Changing from Index to ETF

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JustinTime
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Changing from Index to ETF

Post by JustinTime » Mon Jun 19, 2017 12:41 pm

Thoughts from you guys, I think I'm going to change from a total market index fund FSTVX ER (.045) to a total market ETF ITOT ER (.03) commission-free with Fidelity. This is all in a tax-deferred account so not worried about cap gains when making the trade.

Reasons:

- I've switched from purchasing FSTVX to ITOT already in my taxable due to FSTVX often distributing capital gains with their distributions
- Distributions are quarterly in ITOT rather than April and Dec for FSTVX. I like quarterly better.
- Have same fund in tax-advantage as well as taxable
- ITOT is .03 vs .045 expense ratio
- Not big, but it's kind of nice seeing portfolio changes throughout the day rather than hours after close

Any reason why this would be a bad idea? Only big thing I can thing of is time out of the market. So Index fund wouldn't sell until end of market close then if market jumps up the following morning before ETF ITOT is purchased might be some gain losses.

AcesUp
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Re: Changing from Index to ETF

Post by AcesUp » Mon Jun 19, 2017 1:52 pm

Seems you covered most of the considerations. Only thing I'd add is they track different indexes, though both performed very closely to each other from what I can tell. And you'd face bid/ask spreads with ITOT as an ETF - though it appears volume is high enough and spreads tight enough that what you'd lose there would be negligible I think.

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JustinTime
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Re: Changing from Index to ETF

Post by JustinTime » Mon Jun 19, 2017 1:55 pm

Appreciate it! Yeah, I was aware of the slightly different indexes seems super close though. I was thinking about the Bid/Spread, but as you mentioned seems volume is so high it probably wouldn't be a big deal.

AcesUp wrote:Seems you covered most of the considerations. Only thing I'd add is they track different indexes, though both performed very closely to each other from what I can tell. And you'd face bid/ask spreads with ITOT as an ETF - though it appears volume is high enough and spreads tight enough that what you'd lose there would be negligible I think.

TropikThunder
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Re: Changing from Index to ETF

Post by TropikThunder » Mon Jun 19, 2017 2:49 pm

JustinTime wrote:Reasons:
- Distributions are quarterly in ITOT rather than April and Dec for FSTVX. I like quarterly better.
Why would this matter in tax-advantaged?
JustinTime wrote:Reasons:
- Have same fund in tax-advantage as well as taxable
This may complicate TLH done in taxable (whether purchases in tax-advantaged count as wash sales is unclear).
JustinTime wrote:Reasons:
- TOT is .03 vs .045 expense ratio
That's a difference of only $15/year on $100,000.
JustinTime wrote:Reasons:
- Not big, but it's kind of nice seeing portfolio changes throughout the day rather than hours after close
Some would consider that a disadvantage . :twisted:

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nisiprius
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Re: Changing from Index to ETF

Post by nisiprius » Mon Jun 19, 2017 3:40 pm

I don't think there's any difference at all that could possibly be enough to matter. Don't get hung up on the mental trap of saying "since they are different, one must be better, therefore I must figure out which it is." Better to just say "I'm doing it because, eh, why not. One less ticker symbol to remember."

Since you say it's in a tax-advantaged account, you can try it and if you discover that you don't like it for any reason, you can always switch back.

Six-month free home trial, use it and enjoy it with no obligation, if you don't like it send it back--and the semi-annual report is yours to keep as our gift to you. It's crammed full to bursting with valuable information, and a personal letter from the fund chairman, and it's yours to keep, just for trying ITOT.

By the way I personally like mutual funds and dislike ETFs so I'm not just trying to impose my personal tastes on you.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

retiredjg
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Re: Changing from Index to ETF

Post by retiredjg » Mon Jun 19, 2017 4:13 pm

I don't have an opinion, but do have some comments on what you say are your reasons.

    - I've switched from purchasing FSTVX to ITOT already in my taxable due to FSTVX often distributing capital gains with their distributions<--this seems to be a statement of fact, not a reason

    - Distributions are quarterly in ITOT rather than April and Dec for FSTVX. I like quarterly better. <--not relevant that I can see in a tax-advantaged account

    - Have same fund in tax-advantage as well as taxable<--which may cause a wash sale if you sell anything in taxable at a loss

    - ITOT is .03 vs .045 expense ratio<--too small a difference to matter

    - Not big, but it's kind of nice seeing portfolio changes throughout the day rather than hours after close<--I'm guessing this is the real reason. Not sure it will help you in some way and could be harmful unless you just watch.

Seems to me you just want to do this and are looking for reasons to justify it. I don't see any, but there's no reason you can't just do it because you want to.

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