VFIAX vs. FUSVX capital gains distribution

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savykal
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Joined: Fri Nov 13, 2015 1:12 pm

VFIAX vs. FUSVX capital gains distribution

Postby savykal » Sun Mar 19, 2017 12:57 pm

I am doing the taxes this year. I own both index funds FUSVX (exp. ratio 0.045%) from Fidelity and VFIAX (exp. ratio. 0.05%) from Vanguard. They look identical. However, in 2016 it seems that FUSVX generated quite a bit of capital gains distribution (0.5%). VFIAX generated none.
I see similar capital gains distributions for FUSVX in 2015.

In California, in high tax bracket, it would be then over 0.15% in additional yearly cost as compared to VFIAX -bring the total cost to about 0.2% per year. Quite a big difference. I guess it would be partially offset by higher cost basis in the future.

Does anyone have experience with this long term? Are Fidelity index funds in general less efficient than Vanguard's?
What about other index funds international etc?

Chip
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Joined: Wed Feb 21, 2007 4:57 am

Re: VFIAX vs. FUSVX capital gains distribution

Postby Chip » Sun Mar 19, 2017 1:13 pm

savykal wrote:Does anyone have experience with this long term? Are Fidelity index funds in general less efficient than Vanguard's?
What about other index funds international etc?


Yes. Vanguard funds are more tax efficient because their corresponding ETFs are a share class of the fund. The ETF creation/redemption mechanism allows the fund to reduce the capital gains it realizes and therefore the amount it has to pass through to you. The existence of the ETF share class helps all shareholders, including those who hold the regular mutual fund. This type of structure is unique to and patented by Vanguard.

I owned FUSVX and its predecessor for years and currently own FSTVX. None have been as tax efficient as its Vanguard counterpart (at least since Vanguard created the ETF share classes). If you want maximum tax efficiency at Fidelity, buy an ETF. There are several available that are just as tax efficient as the Vanguard funds. Some of the iShares ETFs trade commission-free.

savykal
Posts: 11
Joined: Fri Nov 13, 2015 1:12 pm

Re: VFIAX vs. FUSVX capital gains distribution

Postby savykal » Sun Mar 19, 2017 5:41 pm

Thank you for your replay. I missed the no fee ETF funds -it is a good idea for Fidelity. So I am comparing the Vanguard VFIAX and IVV and FUSVX

For example pretax 1 year return is

is 24.91% for IVV and FUSVX and 24.94% for VIAX
but after tax I tis
24.29 for IVV %
and only 24.06% for VFIAX and even less (as expected) for FUSVX 23.67%


So it seems that IVV is potentially even more efficient as compared to VFIAX ? Why would that be ?

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: VFIAX vs. FUSVX capital gains distribution

Postby livesoft » Sun Mar 19, 2017 5:52 pm

I think it depends on the pair of funds that one is comparing. Sometimes one vendor has a more tax-efficient fund and sometimes the other vendor has a more tax-efficient fund.

And sometimes one over interprets the data. For instance, I think Investor shares are more efficient than Admiral shares as a general rule. :twisted:
But that is because Admiral shares have lower costs which leads to a slightly higher dividend payout and the higher taxes associated with that extra payout
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F150HD
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Joined: Fri Sep 18, 2015 7:49 pm

Re: VFIAX vs. FUSVX capital gains distribution

Postby F150HD » Sun Mar 19, 2017 8:13 pm

savykal wrote:I am doing the taxes this year. I own both index funds FUSVX (exp. ratio 0.045%) from Fidelity and VFIAX (exp. ratio. 0.05%) from Vanguard. They look identical. However, in 2016 it seems that FUSVX generated quite a bit of capital gains distribution (0.5%). VFIAX generated none.
I see similar capital gains distributions for FUSVX in 2015.

In California, in high tax bracket, it would be then over 0.15% in additional yearly cost as compared to VFIAX -bring the total cost to about 0.2% per year. Quite a big difference. I guess it would be partially offset by higher cost basis in the future.

Does anyone have experience with this long term? Are Fidelity index funds in general less efficient than Vanguard's?
What about other index funds international etc?


are you talking in taxable? or tax-deferred?

savykal
Posts: 11
Joined: Fri Nov 13, 2015 1:12 pm

Re: VFIAX vs. FUSVX capital gains distribution

Postby savykal » Mon Mar 20, 2017 8:57 am

Considering this in taxable

savykal
Posts: 11
Joined: Fri Nov 13, 2015 1:12 pm

Re: VFIAX vs. FUSVX capital gains distribution

Postby savykal » Mon Mar 20, 2017 2:20 pm

Actually, ETF funds are OK in Fidelity but they cannot be set up for automatic investment. So it looks like for automatic investing
in SP500 in taxable account Vanguard is preferred despite the fact that the Fidelity FUSVX has slightly lower cost


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