Vanguard moving clients from mutual funds to ETFs?

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Cincyfed
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Vanguard moving clients from mutual funds to ETFs?

Post by Cincyfed » Thu May 30, 2019 3:28 pm

Spoke with our Vanguard PAS advisor this AM. I think he said later this year Vanguard will transition our funds to their ETF equivalents. I tried to find something about it online, but was unsuccessful. Does anyone know anything about this? Or, was I imaging things in my caffeine deficient state?
Last edited by Cincyfed on Thu May 30, 2019 6:24 pm, edited 1 time in total.

Topic Author
Cincyfed
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Cincyfed » Thu May 30, 2019 5:20 pm

The breadwinner just came home (I FIREd almost 2 yr.s ago :mrgreen: - I'm still giddy about it). She said the advisor said the transition will be done by the end of NEXT year. I guess I was caffeine deficient!
But still, I'm not sure how I feel about this.
I appreciate the lower ER (a whole basis point!) and I won't be daytrading.
It's just that Mr. Bogle was so very opposed to ETFs (mostly due to the temptation to trade) that it makes me wonder if this is a good idea.

Broken Man 1999
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Broken Man 1999 » Thu May 30, 2019 5:41 pm

Mr Bogle had no issues with ETFs that followed broad-based indexes, and were bought to hold.

He stated his support in his last book.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

BigJohn
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by BigJohn » Thu May 30, 2019 5:42 pm

Are you saying that VG PAS clients will be required to switch to ETFs by YE 2020? On one hand I’m surprised that they’d force a move like that but... there no doubt it’s a lower cost/effort model for them to maintain. Should be interesting to read the forum discussions on this if in fact there is no choice.

tj
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by tj » Thu May 30, 2019 5:58 pm

BigJohn wrote:
Thu May 30, 2019 5:42 pm
Are you saying that VG PAS clients will be required to switch to ETFs by YE 2020? On one hand I’m surprised that they’d force a move like that but... there no doubt it’s a lower cost/effort model for them to maintain. Should be interesting to read the forum discussions on this if in fact there is no choice.

What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...

GmanJeff
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by GmanJeff » Thu May 30, 2019 6:02 pm

tj wrote:
Thu May 30, 2019 5:58 pm
BigJohn wrote:
Thu May 30, 2019 5:42 pm
Are you saying that VG PAS clients will be required to switch to ETFs by YE 2020? On one hand I’m surprised that they’d force a move like that but... there no doubt it’s a lower cost/effort model for them to maintain. Should be interesting to read the forum discussions on this if in fact there is no choice.

What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...
In my experience, no changes are made without client prior concurrence, following an explanation for the recommendation.

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GerryL
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by GerryL » Thu May 30, 2019 6:03 pm

Broken Man 1999 wrote:
Thu May 30, 2019 5:41 pm
Mr Bogle had no issues with ETFs that followed broad-based indexes, and were bought to hold.

He stated his support in his last book.

Broken Man 1999
I believe it was at the 2016 Boglehead Conference that Jack Bogle said, "There is nothing wrong with exchange-traded funds … as long as you don't trade them."

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Broken Man 1999 » Thu May 30, 2019 6:04 pm

I am not using PAS at this time, but I wouldn't be upset if they put me in ETFs.

I am already in ETFs for my equity holdings except for a few individual stocks.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by BigJohn » Thu May 30, 2019 6:07 pm

tj wrote:
Thu May 30, 2019 5:58 pm
What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...
Interesting perspective. I’m not a PAS user so don’t care one way or the other but I’ll predict some wailing and gnashing of teeth over this if it comes to pass.

AKalltheway
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by AKalltheway » Thu May 30, 2019 6:11 pm

So I just received this email today. Is this the kind of thing everyone is talking about here?

Fee change for our Long-Term Bond Index Fund

Dear Shareholder,

This message is to let you know that as of July 10, 2019, Vanguard Long-Term Bond Index Fund will charge a 0.5% purchase fee for all new purchases and exchanges into the Fund's mutual fund share classes, including purchases completed through direct deposits, automatic investment plans, automatic exchange services, and directed dividend plans.

The Fund's ETF share class and purchases resulting from reinvested dividend or capital gains distributions are not subject to the fee.

Note that this fee is paid directly to the Fund to help protect current investors by offsetting the transaction costs of buying certain new securities for the Fund.

Vanguard will continue to monitor the Fund's costs and recommend changes, such as lowering or eliminating this fee, should the associated costs decrease over time.

Please read the required shareholder notice for more details about the fee change.

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by HEDGEFUNDIE » Thu May 30, 2019 6:13 pm

BigJohn wrote:
Thu May 30, 2019 6:07 pm
tj wrote:
Thu May 30, 2019 5:58 pm
What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...
Interesting perspective. I’m not a PAS user so don’t care one way or the other but I’ll predict some wailing and gnashing of teeth over this if it comes to pass.
I mean, there was much wailing and gnashing of teeth over Vanguard’s forced move to brokerage accounts, which didn’t negatively affect anyone in any way.

So obviously this will be an even bigger deal.

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Bacchus01 » Thu May 30, 2019 6:16 pm

HEDGEFUNDIE wrote:
Thu May 30, 2019 6:13 pm
BigJohn wrote:
Thu May 30, 2019 6:07 pm
tj wrote:
Thu May 30, 2019 5:58 pm
What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...
Interesting perspective. I’m not a PAS user so don’t care one way or the other but I’ll predict some wailing and gnashing of teeth over this if it comes to pass.
I mean, there was much wailing and gnashing of teeth over Vanguard’s forced move to brokerage accounts, which didn’t negatively affect anyone in any way.

So obviously this will be an even bigger deal.
But many of us still haven’t moved to brokerage accounts

stan1
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by stan1 » Thu May 30, 2019 6:18 pm

Bacchus01 wrote:
Thu May 30, 2019 6:16 pm
But many of us still haven’t moved to brokerage accounts
Why do you care if you are using Vanguard PAS?

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Cincyfed
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Cincyfed » Thu May 30, 2019 6:27 pm

Broken Man 1999 wrote:
Thu May 30, 2019 5:41 pm
Mr Bogle had no issues with ETFs that followed broad-based indexes, and were bought to hold.

He stated his support in his last book.

Broken Man 1999

Good to know. Thx.

edited to add this link to the interviews that Christine Benz did w/Mr. Bogle at the last conference, "I'm afraid there's too much trading in ETFs, but I also see that maybe I was too tough on the fact that there can be and is legitimate uses of ETFs."

https://www.morningstar.com/videos/8869 ... -etfs.html
Last edited by Cincyfed on Thu May 30, 2019 6:56 pm, edited 1 time in total.

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Cincyfed
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Cincyfed » Thu May 30, 2019 6:34 pm

BigJohn wrote:
Thu May 30, 2019 5:42 pm
Are you saying that VG PAS clients will be required to switch to ETFs by YE 2020? On one hand I’m surprised that they’d force a move like that but... there no doubt it’s a lower cost/effort model for them to maintain. Should be interesting to read the forum discussions on this if in fact there is no choice.

It sounded like it would be voluntary, "Vanguard is looking to move . . ." - but I obviously wasn't hearing (thinking??) clearly this AM. So, consider the source!

I am hoping someone has more information, I couldn't find anything on the VG website or on the web.

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Cincyfed
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Cincyfed » Thu May 30, 2019 6:44 pm

AKalltheway wrote:
Thu May 30, 2019 6:11 pm
So I just received this email today. Is this the kind of thing everyone is talking about here?

Fee change for our Long-Term Bond Index Fund

Dear Shareholder,

This message is to let you know that as of July 10, 2019, Vanguard Long-Term Bond Index Fund will charge a 0.5% purchase fee for all new purchases and exchanges into the Fund's mutual fund share classes, including purchases completed through direct deposits, automatic investment plans, automatic exchange services, and directed dividend plans.

The Fund's ETF share class and purchases resulting from reinvested dividend or capital gains distributions are not subject to the fee.

Note that this fee is paid directly to the Fund to help protect current investors by offsetting the transaction costs of buying certain new securities for the Fund.

Vanguard will continue to monitor the Fund's costs and recommend changes, such as lowering or eliminating this fee, should the associated costs decrease over time.

Please read the required shareholder notice for more details about the fee change.

I think my advisor was talking about something different.

I think you are one of the "lucky" ones affected by this:
https://www.philly.com/business/vanguar ... 90516.html
"Although everyone is liable to pay this fee, it would seem to hit hardest at professional, or “institutional,” frequent traders in and out of this bond fund. Vanguard says it may levy these fees if a client’s purchases over a 12-month period exceed $100 million up to $500 million, depending on the fund.

"Vanguard noted that “generally, these fees will not apply to transactions coordinated in advance between a client and Vanguard.""

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Toons
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Toons » Thu May 30, 2019 7:12 pm

Bacchus01 wrote:
Thu May 30, 2019 6:16 pm
HEDGEFUNDIE wrote:
Thu May 30, 2019 6:13 pm
BigJohn wrote:
Thu May 30, 2019 6:07 pm
tj wrote:
Thu May 30, 2019 5:58 pm
What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...
Interesting perspective. I’m not a PAS user so don’t care one way or the other but I’ll predict some wailing and gnashing of teeth over this if it comes to pass.
I mean, there was much wailing and gnashing of teeth over Vanguard’s forced move to brokerage accounts, which didn’t negatively affect anyone in any way.

So obviously this will be an even bigger deal.
But many of us still haven’t moved to brokerage accounts
+1 :happy
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kilkoyne
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by kilkoyne » Thu May 30, 2019 7:19 pm

I added mutual funds because I started doing the recurring automatic investments which is not available with ETFs.

This helps eliminate market timing for me.

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Bacchus01 » Thu May 30, 2019 8:26 pm

stan1 wrote:
Thu May 30, 2019 6:18 pm
Bacchus01 wrote:
Thu May 30, 2019 6:16 pm
But many of us still haven’t moved to brokerage accounts
Why do you care if you are using Vanguard PAS?
I’m not. And that wasn’t really the comment.

tj
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by tj » Thu May 30, 2019 10:01 pm

Toons wrote:
Thu May 30, 2019 7:12 pm
Bacchus01 wrote:
Thu May 30, 2019 6:16 pm
HEDGEFUNDIE wrote:
Thu May 30, 2019 6:13 pm
BigJohn wrote:
Thu May 30, 2019 6:07 pm
tj wrote:
Thu May 30, 2019 5:58 pm
What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...
Interesting perspective. I’m not a PAS user so don’t care one way or the other but I’ll predict some wailing and gnashing of teeth over this if it comes to pass.
I mean, there was much wailing and gnashing of teeth over Vanguard’s forced move to brokerage accounts, which didn’t negatively affect anyone in any way.

So obviously this will be an even bigger deal.
But many of us still haven’t moved to brokerage accounts
+1 :happy
If you are in pas, you already have a brokerage account. Pas presumably isn't going to keep legacy accounts with how heavily they push converting.

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Harry Livermore
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Harry Livermore » Fri May 31, 2019 6:14 am

I did not move my account or wife's account a couple years ago when VG offered the "enhancement" of switching to a brokerage account.
My college kid opened a ROTH in 2018. The only account type for new folks is brokerage.
That does not necessarily mean ETFs only though, I think.
Not is the PAS program so I'm not sure how strong the "requirement" is, or if it's just the individual.
I also saw the bond fee thing (I think someone here started a thread on it)
I'm not convinced any of it is necessarily nefarious.
Cheers

McDougal
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by McDougal » Fri May 31, 2019 6:26 am

Cincyfed wrote:
Thu May 30, 2019 6:34 pm
BigJohn wrote:
Thu May 30, 2019 5:42 pm
Are you saying that VG PAS clients will be required to switch to ETFs by YE 2020? On one hand I’m surprised that they’d force a move like that but... there no doubt it’s a lower cost/effort model for them to maintain. Should be interesting to read the forum discussions on this if in fact there is no choice.

It sounded like it would be voluntary, "Vanguard is looking to move . . ." - but I obviously wasn't hearing (thinking??) clearly this AM. So, consider the source!

I am hoping someone has more information, I couldn't find anything on the VG website or on the web.
Can't you just call your advisor and ask him/her?

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Cincyfed
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Cincyfed » Fri May 31, 2019 6:57 am

McDougal wrote:
Fri May 31, 2019 6:26 am
Can't you just call your advisor and ask him/her?
[/quote]


I was hoping for an outside perspective. The advisor said it was to keep costs down, but I am a skeptical cuss.

Part of me wonders if this is to increase revenue from the bid/ask spread . . .

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by livesoft » Fri May 31, 2019 7:01 am

Cincyfed wrote:
Fri May 31, 2019 6:57 am
Part of me wonders if this is to increase revenue from the bid/ask spread . . .
The bid/ask spread issue is a typical Bogleheads red herring thing.

You know there is no spread at the Opening Cross when Vanguard reinvests dividends for ETF holders? Also, it is the market makers, HFTraders, and retail investors like me that potentially benefit and not Vanguard, right?
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by DarkHelmetII » Fri May 31, 2019 7:06 am

Cincyfed wrote:
Thu May 30, 2019 5:20 pm
It's just that Mr. Bogle was so very opposed to ETFs (mostly due to the temptation to trade) that it makes me wonder if this is a good idea.
This is largely my aversion to ETFs as well, IMHO it's a behavioral thing. Plenty of "good" ETFs but psychologically, at least for me, I like having mutual funds so I don't start thinking about tinkering with stop losses, limit orders etc....

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ruralavalon
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by ruralavalon » Fri May 31, 2019 8:11 am

Toons wrote:
Thu May 30, 2019 7:12 pm
Bacchus01 wrote:
Thu May 30, 2019 6:16 pm
HEDGEFUNDIE wrote:
Thu May 30, 2019 6:13 pm
BigJohn wrote:
Thu May 30, 2019 6:07 pm
tj wrote:
Thu May 30, 2019 5:58 pm
What's there to "force" ? When you hire VPAS, they are in charge of your portfolio...
Interesting perspective. I’m not a PAS user so don’t care one way or the other but I’ll predict some wailing and gnashing of teeth over this if it comes to pass.
I mean, there was much wailing and gnashing of teeth over Vanguard’s forced move to brokerage accounts, which didn’t negatively affect anyone in any way.

So obviously this will be an even bigger deal.
But many of us still haven’t moved to brokerage accounts
+1 :happy
+ 2, we didn't switch our IRAs to the brokerage version either.

AKalltheway wrote:
Thu May 30, 2019 6:11 pm
So I just received this email today. Is this the kind of thing everyone is talking about here?

Fee change for our Long-Term Bond Index Fund

Dear Shareholder,

This message is to let you know that as of July 10, 2019, Vanguard Long-Term Bond Index Fund will charge a 0.5% purchase fee for all new purchases and exchanges into the Fund's mutual fund share classes, including purchases completed through direct deposits, automatic investment plans, automatic exchange services, and directed dividend plans.

The Fund's ETF share class and purchases resulting from reinvested dividend or capital gains distributions are not subject to the fee.

Note that this fee is paid directly to the Fund to help protect current investors by offsetting the transaction costs of buying certain new securities for the Fund.

Vanguard will continue to monitor the Fund's costs and recommend changes, such as lowering or eliminating this fee, should the associated costs decrease over time.

Please read the required shareholder notice for more details about the fee change.
I don't think that the purchase fee is the same issue.

And the purchase fee paid to the fund should not adversely affect the retail investor who does not actively trade.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Abarn
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Abarn » Fri May 31, 2019 9:56 am

kilkoyne wrote:
Thu May 30, 2019 7:19 pm
I added mutual funds because I started doing the recurring automatic investments which is not available with ETFs.

This helps eliminate market timing for me.
This might be a novice question, but can you not make automatic contributions if using ETFs (i.e. if you invest in an ETF fund you can't make automatic monthly contributions to the fund like you would with a mutual fund)?

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by goodenyou » Fri May 31, 2019 10:03 am

Oh no...not the grape bricks again :oops:
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kilkoyne
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by kilkoyne » Fri May 31, 2019 11:20 am

Abarn wrote:
Fri May 31, 2019 9:56 am
kilkoyne wrote:
Thu May 30, 2019 7:19 pm
I added mutual funds because I started doing the recurring automatic investments which is not available with ETFs.

This helps eliminate market timing for me.
This might be a novice question, but can you not make automatic contributions if using ETFs (i.e. if you invest in an ETF fund you can't make automatic monthly contributions to the fund like you would with a mutual fund)?
If I remember correctly you can't with an ETF because trades can happen all throughout the day vs a mutual fund which buys at the end of the day. That's the way it works with Vanguard mutual funds and ETFs anyway.

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by ruralavalon » Fri May 31, 2019 11:26 am

kilkoyne wrote:
Fri May 31, 2019 11:20 am
Abarn wrote:
Fri May 31, 2019 9:56 am
kilkoyne wrote:
Thu May 30, 2019 7:19 pm
I added mutual funds because I started doing the recurring automatic investments which is not available with ETFs.

This helps eliminate market timing for me.
This might be a novice question, but can you not make automatic contributions if using ETFs (i.e. if you invest in an ETF fund you can't make automatic monthly contributions to the fund like you would with a mutual fund)?
If I remember correctly you can't with an ETF because trades can happen all throughout the day vs a mutual fund which buys at the end of the day.
You usually can't buy or sell fractional shares of an ETF. (Some brokerages accommodate buys of fractional shares.)

So you can't set up automatic purchases of $xxx every pay period, because you don't know in advance how much an individual share will cost.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Ragnoth » Fri May 31, 2019 12:47 pm

This might be unpopular to say— But for all intents and purposes, owning the big Vanguard ETFs is identical to owning the equivalent mutual fund.

Bogle’s issue was with people day trading ETF’s, or buying into ETF’s with a snazzy name that only invests in a small number of stock (e.g., a themed NASCAR ETF). None of this matters if you are just buying a few shares of vanguard total stock market (VTI) or similar index fund style ETF’s each month.

People make a lot of fuss about the bid/ask spread (usually a penny on a $100-$300 share), or the fact that you are getting prices throughout the day (some intra-day volatility as opposed to getting the price at close for a mutual fund). But this is all just noise. Maybe you got a slightly better/worse price, but it’s meaningless given the swings you see in even a week of trading. If you are going to buy and hold for months or years, it’s a big non-issue.

Same with reinvestment. Almost any broker will just let you reinvest the dividends of your ETF into fractional shares (or just let it accumulate and reinvest whenever you normally contribute to your account). Not to mention that unless you are a *very* small scale investor, having $100 uninvested (or whatever the price is to buy a single share) is also pretty meaningless.

Matt228822
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Matt228822 » Sat Jun 08, 2019 5:45 pm

Bump...curious how they would move the mutual funds to etfs in a taxable account? Wouldn’t they have to sell the mutual fund then buy the etf, triggering taxable event?

Nthomas
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by Nthomas » Sat Jun 08, 2019 6:19 pm

Matt228822 wrote:
Sat Jun 08, 2019 5:45 pm
Bump...curious how they would move the mutual funds to etfs in a taxable account? Wouldn’t they have to sell the mutual fund then buy the etf, triggering taxable event?
No they can convert to ETF w/o selling. The reverse (ETF to MF) would be taxable.

UpperNwGuy
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by UpperNwGuy » Sat Jun 08, 2019 6:49 pm

Many Vanguard mutual funds do not have ETF share classes, so it won't be possible for Vanguard to move those clients over to ETFs without first creating the missing ETFs. For example, the whole family of tax exempt mutual funds has no ETF share classes.

grok87
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Re: Vanguard moving clients from mutual funds to ETFs?

Post by grok87 » Sat Jun 08, 2019 6:58 pm

my theory is they want to pump up the volume of the ETFs so they can produce more juicy tax benefits for the mutual fund holders.
RIP Mr. Bogle.

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