Lazy portfolio - Mutual funds or ETFs?

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l1am
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Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Sun Mar 20, 2016 7:30 pm

I have quite a lot of money sitting around in cash. I've never set up a taxable investment account and I'm ready to start, but I don't think I'll be very active - maybe I could re-balance once or twice a year if I educate myself further, but for now I'm looking at the three-fund lazy portfolio option:
https://www.bogleheads.org/wiki/Three-fund_portfolio

I'm 32, so I'll probably go with a 70/30 allocation. US:INTL stock should be 70:30 too right?
I'm leaning towards funds, since I don't need to actively trade. My options:

Mutual funds:
  • Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - ER 0.05%
    Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) - ER 0.12%
    Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - ER 0.07%
ETFs:
  • Vanguard Total Stock ETF (VTI) - ER 0.05%
    Vanguard Total International Stock ETF (VXUS) - ER 0.13%
    Vanguard Total Bond Market ETF (BND) - ER 0.07%
Last edited by l1am on Sun Mar 20, 2016 7:32 pm, edited 1 time in total.

livesoft
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by livesoft » Sun Mar 20, 2016 7:32 pm

I love ETFs, but since you asked, you should use mutual funds.
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l1am
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Sun Mar 20, 2016 7:33 pm

livesoft wrote:I love ETFs, but since you asked, you should use mutual funds.
Because I'm not an advanced enough investor to need ETFs?

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by livesoft » Sun Mar 20, 2016 7:46 pm

Advanced investors don't need ETFs. See also: https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds
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David Jay
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by David Jay » Sun Mar 20, 2016 7:52 pm

l1am wrote:
livesoft wrote:I love ETFs, but since you asked, you should use mutual funds.
Because I'm not an advanced enough investor to need ETFs?
It is a lot easier (and cheaper) to rebalance in Mutual funds.

Let's say you want to rebalance $200 from an ETF with a share price of $90 to an ETF with a share price of $220. What do you do?

With Mutual Funds, you transfer $200 from Fund A to Fund B.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

l1am
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Sun Mar 20, 2016 8:00 pm

David Jay wrote: It is a lot easier (and cheaper) to rebalance in Mutual funds.

Let's say you want to rebalance $200 from an ETF with a share price of $90 to an ETF with a share price of $220. What do you do?

With Mutual Funds, you transfer $200 from Fund A to Fund B.
Makes sense, also read in livesoft's link that the funds can be easily shifted to ETFs later if desired.

stlutz
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by stlutz » Sun Mar 20, 2016 8:01 pm

In taxable I'm a fan of ETFs. They allow you to separate the manager of your assets from the custodian of your assets if you so desire in the future. With funds, if you decide 10 years from now that you're unhappy with Vanguard's customer service/website/something else, you can easily transfer ETFs to any other broker. You can't do that with Admiral-share mutual funds.

livesoft
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by livesoft » Sun Mar 20, 2016 8:11 pm

David Jay wrote:Let's say you want to rebalance $200 from an ETF with a share price of $90 to an ETF with a share price of $220. What do you do?
Here's what I do:

I realize that it is ridiculous to believe that rebalancing has or even needs a precision of better than $1,000. I also realize that the next day after any rebalancing transactions that all my investments have changed value by amounts larger than $200. Therefore, I never want to rebalance using a transaction amount like $200.

And in fact, when rebalancing I usually (but not always) just buy/sell round lots (divisible by 100) of shares in ETFs. If I am reinvesting dividends, then I have no problems either buying 1 or 2 shares or even having automatic dividend reinvestment set up.

But I will agree that for ultimate in laziness ("Lazy portfolio" was in the thread title), one might as well use mutual funds.
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by Tommy » Sun Mar 20, 2016 8:16 pm

Does ETF allow to setup automatic dividend reinvestment, like finds?

livesoft
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by livesoft » Sun Mar 20, 2016 8:28 pm

Tommy wrote:Does ETF allow to setup automatic dividend reinvestment, like finds?
Definitely, Yes!
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iceport
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by iceport » Sun Mar 20, 2016 8:33 pm

l1am wrote:I'm leaning towards funds, since I don't need to actively trade.
That's the right call. If you're at Vanguard, there's absolutely no benefit to using ETFs, given these options.
l1am wrote:Because I'm not an advanced enough investor to need ETFs?
Mutual funds are far more advanced than ETFs. The unnecessary hassles nearly all go away with mutual funds. Some folks are forced to use ETFs because they invest through a brokerage, and their funds of choice are only available to them in ETF form. If that doesn't describe your situation, there's no need to suffer the blasted things.

Here are a few recent threads for your reading enjoyment:

I hate ETFs!!! [Lessons learned from market not going as expected]

Vanguard Index Funds (Admiral) vs ETFs (Advantages and disadvantages)

Tips on Buy/Selling ETFs
"Discipline matters more than allocation.” ─William Bernstein

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by Lafder » Sun Mar 20, 2016 9:37 pm

Vanguard ETFs have the same low fees as their Admiral share mutual funds.

Mutual funds are much easier to make orders and changes. You do not need to set sale or purchase prices. You simply say the amount you want to transact and put the order in any time of day or night, and it should go through the same or next day.

My relative had ETFs and orders could only be put in when the market was open. Which is not evenings and weekends. When are you most likely to have time to put orders in?

lafder

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by mcraepat9 » Mon Mar 21, 2016 12:02 am

livesoft wrote:I love ETFs, but since you asked, you should use mutual funds.
+1
Amateur investors are not cool-headed logicians.

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fourwedge
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by fourwedge » Mon Mar 21, 2016 12:42 am

I only use Mutual Funds because I love to have Automatic Investments set up on a calendar schedule. This isn't an option with ETF's.
Max out your tax sheltered retirement accounts with inexpensive, well diversified, index funds and you will beat 90% of all investors.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by kazper » Mon Mar 21, 2016 11:48 am

fourwedge wrote:I only use Mutual Funds because I love to have Automatic Investments set up on a calendar schedule. This isn't an option with ETF's.
Exactly! With ETFs, you would need to log in and make your biweekly/monthly ETF purchases. With mutual funds, you can set it up through Vanguard (or whoever you are currently with) and set it for automatic investing. The mutual fund option definitely sounds like the "lazier" portfolio to me :)

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by Duckie » Mon Mar 21, 2016 6:18 pm

l1am wrote:My options:

Mutual funds:
  • Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - ER 0.05%
    Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) - ER 0.12%
    Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - ER 0.07%
Total Bond Market does not belong in a taxable account. If you don't have tax-sheltered accounts (401k/IRA) to hold your bond AA use (VWITX) Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (0.20%) or the new (VTEBX) Vanguard Tax-Exempt Bond Index Fund Investor Shares (0.20%).

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ogd
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by ogd » Mon Mar 21, 2016 10:24 pm

stlutz wrote:In taxable I'm a fan of ETFs. They allow you to separate the manager of your assets from the custodian of your assets if you so desire in the future. With funds, if you decide 10 years from now that you're unhappy with Vanguard's customer service/website/something else, you can easily transfer ETFs to any other broker. You can't do that with Admiral-share mutual funds.
Well, at Vanguard you retain the freedom to switch to ETFs if you want to transfer assets some day. It's a 5 minute phone call and happens overnight. Importantly, without tax consequences.

In the other direction, you don't have that freedom. If you get "bored" (or whatever the opposite of "bored" is) with ETFs or something happens with the instrument in the marketplace, you have to pay taxes to switch back to mutual funds. In the Wiki I pointed out that it's an argument to start with mutual funds if you're unsure.
l1am wrote:I'm leaning towards funds, since I don't need to actively trade.
This is my recommendation too. You should find all the information you need in https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds .

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Tue Mar 22, 2016 11:55 am

Duckie wrote:
l1am wrote:My options:

Mutual funds:
  • Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - ER 0.05%
    Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) - ER 0.12%
    Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - ER 0.07%
Total Bond Market does not belong in a taxable account. If you don't have tax-sheltered accounts (401k/IRA) to hold your bond AA use (VWITX) Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (0.20%) or the new (VTEBX) Vanguard Tax-Exempt Bond Index Fund Investor Shares (0.20%).
Wait... the gains are tax free?

https://personal.vanguard.com/us/funds/ ... IntExt=INT

jayhawkerbeef
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by jayhawkerbeef » Tue Mar 22, 2016 12:54 pm

Also, review this thread for deciding between taxable vs. tax exempt bonds in taxable.

viewtopic.php?p=2839638#p2839638

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by Yossarian » Tue Mar 22, 2016 3:30 pm

I prefer to have a good chunk of ETFs in order to move them around from brokerage to brokerage, collecting bonuses like Merrill's current $1k for letting them hold $200k in ETFs. You can't do this with mutual funds. I keep at least minimum for Admiral shares in the same funds at Vanguard so I can more easily do automatic contributions each month.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by jjface » Tue Mar 22, 2016 3:49 pm

There is less chance of making an error with mutual funds.

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Duckie
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by Duckie » Tue Mar 22, 2016 4:25 pm

l1am wrote:Wait... the gains are tax free?
Municipal bond interest and municipal bond fund dividends are exempt from federal taxes. AMT and state income taxes are something else. And if you sell for a gain that is taxable.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by oldcomputerguy » Tue Mar 22, 2016 8:19 pm

David Jay wrote: It is a lot easier (and cheaper) to rebalance in Mutual funds.
It's also easier to set up automatic investing with mutual funds.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by oldcomputerguy » Tue Mar 22, 2016 8:22 pm

l1am wrote:
Duckie wrote:
l1am wrote:My options:

Mutual funds:
  • Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - ER 0.05%
    Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) - ER 0.12%
    Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - ER 0.07%
Total Bond Market does not belong in a taxable account. If you don't have tax-sheltered accounts (401k/IRA) to hold your bond AA use (VWITX) Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (0.20%) or the new (VTEBX) Vanguard Tax-Exempt Bond Index Fund Investor Shares (0.20%).
Wait... the gains are tax free?

https://personal.vanguard.com/us/funds/ ... IntExt=INT
Dividends paid by municipal bonds are free from federal taxes, but not (in general) from state and local taxes. However, if you are a resident in the municipality that issued the bonds, they are also free from taxation levied by your municipality.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

l1am
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Wed Mar 23, 2016 6:33 pm

Duckie wrote: Municipal bond interest and municipal bond fund dividends are exempt from federal taxes. AMT and state income taxes are something else. And if you sell for a gain that is taxable.
smartinwate wrote: Dividends paid by municipal bonds are free from federal taxes, but not (in general) from state and local taxes. However, if you are a resident in the municipality that issued the bonds, they are also free from taxation levied by your municipality.
Damn, this is getting more complicated. So I could shift my tax advantaged accounts to be bond heavy, at least the pre-tax portion. Then, make my taxable more stock heavy.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by Joe_R95 » Wed Mar 23, 2016 6:56 pm

Duckie wrote:
Total Bond Market does not belong in a taxable account. If you don't have tax-sheltered accounts (401k/IRA) to hold your bond AA use (VWITX) Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (0.20%) or the new (VTEBX) Vanguard Tax-Exempt Bond Index Fund Investor Shares (0.20%).

+1 be aware that VTEBX currently has a 0.25% purchasing fee that VWITX does not have.

Also I wouldn't shift bonds to a tax advantaged account unless you needed to maintain balance. Stocks, REITs, and such are much better there because the dividend and capital gains aren't taxed until withdrawal so it can grow faster rather than creating more taxable events. No worries man, its not complicated once you get it setup and rolling.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by jayhawkerbeef » Wed Mar 23, 2016 7:05 pm

VTEB has no purchase fee and the expense ratio is the same as admiral class for the mutual fund version.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Wed Mar 23, 2016 8:14 pm

Joe_R95 wrote:[
+1 be aware that VTEBX currently has a 0.25% purchasing fee that VWITX does not have.

Also I wouldn't shift bonds to a tax advantaged account unless you needed to maintain balance. Stocks, REITs, and such are much better there because the dividend and capital gains aren't taxed until withdrawal so it can grow faster rather than creating more taxable events. No worries man, its not complicated once you get it setup and rolling.
So bond gains are taxed before withdrawal?

Also, VTEBX has a higher ER than the Total Bond Market. And admiral requires minimum of $50k which is too high if bonds are going to be 20% of my portfolio.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by Joe_R95 » Wed Mar 23, 2016 9:27 pm

l1am wrote:
So bond gains are taxed before withdrawal?

Also, VTEBX has a higher ER than the Total Bond Market. And admiral requires minimum of $50k which is too high if bonds are going to be 20% of my portfolio.
You pay tax on taxable bond distributions in a taxable account. You will be paid a little every month for holding them it doesn't matter if you reinvest it or not you will pay taxes on the distribution if its a taxable fund. If you go the tax exempt route with muni bonds you wont pay federal but will likely pay some state/local taxes. So holding total bond market in a taxable account you will pay federal taxes on distributions, but the tax exempt funds you wont. You might check your situation, but for me paying the higher rate for VWITX left me with more after tax gains, and room for better options in my tax deferred accounts. VTEBX would have resulted in less gains overall due to the purchase fee. If that eventually goes away it will also be a good option. The ETF (VTEB) of that fund is a good choice in a taxable, but you run into some risks with spread. That being said if you are dollar cost averaging the spread issues should even out. Basically make the best possible choices you can to lower taxes and preserve gains.

Edit: Here's a link to the wiki on bonds. I would highly suggest reading through it. https://www.bogleheads.org/wiki/Bond_basics#Risks

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Wed Apr 06, 2016 3:56 pm

I'm ready to invest and here's the current plan. I'd love more feedback on which Bond fund to invest in. I'll be in California for now.

Image

1. Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - ER 0.05%

2. Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) - ER 0.12%

3. Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - ER 0.07%
OR
(VWITX) Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (0.20%)
OR
(VTEBX) Vanguard Tax-Exempt Bond Index Fund Investor Shares (0.20%).

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by BHUser27 » Wed Apr 06, 2016 4:10 pm

l1am wrote:I'm ready to invest and here's the current plan. I'd love more feedback on which Bond fund to invest in. I'll be in California for now.

1. Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - ER 0.05%
2. Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) - ER 0.12%
3. Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - ER 0.07%
OR
(VWITX) Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (0.20%)
OR
(VTEBX) Vanguard Tax-Exempt Bond Index Fund Investor Shares (0.20%).
You will get better responses if you follow this format viewtopic.php?f=1&t=6212 and start a new thread with the same question(s).

For example, it is difficult to advise on bond fund selection without knowing age, tax bracket, and whether you have other tax-advantaged accounts (401K, IRA...) and what they contain.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Tue Apr 12, 2016 7:46 pm

I think it makes sense to just go all-stocks in my taxable account. I'll balance out with bond allocations in my tax-advantaged account - thanks everyone for pointing this out.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Tue Apr 12, 2016 7:46 pm

I think it makes sense to just go all-stocks in my taxable account - probably 70/30 US:INTL. I'll balance out with bond allocations in my tax-advantaged account - thanks everyone for pointing this out.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by oldcomputerguy » Tue Apr 12, 2016 8:13 pm

iceport wrote:If you're at Vanguard, there's absolutely no benefit to using ETFs, given these options.
There is one possible benefit. If the investor doesn't have enough funds together to purchase Admiral shares, he can get similar low expense ratios by going with ETF's rather than with the more expensive Investor shares.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by iceport » Tue Apr 12, 2016 8:22 pm

smartinwate wrote:
iceport wrote:If you're at Vanguard, there's absolutely no benefit to using ETFs, given these options.
There is one possible benefit. If the investor doesn't have enough funds together to purchase Admiral shares, he can get similar low expense ratios by going with ETF's rather than with the more expensive Investor shares.
Ahh, but the OP's choice was between Admiral share class mutual funds and ETFs.
"Discipline matters more than allocation.” ─William Bernstein

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by oldcomputerguy » Wed Apr 13, 2016 7:44 pm

iceport wrote:
smartinwate wrote:
iceport wrote:If you're at Vanguard, there's absolutely no benefit to using ETFs, given these options.
There is one possible benefit. If the investor doesn't have enough funds together to purchase Admiral shares, he can get similar low expense ratios by going with ETF's rather than with the more expensive Investor shares.
Ahh, but the OP's choice was between Admiral share class mutual funds and ETFs.
Ah. Sorry, I failed to pick up on that detail. Yep, given that, no benefit to ETF's. In fact, I purposely shy away from them in my taxable account, as I don't want the temptation of looking at share prices through the trading day. Also, I'm doing autopilot investing, and one really can't do that using ETFs.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by jayhawkerbeef » Thu Apr 14, 2016 11:39 am

smartinwate wrote:Also, I'm doing autopilot investing, and one really can't do that using ETFs.
Also, it's not that difficult to know how much and when someone wants to contribute. Then open up a browser, log into whichever brokerage site and buy entering marketable limit orders based upon allocation. This should take all but 5 minutes max.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by steve roy » Thu Apr 14, 2016 5:37 pm

I purchase Vanguard Mutual Funds, Admiral share classes EXCEPT ....

in the case of Vanguard FTSE All-World ex-US Small-Cap. For the small cap, I buy the ETF (VSS) because there is no Admiral share class available and I want the lower price offered in the ETF format. (Ordinarily, Vanguard ETFs are the same price as Admiral shares. But not in this particular case).

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by iceport » Thu Apr 14, 2016 6:42 pm

smartinwate wrote:
iceport wrote:
smartinwate wrote:
iceport wrote:If you're at Vanguard, there's absolutely no benefit to using ETFs, given these options.
There is one possible benefit. If the investor doesn't have enough funds together to purchase Admiral shares, he can get similar low expense ratios by going with ETF's rather than with the more expensive Investor shares.
Ahh, but the OP's choice was between Admiral share class mutual funds and ETFs.
Ah. Sorry, I failed to pick up on that detail. Yep, given that, no benefit to ETF's. In fact, I purposely shy away from them in my taxable account, as I don't want the temptation of looking at share prices through the trading day. Also, I'm doing autopilot investing, and one really can't do that using ETFs.
Agreed. As documented in the links I provided up-thread, there are multiple disadvantages of ETFs. Unfortunately, it seems on this forum folks are often goaded into ETFs, sometimes with the implication that mutual funds are better suited for the less intelligent.

Ironically, it actually takes more intelligence to discern — and avoid — the (often) unnecessary busywork and complications of ETFs.
"Discipline matters more than allocation.” ─William Bernstein

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Tue May 03, 2016 11:40 pm

Invested it all his morning. Down 1.6% on my first day, great start :wink:

Ye I know it's a long term game...

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by jjface » Wed May 04, 2016 12:25 am

Probably wishing you chose mutual funds

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Thu May 05, 2016 1:17 am

jjface wrote:Probably wishing you chose mutual funds
I actually went 70/30 on VTSAX:VTIAX.

Looking at the performance of VTIAX, I'm not sure why I didn't just go all-in on VTSAX - ER is lower too.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by in_reality » Thu May 05, 2016 11:47 am

l1am wrote:
jjface wrote:Probably wishing you chose mutual funds
I actually went 70/30 on VTSAX:VTIAX.

Looking at the performance of VTIAX, I'm not sure why I didn't just go all-in on VTSAX - ER is lower too.
Because you shouldn't choose funds based on past performance.

US valuations are high now and expected returns lower than international. Nobody knows for sure which will turn out to be the best in the next 5 or 10 or 20 years of course. Expected returns from international are just higher due to their lower current price and room for their currencies to strengthen.

You did the right think by following your allocation! Stick with it. At some point the emerging market returns in VTIAX will likely make you smile even if recent return have me frowning.

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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Thu Dec 15, 2016 7:16 pm

in_reality wrote:
l1am wrote: I actually went 70/30 on VTSAX:VTIAX.

Looking at the performance of VTIAX, I'm not sure why I didn't just go all-in on VTSAX - ER is lower too.
Because you shouldn't choose funds based on past performance.

US valuations are high now and expected returns lower than international. Nobody knows for sure which will turn out to be the best in the next 5 or 10 or 20 years of course. Expected returns from international are just higher due to their lower current price and room for their currencies to strengthen.

You did the right think by following your allocation! Stick with it. At some point the emerging market returns in VTIAX will likely make you smile even if recent return have me frowning.
VTSAX still outperforming VTIAX, I hope you're right.

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FIREchief
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by FIREchief » Thu Dec 15, 2016 8:48 pm

It looks like you've joined the mainstream here, since you're lamenting the underperformance of foreign vs. domestic equities. This is probably one of the only major divides among bogleheads, as even the forum's hero has been reported to waffle on this issue. Has the rest of the world become the next Japan? Are they simply overdue for a huge correction upward? Does international diversification add anything? Are geopolitical risks a huge concern in the long run? What if the US caves in?

As others are fond of saying, "nobody knows nothin." :beer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

l1am
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by l1am » Thu Dec 15, 2016 11:09 pm

FIREchief wrote:It looks like you've joined the mainstream here, since you're lamenting the underperformance of foreign vs. domestic equities. This is probably one of the only major divides among bogleheads, as even the forum's hero has been reported to waffle on this issue. Has the rest of the world become the next Japan? Are they simply overdue for a huge correction upward? Does international diversification add anything? Are geopolitical risks a huge concern in the long run? What if the US caves in?

As others are fond of saying, "nobody knows nothin." :beer
Nobody knows, but I often see arguments on here for investing in a particular fund based on weighing ER to past performance. It seems that people just throw that line away for VTIAX, unless the whole idea is to have a safety net if US stocks collapse.

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in_reality
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Re: Lazy portfolio - Mutual funds or ETFs?

Post by in_reality » Sat Dec 17, 2016 3:36 am

l1am wrote:
in_reality wrote:
l1am wrote: I actually went 70/30 on VTSAX:VTIAX.

Looking at the performance of VTIAX, I'm not sure why I didn't just go all-in on VTSAX - ER is lower too.
Because you shouldn't choose funds based on past performance.

US valuations are high now and expected returns lower than international. Nobody knows for sure which will turn out to be the best in the next 5 or 10 or 20 years of course. Expected returns from international are just higher due to their lower current price and room for their currencies to strengthen.

You did the right think by following your allocation! Stick with it. At some point the emerging market returns in VTIAX will likely make you smile even if recent return have me frowning.
VTSAX still outperforming VTIAX, I hope you're right.

Image
Keep in mind the USD has seen a nice boost recently. So contributions into VTIAX are at both lower stock valuations and lower currency valuations.

I'm in this for 20 or 30 or 40 years. I'm not expecting VTIAX to outperform in the next six months or year or two. It may and it many not.

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