Best way to automatically invest in Vanguard ETFs

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BFRAME
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Best way to automatically invest in Vanguard ETFs

Post by BFRAME » Wed Jul 11, 2018 6:31 pm

I'm trying to sort out the best way to set up automatic investment in my Roth IRA, which I recently converted to a brokerage account. Right now I am just keeping automatic investments into Vanguard mutual funds, but for some of these funds I can get for a lower expense ratio if I switch to the Vanguard ETF version.

My plan right now is keep the automatic investment going into the mutual funds, and every couple months just exchange the mutual funds for the corresponding ETF. But if I go this route, should I do an official conversion of the mutual fund into the ETF (e.g., buy calling Vanguard) or is selling/buying sufficient? Given that there are no tax implications nor cost basis to keep track of (as far as I understand) I don't see an issue with just exchanging myself, but I could be wrong? For example, is exchanging a mutual fund for an ETF an exact 1-to-1 correspondence, or is there some risk that I will by taking a loss on these exchanges? Or are there any fees I will incur that might minimize the effectiveness of this approach? Alternately, I could always just auto-invest into a money market or similar, and then periodically buy the ETFs, but then I lose out on a bit of dollar cost averaging.

Thanks for the feedback!

venkman
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Re: Best way to automatically invest in Vanguard ETFs

Post by venkman » Wed Jul 11, 2018 10:44 pm

If this is a case where the ER is higher because you have Investor shares instead of Admiral shares, I wouldn't even bother with the ETF's. The actual extra dollar amount you pay for Investor shares doesn't become significant until you're well past the point where you qualify for Admiral shares.

If we're talking about one of the small number of funds where there are no Admiral shares and the ETF is cheaper (Intl. Small Cap, Long Term Bond Index), then I'd just put money into the MM until you had enough to buy at least one ETF share.

jacoavlu
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Re: Best way to automatically invest in Vanguard ETFs

Post by jacoavlu » Wed Jul 11, 2018 10:56 pm

venkman wrote:
Wed Jul 11, 2018 10:44 pm
If this is a case where the ER is higher because you have Investor shares instead of Admiral shares, I wouldn't even bother with the ETF's. The actual extra dollar amount you pay for Investor shares doesn't become significant until you're well past the point where you qualify for Admiral shares.
further, you'll be left with small bits of cash because you can only buy full ETF shares, which might negate the small savings from the lower ER (admittedly I did not do any math to actually compare the significance of this small cash drag to the cost savings of some amount in investor shares vs ETFs)

johan851
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Re: Best way to automatically invest in Vanguard ETFs

Post by johan851 » Wed Jul 11, 2018 11:03 pm

I agree that in real terms the lower ER isn't with the hassle.

If you do want to convert shares, I'd recommend calling and doing a share class conversion instead of buying and selling. That way your dollars stay "in the market" the whole time. If you sell and then buy, you likely won't buy for the same price you sell due to the time required to sell and have cash available, market changes throughout the trading day, bid/ask spreads, etc.

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whodidntante
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Re: Best way to automatically invest in Vanguard ETFs

Post by whodidntante » Wed Jul 11, 2018 11:09 pm

Is M1 Finance what you want?

BFRAME
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Re: Best way to automatically invest in Vanguard ETFs

Post by BFRAME » Thu Jul 12, 2018 8:36 am

venkman wrote:
Wed Jul 11, 2018 10:44 pm
If this is a case where the ER is higher because you have Investor shares instead of Admiral shares, I wouldn't even bother with the ETF's. The actual extra dollar amount you pay for Investor shares doesn't become significant until you're well past the point where you qualify for Admiral share
jacoavlu wrote:
Wed Jul 11, 2018 10:56 pm
further, you'll be left with small bits of cash because you can only buy full ETF shares, which might negate the small savings from the lower ER (admittedly I did not do any math to actually compare the significance of this small cash drag to the cost savings of some amount in investor shares vs ETFs)
Thanks -- these are the exact sorts of things I was wondering. I'll just stick with mutual funds for now, and reassess in a few years.

BFRAME
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Re: Best way to automatically invest in Vanguard ETFs

Post by BFRAME » Thu Jul 12, 2018 9:05 am

whodidntante wrote:
Wed Jul 11, 2018 11:09 pm
Is M1 Finance what you want?
I've never seen this site/company before, but seems sort of interesting. But I can't quite tell if there's any value beyond automatic investments. Otherwise I can't see a good reason to move out of Vanguard or TIAA.

William55
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Re: Best way to automatically invest in Vanguard ETFs

Post by William55 » Tue Oct 09, 2018 5:25 pm

That's what I use right now and M1 isn't just for Vanguard they also have Blackrock and Invesco ETFs. I can choose between nearly any etf company put the percentage I want invested in each ETF and set forget it. They even let me buy fractional shares so as soon as my account cash balance exceeds $10 it automatically trades

Culbretd
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Re: Best way to automatically invest in Vanguard ETFs

Post by Culbretd » Tue Oct 09, 2018 5:41 pm

William55 wrote:
Tue Oct 09, 2018 5:25 pm
That's what I use right now and M1 isn't just for Vanguard they also have Blackrock and Invesco ETFs. I can choose between nearly any etf company put the percentage I want invested in each ETF and set forget it. They even let me buy fractional shares so as soon as my account cash balance exceeds $10 it automatically trades
Wow, they let you buy fractional shares of ETFs? Worth looking into them.

Orville Tootenbacher
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Re: Best way to automatically invest in Vanguard ETFs

Post by Orville Tootenbacher » Tue Oct 09, 2018 6:10 pm

Culbretd wrote:
Tue Oct 09, 2018 5:41 pm
William55 wrote:
Tue Oct 09, 2018 5:25 pm
That's what I use right now and M1 isn't just for Vanguard they also have Blackrock and Invesco ETFs. I can choose between nearly any etf company put the percentage I want invested in each ETF and set forget it. They even let me buy fractional shares so as soon as my account cash balance exceeds $10 it automatically trades
Wow, they let you buy fractional shares of ETFs? Worth looking into them.
I really like their fractional share. Got me picking some individual stocks just for my "hobby investing"


only negative is no limit order. you are basically buying at market price during their trade window.

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vineviz
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Re: Best way to automatically invest in Vanguard ETFs

Post by vineviz » Tue Oct 09, 2018 6:30 pm

BFRAME wrote:
Wed Jul 11, 2018 6:31 pm
Alternately, I could always just auto-invest into a money market or similar, and then periodically buy the ETFs, but then I lose out on a bit of dollar cost averaging.
I'd do the auto-invest into either a LifeStrategy or Target Date fund that matches your overall asset allocation (instead of a money market), and then periodically redeem it and buy the ETFs you need.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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