Index Admiral Shares or ETF's??

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michaelc
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Index Admiral Shares or ETF's??

Post by michaelc » Tue Apr 03, 2018 1:01 pm

Hi,

I am 55, single, no debt, planning to work at least 12 more years to 67, 68. Other retirement assets are with my 403(b) TIAA-CREF valued at $425,000.

By the end of the week, I intend to transfer my current ROTH with TRP Cap Apprec over to Vanguard, using the 3 fund portfolio approach. I am debating if I should go with one of the below. Also wondering if its worth while to add the International Bond?? What are the advantages and disadvantages going with either a ETF portfolio vs Index portfolio? I will be contributing $540.00 every month with automatic withdrawls from my checking account.

BND - Total Bond ETF
VTI - Total Stock Market ETF
VXUS - Total International Stock ETF

OR

VTSAX - Total Stock Market Index Admiral Shares
VTIAX - Total International Stock Index Admiral Shares
VBTLX - Total Bond Index Admiral Shares

The Roth transfer is $80,0000, so I believe I quality for the Admiral Shares.
Last edited by michaelc on Tue Apr 03, 2018 1:06 pm, edited 2 times in total.

onourway
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Re: Index Admiral Shares or ETF's??

Post by onourway » Tue Apr 03, 2018 1:03 pm

Makes little to no difference. If you expect to continue to make contributions and would like to do so automatically, choose the mutual funds. If you think you might like to move your account again to another custodian, ETF's are more easily portable.

FWIW, mutual funds can be converted to ETF's on request. The reverse is not permitted.

b42
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Re: Index Admiral Shares or ETF's??

Post by b42 » Tue Apr 03, 2018 1:07 pm

I prefer mutual funds since I can buy fractional shares, which makes exact dollar purchases possible (such as buying $3k of any index).

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Alexa9
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Re: Index Admiral Shares or ETF's??

Post by Alexa9 » Tue Apr 03, 2018 1:08 pm

I'd give a slight edge to mutual funds. Convenient to buy partial shares, rebalancing, auto invest/withdraw, encourages buy & hold, although ETF's are fine.

michaelc
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Re: Index Admiral Shares or ETF's??

Post by michaelc » Tue Apr 03, 2018 1:16 pm

So pretty much flip a coin?

onourway
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Re: Index Admiral Shares or ETF's??

Post by onourway » Tue Apr 03, 2018 1:19 pm

IMO if you don't have a good reason for choosing ETF's I'd go with the mutual fund.

Amphian
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Re: Index Admiral Shares or ETF's??

Post by Amphian » Tue Apr 03, 2018 1:29 pm

I'm another vote for mutual funds. ETFs definitely have their place, but one of their strengths is tax efficiency - which is meaningless in a Roth. For regular purchases, the fractional shares available for the mutual funds wins out in this case, especially since you can always convert to ETFs. You have enough in the account that you could do admiral for all if you wanted to include an international bond.

retiringwhen
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Re: Index Admiral Shares or ETF's??

Post by retiringwhen » Tue Apr 03, 2018 1:29 pm

michaelc wrote:
Tue Apr 03, 2018 1:16 pm
So pretty much flip a coin?
I had the same question/choice recently. Went mutual funds because,

1.) I had enough per fund to buy Admiral Funds
2.) When I previously traded stock and ETFs (GLD ARGH!) I found the stress of trade "timing" and strategy to be stressful, annoying and time consuming.
3.) If I ever want to move the funds out of Vanguard (this assumes Vanguard funds), I could always convert them to ETFs so it a choice that can be revisited once if you start with Mutual funds (can't go the other direction).

Unless you like trading as an activity, the mutual funds have a small edge in my book.

Captain kangaroo
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Re: Index Admiral Shares or ETF's??

Post by Captain kangaroo » Tue Apr 03, 2018 1:54 pm

I like etfs.. You can more easily more custodian.

Say you want to use Merrill edge as your brokerage.. Transfer in kind and trade for free etfs. Transfer to fidelity and trade for 4 dollars.

Admiral shares wouldn't transfer well.. Your only real option is Vanguard

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mhc
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Re: Index Admiral Shares or ETF's??

Post by mhc » Tue Apr 03, 2018 1:59 pm

I have tried both, and I prefer mutual funds. I find them slightly more convenient because I can buy fractional shares and you just get the NAV at the end of the day.

I would recommend trying the mutual funds. If you don't like them, then you can convert them to ETFs.

I think a set automatic dollar amount investment will work better with mutual funds.

michaelc
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Re: Index Admiral Shares or ETF's??

Post by michaelc » Tue Apr 03, 2018 2:08 pm

Thanks all,
I will go with Admiral Funds.

Marketman
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Re: Index Admiral Shares or ETF's??

Post by Marketman » Tue Apr 03, 2018 2:14 pm

I like mutual funds but I did not know they can be converted to ETFs. Nice to know!

asif408
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Re: Index Admiral Shares or ETF's??

Post by asif408 » Tue Apr 03, 2018 2:16 pm

Agree with others suggesting mutual funds. Will also mention that I don't think there is any way to automatically purchase ETFs on a monthly schedule through Vanguard (at least when I checked into it last year), so if you're planning to set up automatic contributions through Vanguard so you don't have to login every month to buy you'll have to go with mutual funds anyway.

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oldcomputerguy
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Re: Index Admiral Shares or ETF's??

Post by oldcomputerguy » Tue Apr 03, 2018 2:19 pm

Marketman wrote:
Tue Apr 03, 2018 2:14 pm
I like mutual funds but I did not know they can be converted to ETFs. Nice to know!
This only works at Vanguard (they patented the fund structure that makes this possible). You can't do that with anyone else's funds without going to cash first.

One point against ETFs in my mind (which I don't think anyone here has mentioned) is that, unlike mutual funds, they are priced in realtime throughout the trading day just like stocks, and so they tend to enable more frequent trading. To me, ETFs changing prices throughout the day provide too much temptation to abandon a buy-and-hold approach, especially during large market moves.
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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SpringMan
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Re: Index Admiral Shares or ETF's??

Post by SpringMan » Tue Apr 03, 2018 2:34 pm

Generally I prefer mutual funds but there are good reasons for ETFs. Many Vanguard sector specific index funds have 100K minimums for admiral shares, their ETF shares can be purchased in any integer share amount. REITs are the exception with 10K minimums for admiral class. Perhaps another case for using ETFs is when the mutual fund version has a purchase fee. I use both which is handy if you want to be fully invested. You can buy an integer amount of the ETF and stuff any remainder in a mutual fund. For example, I use VSS and VTMSX (tax managed small cap) in a taxable account.
Best Wishes, SpringMan

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Epsilon Delta
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Re: Index Admiral Shares or ETF's??

Post by Epsilon Delta » Tue Apr 03, 2018 2:57 pm

onourway wrote:
Tue Apr 03, 2018 1:03 pm
Makes little to no difference. If you expect to continue to make contributions and would like to do so automatically, choose the mutual funds. If you think you might like to move your account again to another custodian, ETF's are more easily portable.

FWIW, mutual funds can be converted to ETF's on request. The reverse is not permitted.
In a tax deferred or Roth account you can sell the ETF and buy the mutual fund (or vice versa) without tax issues. So pick which one you prefer now. If you want the other one later (e.g. to move ETFs to Schwab to pick up a new account bonus) you can swap at that time.

It might be a tinier bit easier to convert a Vanguard mutual fund to an Vanguard ETF at Vanguard than to sell and buy, but the difference is tiny.

neilpilot
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Re: Index Admiral Shares or ETF's??

Post by neilpilot » Tue Apr 03, 2018 4:24 pm

I was primarily invested in Admiral class funds until Scottrade dropped that option for their self-directed accounts. I prefer ETFs over Admiral shares simply because it makes it much easier to do in-kind transfers, and this has allowed me to collect $8k in new account bonuses since mid-2015.

Since I retired, I only trade to adjust allocation and don't have regular accumulation, so the lack of partial share trades is a non-issue. My ETF trades are usually free, and at most $8/trade. I will never spend more on trades than I have collected in bonus $$, so I don't care about free trades and possible customer service issues at Vanguard.

youngpleb
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Re: Index Admiral Shares or ETF's??

Post by youngpleb » Tue Apr 03, 2018 4:50 pm

Maybe I’m just an idiot, but I don’t know of any way to automatically purchase ETFs, which made it a pain in the butt for me. Not having to log in and manually buy stuff gives mutual funds the advantage for me.
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GerryL
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Re: Index Admiral Shares or ETF's??

Post by GerryL » Tue Apr 03, 2018 5:39 pm

Jack Bogle says: "There is nothing wrong with exchange traded funds ... as long as you don't trade them."
As someone else above wrote, unless you have a particular reason for needed ETFs, mutual funds seem to be the best option.

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Earl Lemongrab
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Re: Index Admiral Shares or ETF's??

Post by Earl Lemongrab » Tue Apr 03, 2018 6:55 pm

I use ETFs because I don't want to be stuck with Vanguard as the custodian. I prefer to split the relationship, buy the best products but keep them where I want. That includes generating cash bonuses for transfers.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Earl Lemongrab
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Re: Index Admiral Shares or ETF's??

Post by Earl Lemongrab » Tue Apr 03, 2018 6:59 pm

oldcomputerguy wrote:
Tue Apr 03, 2018 2:19 pm
One point against ETFs in my mind (which I don't think anyone here has mentioned) is that, unlike mutual funds, they are priced in realtime throughout the trading day just like stocks, and so they tend to enable more frequent trading. To me, ETFs changing prices throughout the day provide too much temptation to abandon a buy-and-hold approach, especially during large market moves.
Really? You have a suppressed desire to day-trade ETFs? Never been a problem for me. Besides, you can still abandon your approach by exchanging mutual funds. It's true they're only priced once a day, but if you're prone to market timing that won't matter much.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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