Vanguard mutual fund vs etf

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seafood10
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Vanguard mutual fund vs etf

Post by seafood10 » Mon Mar 11, 2013 8:10 am

if you have a taxable account and were just looking at vanguard mutual funds and etf...which one would you put your money in? for example, for each vanguard mutual fund, it has exactly mirror of an etf for it...like VTI - Vanguard Total Stock Market etf is the same as VTSMX - Vanguard Total Stock Market Index Inv etc. and the expense ratio is almost the same or even cheaper for an ETF.

so for someone who has a taxable account, wouldn't it make sense that someone invest in etf instead of mutual fund since you can sell or buy etf right away instead of waiting till end of day unlike mutual fund?

what is the pros and cons of etf vs mutual fund if you buying from vanguard?

NYBoglehead
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Re: Vanguard mutual fund vs etf

Post by NYBoglehead » Mon Mar 11, 2013 8:17 am

I choose the mutual fund, every time. For starters, you can buy fractional shares. With ETFs you can only purchase whole shares, so if you want to invest $100 you can put it all in the mutual fund, where you might find that you could only invest $86 or some or other figure purchasing whole shares while the remainder would stick around in your sweep account.

As far as buying/selling right away, why are you convinced that you know what the price should be at 11:36 or 2:47 or whenever else you'd be executing a trade? Just because you are setting the price doesn't mean that you aren't going to get screwed. You could get burned just as badly buying high and having the market closing lower and vice versa.

ETFs are good if you don't have the 3k to open a mutual fund account but beyond that I think mutual funds are much better.

Ed 2
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Re: Vanguard mutual fund vs etf

Post by Ed 2 » Mon Mar 11, 2013 8:24 am

I am joining opinion of NYBoglehead,I am not a starter but I have all in Index Funds. Hard to see any cons for Index Funds .
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2comma
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Re: Vanguard mutual fund vs etf

Post by 2comma » Mon Mar 11, 2013 8:26 am

If I am stupid I will pay.

livesoft
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Re: Vanguard mutual fund vs etf

Post by livesoft » Mon Mar 11, 2013 8:28 am

I'd choose the ETF since I would not have that money at Vanguard.
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seafood10
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Re: Vanguard mutual fund vs etf

Post by seafood10 » Mon Mar 11, 2013 8:31 am

well i bought and sold a vanguard mutual fund less than 90 days on my scottrade account and got a warning from scottrade that vanguard could ban me of buying future vanguard mutual fund on my taxable account cause of sec restriction and buying and selling mutual fund that quick. let say i want to hold something for like 1 - 2 months and want to take my profit...mutual funds won't allow you or discourage u due to sec rules and regulation.
Last edited by seafood10 on Mon Mar 11, 2013 8:36 am, edited 1 time in total.

livesoft
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Re: Vanguard mutual fund vs etf

Post by livesoft » Mon Mar 11, 2013 8:35 am

I would not use Scottrade because they charge commissions when many other brokers do not charge commissions.

I think that link that rickmerrill posted should be helpful if you read it.
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seafood10
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Re: Vanguard mutual fund vs etf

Post by seafood10 » Mon Mar 11, 2013 8:43 am

livesoft wrote:I would not use Scottrade because they charge commissions when many other brokers do not charge commissions.

I think that link that rickmerrill posted should be helpful if you read it.
i'm not too bother with $7/trade for etf on my scottrade account. i'm more concern on expense ratio and allowing to trade short term if i need it on my taxable account.

assumer
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Re: Vanguard mutual fund vs etf

Post by assumer » Mon Mar 11, 2013 8:45 am

NYBoglehead wrote:I choose the mutual fund, every time. For starters, you can buy fractional shares. With ETFs you can only purchase whole shares, so if you want to invest $100 you can put it all in the mutual fund, where you might find that you could only invest $86 or some or other figure purchasing whole shares while the remainder would stick around in your sweep account.

As far as buying/selling right away, why are you convinced that you know what the price should be at 11:36 or 2:47 or whenever else you'd be executing a trade? Just because you are setting the price doesn't mean that you aren't going to get screwed. You could get burned just as badly buying high and having the market closing lower and vice versa.

ETFs are good if you don't have the 3k to open a mutual fund account but beyond that I think mutual funds are much better.
I'm not sure I agree. For Vanguard, the ETF's have expense ratio's equivalent to admiral shares, not investor shares. So if one is at the "investor shares" level, then it's cheaper to get the ETF, no?

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Re: Vanguard mutual fund vs etf

Post by mhc » Mon Mar 11, 2013 9:00 am

I buy mutual funds with my Vanguard accounts.

I buy Vanguard ETF's in my Fidelity HSA brokerage account.

I prefer using my Vanguard accounts. It takes just a little bit more effort buying ETF's and I find it an annoyance to have a few dollars left over in my Fidelity brokerage account since I have to buy whole shares of ETF's.

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Chan_va
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Re: Vanguard mutual fund vs etf

Post by Chan_va » Mon Mar 11, 2013 9:11 am

One advantage to ETF's in taxable accounts with Vanguard is if you plan to Tax loss harvest.

Vanguard imposes a 90 day trading ban on mutual fund accounts after you sell, so it makes it a pain to TLH. There are ways around it, but it's easier with an ETF.

NYBoglehead
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Re: Vanguard mutual fund vs etf

Post by NYBoglehead » Mon Mar 11, 2013 9:13 am

assumer wrote:
NYBoglehead wrote:I choose the mutual fund, every time. For starters, you can buy fractional shares. With ETFs you can only purchase whole shares, so if you want to invest $100 you can put it all in the mutual fund, where you might find that you could only invest $86 or some or other figure purchasing whole shares while the remainder would stick around in your sweep account.

As far as buying/selling right away, why are you convinced that you know what the price should be at 11:36 or 2:47 or whenever else you'd be executing a trade? Just because you are setting the price doesn't mean that you aren't going to get screwed. You could get burned just as badly buying high and having the market closing lower and vice versa.

ETFs are good if you don't have the 3k to open a mutual fund account but beyond that I think mutual funds are much better.
I'm not sure I agree. For Vanguard, the ETF's have expense ratio's equivalent to admiral shares, not investor shares. So if one is at the "investor shares" level, then it's cheaper to get the ETF, no?
I think the Admiral Shares threshold at $10k gets you there fairly quickly. I still think that getting the whole amount of your desired money into the market instead of having even a fractional amount on the sidelines (because of the requirement to purchase ETFs in whole shares) negate the tiny ER advantage ETFs have over Investor shares.

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Re: Vanguard mutual fund vs etf

Post by assumer » Mon Mar 11, 2013 9:19 am

NYBoglehead wrote:I think the Admiral Shares threshold at $10k gets you there fairly quickly. I still think that getting the whole amount of your desired money into the market instead of having even a fractional amount on the sidelines (because of the requirement to purchase ETFs in whole shares) negate the tiny ER advantage ETFs have over Investor shares.
Yes, very true, but for something like bonds, in which one's AA may not have too much in bonds, it could take a little longer to get to the admiral shares level. 80/20 would be a $50k total portfolio to reach admiral shares in bonds. Anyway, I think we're pretty much on the same page here, as it just depends on the total amount of money being either left out of the market, or paid in expenses, and is individual to the person's portfolio.

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Re: Vanguard mutual fund vs etf

Post by Allan Roth » Mon Mar 11, 2013 9:23 am

Admiral shares have the same expense ratio as ETFs but have several key advantages: no commission, no bid-ask spread, and no premium or discount paid. They are also easier to work with in that you can buy an exact amount. With an ETF, you must buy whole shares and the price is always changing so you may end up buying more or less than what you planned.

With ETFs you can buy and sell throughout the day but i don't see this as an advantage.

Both Vanguard ETF and Admiral share class index funds are great but the clear advantage, IMO, goes to the Admiral mutual fund share class.

letsgobobby
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Re: Vanguard mutual fund vs etf

Post by letsgobobby » Mon Mar 11, 2013 9:29 am

I like day trading and market timing my buy and hold index portfolio, so ETFs are clearly superior.

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noyopacific
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Re: Vanguard mutual fund vs etf

Post by noyopacific » Mon Mar 11, 2013 9:47 am

seafood10 wrote:if you have a taxable account and were just looking at vanguard mutual funds and etf...which one would you put your money in? for example, for each vanguard mutual fund, it has exactly mirror of an etf for it...like VTI - Vanguard Total Stock Market etf is the same as VTSMX - Vanguard Total Stock Market Index Inv etc. and the expense ratio is almost the same or even cheaper for an ETF.

so for someone who has a taxable account, wouldn't it make sense that someone invest in etf instead of mutual fund since you can sell or buy etf right away instead of waiting till end of day unlike mutual fund?

what is the pros and cons of etf vs mutual fund if you buying from vanguard?
First off, your statement that: "for each vanguard mutual fund, it has a mirror of an etf" is inaccurate.
So far as I am aware, each ETF has an identical mutual fund but not visa versa.
Actively managed funds, like Wellesley for example, do not have an equivalent ETF.
Both have advantages and disadvantages but most the differences usually seem pretty minor to me.
I have all of my accounts at Vanguard so commissions on either are not a factor for me.
If you don't meet the threshold to buy Admiral shares, ETF's have lower expenses than Investor shares but as has been said before, you can't buy fractional shares of ETF's.
You can buy Mutual funds at net asset value, with ETF's you can buy them at the market price or use a limit order if you are so inclined.
I only sell shares once a year when I rebalance so the frequent trading limitations on mutual funds is not an issue for me.
For someone who has difficulty restraining themselves from frequent trading (which in my opinion is an unwise investment practice,) the limitations on frequent trading of mutual funds might be desirable if they help you to reduce your trading activity.
For a few funds, the minimum purchase is pretty high ($100K for the utilities mutual fund the last time I checked) so if you can't meet the minimums, the ETF alternative may be the only option.
I'm more concerned about your comments about selling right away than about the minor differences between ETF's and mutual funds.
The majority of my holdings are in traditional mutual funds but I have a few ETF's too.
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Re: Vanguard mutual fund vs etf

Post by Default User BR » Mon Mar 11, 2013 12:42 pm

livesoft wrote:I'd choose the ETF since I would not have that money at Vanguard.
Same for me. When holding at another brokerage, the ETFs win hands-down.


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Toons
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Re: Vanguard mutual fund vs etf

Post by Toons » Mon Mar 11, 2013 1:01 pm

FYI
Compare Vanguard Mutual Funds & ETFs :happy

https://investor.vanguard.com/what-we-o ... ndex-funds
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Re: Vanguard mutual fund vs etf

Post by livesoft » Mon Mar 11, 2013 1:56 pm

letsgobobby wrote:I like day trading and market timing my buy and hold index portfolio, so ETFs are clearly superior.
+1
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seafood10
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Re: Vanguard mutual fund vs etf

Post by seafood10 » Mon Mar 11, 2013 2:14 pm

thx for some of your response. i'm sticking with etf on my taxable account. even thought this board would advise against market timing, i'm one of those that would like to cash in profit etc.

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Re: Vanguard mutual fund vs etf

Post by boggler » Mon Apr 01, 2013 5:34 pm

Assuming you have 100 shares of a Vanguard ETF vs. 100 shares of the equivalent Vanguard Admiral fund, with the same expense ratio, is there any tax advantage to holding the ETF? I've heard that there are advantages in terms of reduced capital gains taxes caused by fund redemptions, but I don't know how true this is.

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Re: Vanguard mutual fund vs etf

Post by BrandonBogle » Mon Apr 01, 2013 6:14 pm

boggler wrote:Assuming you have 100 shares of a Vanguard ETF vs. 100 shares of the equivalent Vanguard Admiral fund, with the same expense ratio, is there any tax advantage to holding the ETF? I've heard that there are advantages in terms of reduced capital gains taxes caused by fund redemptions, but I don't know how true this is.
For Vanguard MF vs ETF, no difference. For any other fund company, then yes the ETF is more efficient. This is because Vanguard has their ETFs as another share class of the same fund, so all classes get the enhancement of the ETF redemption unit process. Other fund families have ETFs as completely separate funds from equivalent MFs, and thus, those MF classes do not get the benefit of the ETF redemption unit process.

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Re: Vanguard mutual fund vs etf

Post by popcathiphat » Mon Dec 16, 2013 9:22 am

Assuming that you won't hit Admiral Shares for the next 3-5 years, it looks like it's better to put money into Vanguard ETFs?

I'm looking at mimicking Paul Merriman's Vanguard ETF portfolio: http://paulmerriman.com/pauls-etf-recommendations/

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Re: Vanguard mutual fund vs etf

Post by riptide » Sun Jan 24, 2016 9:22 am

Thanks this thread helped me just stay with my Vanguard Admiral Index funds. I have been thinking of switching to Vanguard ETF's for a while. I also am maturing as an investor and becoming successful with the urge to trade too often vs. stay the course and be patient. I think the index funds help some since they don't trade immediately like ETF's.
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Re: Vanguard mutual fund vs etf

Post by grabiner » Sun Jan 24, 2016 6:55 pm

boggler wrote:Assuming you have 100 shares of a Vanguard ETF vs. 100 shares of the equivalent Vanguard Admiral fund, with the same expense ratio, is there any tax advantage to holding the ETF? I've heard that there are advantages in terms of reduced capital gains taxes caused by fund redemptions, but I don't know how true this is.
There is no tax advantage because ETF and Admiral shares are share classes of the same fund. Both share classes get the same benefit from the redemption process, and as a result, very few of Vanguard's stock ETFs have distributed capital gains.

For a fair comparison, you need equal dollar amounts, not shares, as the share prices are different; a $10,000 investment might be 300 Admiral shares at $33.33 and 200 ETF shares at $50.00.
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