ETF vs Investor Shares?

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ETF vs Investor Shares?

Postby tempestam83 » Mon Jan 09, 2017 11:02 am

I have $9,000 in my Roth that I'm looking to divide equally among the following:

VB (Vanguard Small Cap ETF)
BND (Total Bond Market)

With $3,000 to go into each, is it worth the extra expense to buy at investor shares vs ETF?

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Re: ETF vs Investor Shares?

Postby CABob » Mon Jan 09, 2017 1:27 pm

There are many reasons why one might want and prefer to use the investor share class of mutual funds vs. an ETF, but I don't believe there is a specific advantage to use the mutual fund that would warrant the higher expense ratio. Personally however I would prefer the mutual fund even at the higher ER. I also know that when the fund balance grows to $10K it will convert to Admiral class with an ER the same as the ETF.
For more information you might look at the wiki sections on ETFs - or

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Re: ETF vs Investor Shares?

Postby tempestam83 » Mon Jan 09, 2017 1:37 pm

My thinking would be to go in as investor shares, then they would convert to Admiral after a few years of contributions.

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Re: ETF vs Investor Shares?

Postby jhfenton » Mon Jan 09, 2017 2:10 pm

If I had $9,000 to divide in a Roth IRA among those 3 funds 1/3 each, I'd buy as many shares of VBR and VNQ as I could with $3,000 each, and then put the remaining $3,0xx in VBMFX (Total Bond Investor Shares). And I'd keep that basic principle up as I added new money. Once I got to $10,000 each, I'd sell the VBR and VNQ and buy the corresponding Admiral Shares. The Total Bond would convert to Admiral.

1. I'd be close to my desired allocation.
2. I'd always have a fund to add the odd dollars and cents to.
3. Total Bond has the small ER difference between the ETF/Admiral and Investor shares (10 bp vs 12 bp or 14 bp).
4. I prefer bond mutual fund shares.

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Re: ETF vs Investor Shares?

Postby Geologist » Mon Jan 09, 2017 5:16 pm

One thing to keep in mind is that for small account sizes ($3000 or even up to $9000, just below the dividing line between Investor and Admiral/ETF shares), the difference in dollars between the expenses of the share classes is not significant. For the Total Bond Market, for example, on an account of $9000, the expense difference is $9 per year. The other funds will be roughly similar, so you would pay (at the moment) about $9/year extra to buy Investor mutual fund shares rather than ETF shares.

Therefore, you should make your choice of mutual fund vs. ETF on grounds other than expenses.

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