VTEAX Tax Exempt Bond Index Fund

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MarvinK
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VTEAX Tax Exempt Bond Index Fund

Post by MarvinK »

VTEAX is the Tax Exempt Bond Index (Admiral shares)
Please check my math below. Seeking any feedback from current investors.
I am reviewing this fund as the bond portion of a taxable account. It seems like the best fit for our long-term goals.

Purchase Fee (1 time) - Is this how it works?
Assume $100,000 investment * 0.25% purchase fee = $250 ...so essentially investment turns into $99,750

Ongoing expense fee:
$100,000 * 0.09 expense ratio = $90 per year

The interesting factoid, is that an investor can purchase ETF shares of VTEB without the one-time purchase fee, at the same expense ratio 0.09%


BND vs VTEAX another thread (Oct 2018)
viewtopic.php?f=1&t=262649&p=4189280&hi ... 9#p4189280
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alec
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Re: VTEAX Tax Exempt Bond Index Fund

Post by alec »

If you’re buying directly from Vanguard, why not just do the Int Term Tax Exempt admiral fund. The fund appears very similar to VTEAX.

No purchase fee and no ETF?
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jhfenton
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Re: VTEAX Tax Exempt Bond Index Fund

Post by jhfenton »

I'm with alec. I would either buy VWIUX or buy the ETF VTEB. I wouldn't mess with VTEAX.

But yes, your math is correct for the purchase fee.
grok87
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Re: VTEAX Tax Exempt Bond Index Fund

Post by grok87 »

Going to play devils advocate here.

Vteax and vteb the etf May be two share classes of the same fund. That means that vteax May be less at risk of capital gains distributions due to vanguards unique and patented etf structure which lets it wash out capital gains through etf magic.

Also I wouldn’t worry about the purchase fee. It goes to the fund not to vanguard. That means you benefit from other folks purchase fees.

Cheers
Grok
RIP Mr. Bogle.
FactualFran
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Re: VTEAX Tax Exempt Bond Index Fund

Post by FactualFran »

MarvinK wrote: Thu Jan 17, 2019 1:51 pm The interesting factoid, is that an investor can purchase ETF shares of VTEB without the one-time purchase fee, at the same expense ratio 0.09%
Also interesting, perhaps, is that the market price of ETF shares can diverge from the NAV of the holdings of the ETF. Buying ETF shares at a premium to the NAV or selling at a discount to the NAV can result in price differences greater than the purchase fee of the mutual fund shares.
Van
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Re: VTEAX Tax Exempt Bond Index Fund

Post by Van »

alec wrote: Fri Jan 18, 2019 3:10 pm If you’re buying directly from Vanguard, why not just do the Int Term Tax Exempt admiral fund. The fund appears very similar to VTEAX.

No purchase fee and no ETF?
Similar but certainly not identical. VTEAX is an index fund, whereas the Int. Term TE is not. Different durations etc.
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grabiner
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Re: VTEAX Tax Exempt Bond Index Fund

Post by grabiner »

grok87 wrote: Fri Jan 18, 2019 4:23 pm Going to play devils advocate here.

Vteax and vteb the etf May be two share classes of the same fund. That means that vteax May be less at risk of capital gains distributions due to vanguards unique and patented etf structure which lets it wash out capital gains through etf magic.
This is not particularly relevant for bond funds. When interest rates fall, all bonds have capital gains, and the ETF structure doesn't help much with this. Therefore, Vanguard's bond ETFs do frequently distribute small capital gains. (In contrast, different stocks rise and fall at different times, which gives a stock ETF much more variability of prices for redemptions and allows it to eliminate more capital gains.)
Wiki David Grabiner
grok87
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Re: VTEAX Tax Exempt Bond Index Fund

Post by grok87 »

grabiner wrote: Fri Jan 18, 2019 8:59 pm
grok87 wrote: Fri Jan 18, 2019 4:23 pm Going to play devils advocate here.

Vteax and vteb the etf May be two share classes of the same fund. That means that vteax May be less at risk of capital gains distributions due to vanguards unique and patented etf structure which lets it wash out capital gains through etf magic.
This is not particularly relevant for bond funds. When interest rates fall, all bonds have capital gains, and the ETF structure doesn't help much with this. Therefore, Vanguard's bond ETFs do frequently distribute small capital gains. (In contrast, different stocks rise and fall at different times, which gives a stock ETF much more variability of prices for redemptions and allows it to eliminate more capital gains.)
thanks grabiner.
for the 3 funds in question i'm only seeing income distributions not capital gains.
RIP Mr. Bogle.
jrbdmb
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Re: VTEAX Tax Exempt Bond Index Fund

Post by jrbdmb »

grok87 wrote: Fri Jan 18, 2019 4:23 pm Going to play devils advocate here.

Vteax and vteb the etf May be two share classes of the same fund. That means that vteax May be less at risk of capital gains distributions due to vanguards unique and patented etf structure which lets it wash out capital gains through etf magic.

Also I wouldn’t worry about the purchase fee. It goes to the fund not to vanguard. That means you benefit from other folks purchase fees.

Cheers
Grok
I'm no good at predicting stock or bond price movements, but I'm certain that within 30 days of when I commit to VTEAX and the 0.25% purchase fee Vanguard will announce that the fee is being eliminated. :oops:
GaryA505
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Re: VTEAX Tax Exempt Bond Index Fund

Post by GaryA505 »

jrbdmb wrote: Tue Apr 23, 2019 4:20 pm
grok87 wrote: Fri Jan 18, 2019 4:23 pm Going to play devils advocate here.

Vteax and vteb the etf May be two share classes of the same fund. That means that vteax May be less at risk of capital gains distributions due to vanguards unique and patented etf structure which lets it wash out capital gains through etf magic.

Also I wouldn’t worry about the purchase fee. It goes to the fund not to vanguard. That means you benefit from other folks purchase fees.

Cheers
Grok
I'm no good at predicting stock or bond price movements, but I'm certain that within 30 days of when I commit to VTEAX and the 0.25% purchase fee Vanguard will announce that the fee is being eliminated. :oops:
I'm not seeing the purchase fee for VTEAX on Vanguard's web site, so has it been eliminated?
GaryA505
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Re: VTEAX Tax Exempt Bond Index Fund

Post by GaryA505 »

GaryA505 wrote: Sun Jan 26, 2020 12:13 pm
jrbdmb wrote: Tue Apr 23, 2019 4:20 pm
grok87 wrote: Fri Jan 18, 2019 4:23 pm Going to play devils advocate here.

Vteax and vteb the etf May be two share classes of the same fund. That means that vteax May be less at risk of capital gains distributions due to vanguards unique and patented etf structure which lets it wash out capital gains through etf magic.

Also I wouldn’t worry about the purchase fee. It goes to the fund not to vanguard. That means you benefit from other folks purchase fees.

Cheers
Grok
I'm no good at predicting stock or bond price movements, but I'm certain that within 30 days of when I commit to VTEAX and the 0.25% purchase fee Vanguard will announce that the fee is being eliminated. :oops:
I'm not seeing the purchase fee for VTEAX on Vanguard's web site, so has it been eliminated?
Nevermind, I just spotted it. My bad.
robertalpert
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Re: VTEAX Tax Exempt Bond Index Fund

Post by robertalpert »

Any guesses as to when Vanguard may get rid of the purchase fee for vteax?
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anon_investor
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Re: VTEAX Tax Exempt Bond Index Fund

Post by anon_investor »

robertalpert wrote: Mon Feb 17, 2020 1:58 am Any guesses as to when Vanguard may get rid of the purchase fee for vteax?
Anyone's guess, but in December they announced that the ER for the ETF share class (VTEB) would be lowered to 0.06%. So it probably makes sense to just get the ETF version to avoid the purchase fee, as the lower expense ratio helps make up for any potential of the bid/ask spread.

https://investornews.vanguard/expense-r ... s-for-you/
BionicBillWalsh
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Re: VTEAX Tax Exempt Bond Index Fund

Post by BionicBillWalsh »

robertalpert wrote: Mon Feb 17, 2020 1:58 am Any guesses as to when Vanguard may get rid of the purchase fee for vteax?
It looks like it may be gone. The fee is no longer listed.
Jerry Garcia: If I knew the way...I would take you home.
UpperNwGuy
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Re: VTEAX Tax Exempt Bond Index Fund

Post by UpperNwGuy »

BionicBillWalsh wrote: Sat Feb 29, 2020 8:25 pm
robertalpert wrote: Mon Feb 17, 2020 1:58 am Any guesses as to when Vanguard may get rid of the purchase fee for vteax?
It looks like it may be gone. The fee is no longer listed.
Wow! You're right. I just looked. In the Fees & Minimums tab it now says "Purchase Fee: None". This change must have happened in the last few days because I remember checking recently, and the purchase fee was still there. I guess Vanguard is getting serious about challenging iShares MUB for leadership in this market segment.

Now I need to revisit my municipal bond investing strategy. I've been using Intermediate-Term Tax-Exempt. I could switch to the index fund, I could stay where I am, or I could put new investments into the index fund while keeping old investments in the intermediate-term fund.

I wonder if Vanguard's next move will be to create ETF share classes for its short-term, limited-term, intermediate-term, long-term, and high-yield municipal bond funds.
ofckrupke
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Re: VTEAX Tax Exempt Bond Index Fund

Post by ofckrupke »

UpperNwGuy wrote: Sat Feb 29, 2020 8:34 pm Now I need to revisit my municipal bond investing strategy. I've been using Intermediate-Term Tax-Exempt. I could switch to the index fund, I could stay where I am, or I could put new investments into the index fund while keeping old investments in the intermediate-term fund.
Door #2 or 3. At least for admiral shares, I would be unwilling to pay more than a tiny tax cost to exchange from an existing position.
UpperNwGuy wrote: Sat Feb 29, 2020 8:34 pm I wonder if Vanguard's next move will be to create ETF share classes for its short-term, limited-term, intermediate-term, long-term, and high-yield municipal bond funds.
Since these are actively managed I think the chance of this is practically nil. Entirely new funds are a possibility though.
BionicBillWalsh
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Re: VTEAX Tax Exempt Bond Index Fund

Post by BionicBillWalsh »

UpperNwGuy wrote: Sat Feb 29, 2020 8:34 pm
BionicBillWalsh wrote: Sat Feb 29, 2020 8:25 pm
robertalpert wrote: Mon Feb 17, 2020 1:58 am Any guesses as to when Vanguard may get rid of the purchase fee for vteax?
It looks like it may be gone. The fee is no longer listed.
Wow! You're right. I just looked. In the Fees & Minimums tab it now says "Purchase Fee: None". This change must have happened in the last few days because I remember checking recently, and the purchase fee was still there. I guess Vanguard is getting serious about challenging iShares MUB for leadership in this market segment.

Now I need to revisit my municipal bond investing strategy. I've been using Intermediate-Term Tax-Exempt. I could switch to the index fund, I could stay where I am, or I could put new investments into the index fund while keeping old investments in the intermediate-term fund.

I wonder if Vanguard's next move will be to create ETF share classes for its short-term, limited-term, intermediate-term, long-term, and high-yield municipal bond funds.
I was initially super-excited about the fee being gone. Then I saw the 1.29% 30 day yield and decided to use some cash to light a bonfire on the beach instead. I figured I’d get more enjoyment from the fire. Mmmm. Marshmallows.
Jerry Garcia: If I knew the way...I would take you home.
UpperNwGuy
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Re: VTEAX Tax Exempt Bond Index Fund

Post by UpperNwGuy »

BionicBillWalsh wrote: Sat Feb 29, 2020 10:23 pm
UpperNwGuy wrote: Sat Feb 29, 2020 8:34 pm
BionicBillWalsh wrote: Sat Feb 29, 2020 8:25 pm
robertalpert wrote: Mon Feb 17, 2020 1:58 am Any guesses as to when Vanguard may get rid of the purchase fee for vteax?
It looks like it may be gone. The fee is no longer listed.
Wow! You're right. I just looked. In the Fees & Minimums tab it now says "Purchase Fee: None". This change must have happened in the last few days because I remember checking recently, and the purchase fee was still there. I guess Vanguard is getting serious about challenging iShares MUB for leadership in this market segment.

Now I need to revisit my municipal bond investing strategy. I've been using Intermediate-Term Tax-Exempt. I could switch to the index fund, I could stay where I am, or I could put new investments into the index fund while keeping old investments in the intermediate-term fund.

I wonder if Vanguard's next move will be to create ETF share classes for its short-term, limited-term, intermediate-term, long-term, and high-yield municipal bond funds.
I was initially super-excited about the fee being gone. Then I saw the 1.29% 30 day yield and decided to use some cash to light a bonfire on the beach instead. I figured I’d get more enjoyment from the fire. Mmmm. Marshmallows.
For me, the tax equivalent yield of that 1.29% is 1.91%.
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