fee and a .5% selling fee.
Am I better off leaving everything in VWO and paying the capital gains?
Thanks,
Schmoglehead |
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allenmickers
Joined: 11 Feb 2008
Posts: 427
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| Posted: Sat Mar 15, 2008 11:01 am Post subject: Re: Help moving VWO to VEIEX |
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| schmoglehead wrote: | allenmickers quote is interesting but I don't understand it...
| Quote: | | VEIEX has a 0.5% selling fee. Therefore if you are selling more than $10k or so, you are better off converting for $50 and selling it for $20/$25 rather than selling it at a flat 0.5%. |
How do you minimize the selling fee and also the buying fee?
Our Vanguard retirement account does not allow purchase of ETFs so VWO is not available. I have VWO in a personal account and would like it in a retirement account for the capital gains it produces. However, VEIEX (and the Admiral shares VEMAX) have a .5% buying fee and a .5% selling fee.
Am I better off leaving everything in VWO and paying the capital gains?
Thanks,
Schmoglehead |
Upgrade to an IRA Brokerage account for $30/year and then do $20/$25 trades to buy VWO as needed |
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SpringMan
Joined: 21 Mar 2007
Posts: 2156
Location: Michigan
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| Posted: Sat Mar 15, 2008 11:43 am Post subject: |
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VictoriaF,
If you convert it is not a taxable event and your gains being long term or not would go back to when you purchased VEIEX, assuming you were not reinvesting dividends and cap gains. Any reinvested dividends or capital gains would require 12 months from the date of purchase for them to be long term. Also when you convert, Vanguard will not track the cost basis so you will need to do it yourself.
Best wishes,
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SpringMan |
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VictoriaF
Joined: 27 Feb 2007
Posts: 2467
Location: Arlington, VA
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| Posted: Sat Mar 15, 2008 1:10 pm Post subject: |
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SpringMan,
Thank you very much. I knew that the conversion was not a taxable event, but I needed to know what would happen if I sold VWO within a year after the conversion.
Kindest regards,
Victoria |
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schmoglehead
Joined: 31 Jan 2008
Posts: 34
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| Posted: Sat Mar 15, 2008 5:22 pm Post subject: VWO vs. VEIEX |
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The fund is a retirement fund (pension and profit sharing). I was told there was no way to purchase stocks (ETFs).
So, I have VWO in a personal account and would like it in a retirement account for the capital gains it produces. However, VEIEX (and the Admiral shares VEMAX) have a .5% buying fee and a .5% selling fee. Is there any other way around the fees?
Am I better off leaving everything in VWO and paying the capital gains?
Thanks,
Schmoglehead |
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allenmickers
Joined: 11 Feb 2008
Posts: 427
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| Posted: Sat Mar 15, 2008 5:30 pm Post subject: Re: VWO vs. VEIEX |
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| schmoglehead wrote: | The fund is a retirement fund (pension and profit sharing). I was told there was no way to purchase stocks (ETFs).
So, I have VWO in a personal account and would like it in a retirement account for the capital gains it produces. However, VEIEX (and the Admiral shares VEMAX) have a .5% buying fee and a .5% selling fee. Is there any other way around the fees?
Am I better off leaving everything in VWO and paying the capital gains?
Thanks,
Schmoglehead |
Upgrade to an IRA Brokerage account for $30/year and then do $20/$25 trades to buy VWO as needed |
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SpringMan
Joined: 21 Mar 2007
Posts: 2156
Location: Michigan
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| Posted: Sat Mar 15, 2008 6:06 pm Post subject: Re: VWO vs. VEIEX |
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| schmoglehead wrote: | The fund is a retirement fund (pension and profit sharing). I was told there was no way to purchase stocks (ETFs).
So, I have VWO in a personal account and would like it in a retirement account for the capital gains it produces. However, VEIEX (and the Admiral shares VEMAX) have a .5% buying fee and a .5% selling fee. Is there any other way around the fees?
Am I better off leaving everything in VWO and paying the capital gains?
Thanks,
Schmoglehead |
This fund is not bad in a taxable account. I have VWO in a taxed account and it is fairly tax efficient. It gave a nice foreign tax credit too. It does have a 1.9% yield that would be subject to tax.
Regards,
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SpringMan |
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