surprisingly higher tax cost ratio of Vanguard Admiral shares vs Vanguard ETFs for stocks

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johnsmithsf
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surprisingly higher tax cost ratio of Vanguard Admiral shares vs Vanguard ETFs for stocks

Post by johnsmithsf » Mon Jun 04, 2018 10:50 am

I was under the impression that Vanguard ETFs are structured as share classes of the same underlying fund, so the tax treatment is the same for both (assuming the same expense ratio). But I was surprised to see on morningstar that for the stock funds, the tax cost ratio of Vanguard Admiral shares are much higher (by ~0.1-0.2%) than comparable ETFs with the same expense ratio.

Tax Cost Ratio
Time.. — — — — 1-Yr 3-Yr 5-Yr 10-Yr 15-Yr
VFIAX. — — — — 0.81 0.67 0.71 0.52 0.45 — Vanguard 500 Index Fund Admiral Shares
VOO .. — — — — 0.45 0.48 0.59 — — — ...Vanguard 500 Index
VV ..... — — — — 0.43 0.46 0.57 0.53 — — Vanguard Large-Cap ETF
VLCAX — — — — 0.78 0.65 0.68 0.50 — — Vanguard Large Cap Index Fund Admiral Shares
VTI .... — — — — 0.43 0.46 0.57 0.46 0.39 — Vanguard Total Stock Market ETF
VTSAX — — — — 0.76 0.64 0.68 0.50 0.43 — Vanguard Total Stock Market Index Fund Admiral Shares

This was NOT seen in the bond funds

VCIT . — — — — 1.39 1.40 1.41 — — — Vanguard Intermediate Tm Cpte Bd ETF
VICSX — — — — 1.40 1.41 1.44 — — — Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares
VSIGX — — — — 0.76 0.72 0.71 — — — Vanguard Intermediate-Term Treasury Index Fund Admiral Shares
VGIT . — — — — 0.75 0.72 0.69 — — — Vanguard Intmdte Tm Govt Bd ETF

http://performance.morningstar.com/fund ... ture=en-US

I am debating between ETFs and Admiral shares for my buy and hold taxable portfolio. Compounded over a period of 20 years, this 0.2% annual difference may build up into a big difference in the final balance.

Does this mean that even with Vanguard, we are better off with ETFs (for stocks)?

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Tyler Aspect
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Re: surprisingly higher tax cost ratio of Vanguard Admiral shares vs Vanguard ETFs for stocks

Post by Tyler Aspect » Mon Jun 04, 2018 11:20 am

Inaccurate Morningstar data would be the most obvious explanation.
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triceratop
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Re: surprisingly higher tax cost ratio of Vanguard Admiral shares vs Vanguard ETFs for stocks

Post by triceratop » Mon Jun 04, 2018 11:29 am

Thank you for this excellent reminder that Morningstar tax cost ratio information is often inaccurate and the safe strategy is to treat it as complete garbage for analysis purposes.

Many similar threads can be found using these keywords and the site search.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

johnsmithsf
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Re: surprisingly higher tax cost ratio of Vanguard Admiral shares vs Vanguard ETFs for stocks

Post by johnsmithsf » Mon Jun 04, 2018 11:35 am

triceratop wrote:
Mon Jun 04, 2018 11:29 am
Thank you for this excellent reminder that Morningstar tax cost ratio information is often inaccurate and the safe strategy is to treat it as complete garbage for analysis purposes.

Many similar threads can be found using these keywords and the site search.
Do you know of any other source that can provide Tax cost ratios? Why should we assume that Moriningstar information is incorrect just because it does not match with our notions.

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triceratop
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Re: surprisingly higher tax cost ratio of Vanguard Admiral shares vs Vanguard ETFs for stocks

Post by triceratop » Mon Jun 04, 2018 12:09 pm

johnsmithsf wrote:
Mon Jun 04, 2018 11:35 am
triceratop wrote:
Mon Jun 04, 2018 11:29 am
Thank you for this excellent reminder that Morningstar tax cost ratio information is often inaccurate and the safe strategy is to treat it as complete garbage for analysis purposes.

Many similar threads can be found using these keywords and the site search.
Do you know of any other source that can provide Tax cost ratios? Why should we assume that Moriningstar information is incorrect just because it does not match with our notions.
I do know one source: viewtopic.php?t=242137

There is no assumption involved here — the fact that Morningstar disagrees with itself is proof alone that it’s wrong.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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jhfenton
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Re: surprisingly higher tax cost ratio of Vanguard Admiral shares vs Vanguard ETFs for stocks

Post by jhfenton » Mon Jun 04, 2018 12:10 pm

johnsmithsf wrote:
Mon Jun 04, 2018 11:35 am
triceratop wrote:
Mon Jun 04, 2018 11:29 am
Thank you for this excellent reminder that Morningstar tax cost ratio information is often inaccurate and the safe strategy is to treat it as complete garbage for analysis purposes.

Many similar threads can be found using these keywords and the site search.
Do you know of any other source that can provide Tax cost ratios? Why should we assume that Moriningstar information is incorrect just because it does not match with our notions.
If I knew nothing else about M* tax-cost ratios, the fact that two identically-priced share classes of the exact same fund have wildly-different tax-cost ratios would tell me that M*'s data was wrong.

It is legally and mathematically impossible for VOO and VFIAX to have significantly different tax-cost ratios.

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