Bogleheads

[indexfundfan]

I am considering converting my VEIEX fund to VWO at VBS. From the prospectus:

[LoopyGinJuice]

Hmm. You don't have to pay the redemption fee if you sell ETF shares, do you? Sounds like it could be worth it if the sell commission is less than 0.5% of the sale amount. But, doesn't VBS charge at least a 1.25% commission on trades? (I don't know them very well)

[jeffarvon]

I did this conversion last year. I looked up the transactions and see I started with fractional shares in the mutal fund and ended with fractional shares in the ETF. The conversion fee ($50) was paid from a new MM 'sweep' account that got set up (this activity opened my Vanguard Brokerage account). I had seeded the brokerage MM fund with some monies.

I recall doing this over the phone and it was very smooth and efficient.
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"Enough is as good as a feast" - Mary Poppins

[indexfundfan]

[stan1]

[indexfundfan]

[bbrock]

Hello IndexFunFan,
I read through this poster, and also your post at your site:
http://www.indextown.com/archi....on-at-vbs/

I am looking to move my international holding from Dodge & Cox International to Vanguard FTSE all world ex US. Since I am flagship, I have thought of buying the fund class first (VFWIX) and then converting to the ETF (VEU). I thought of this to avoid the bid-ask spread and any premium/discount to NAV. And, to ease my worries since this would be my first ETF purchase and I am intimidated by doing a market order and getting a bad price or using a limit order. I was considering doing a lump sum into VFWIX and then a full conversion into VEU. What's holding me back is that I am confused on how to calculate the cost basis for the converted shares. Your posting at the above link helps, but is there any way you could outline for me how to calculate this cost basis on a conversion?

Since the conversion factor involves the closing NAV of the fund class VFWIX/the closing NAV of the ETF VEU, I have thought that I could just use the closing NAV of VEU for the cost per share. Could you let me know if that is right, or what is?

Thanks.
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bbrock

[indexfundfan]

bbrock,

Your cost basis is whatever you paid for the shares. If you spent $10,000 on the mutual fund, after the conversion to ETF, your cost basis is still $10,000.

So for example, say after the conversion you end up with 500 shares of the ETF, the cost basis of the entire lot is still $10,000, and your cost per share is 10,000/500 = $20.

The NAV is used by Vanguard to calculate the number of ETFs for the conversion. It does not come into your cost basis calculations.
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[bbrock]

Thanks for the quick response IndexFundFan. I do appreciate the clarification.

If it is that straight-forward, I don't see why Vanguard doesn't do it themselves. Any thoughts?
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bbrock