Worth it to convert VLCAX to VV for the lower expense ratio?

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ishkadetto
Posts: 63
Joined: Thu May 24, 2018 2:49 pm
Location: California, USA

Worth it to convert VLCAX to VV for the lower expense ratio?

Post by ishkadetto »

I have ended up after some tax loss harvesting last December with about $350k of VLCAX (Vanguard Large Cap). The ER is 0.05%. I currently have all mutual funds and no ETFs. I was wondering if it is a good idea to convert it to VV with an ER of 0.04%?

I do not plan to purchase any new VLCAX so the fact that I can't buy exact dollar amounts of more of it doesn't really affect me. I have dividend reinvestment turned off as well. It would maybe be easier for me for future tax loss harvesting if it stays in VLCAX (do a mutual fund exchange, something I'm used to, versus selling the ETF and buying VTSAX and worrying about if the market will go up or down a lot during the time gap). But in the back of my mind I'm thinking: what if the market never drops below the December 2018 level again and I end up keeping VLCAX forever/until I start selling equities in retirement? That's potentially a lot of years down the road (I'm mid-30's).

Any other pros or cons I haven't thought of?
02nz
Posts: 5562
Joined: Wed Feb 21, 2018 3:17 pm

Re: Worth it to convert VLCAX to VV for the lower expense ratio?

Post by 02nz »

I wouldn't do it for the tiny difference in expense ratio. A better reason is portability - ETFs can be held just about anywhere, including any number of brokerages that will give you a bonus (and arguably provide better customer service than Vanguard's brokerage operation, which IMHO isn't very good). Many brokerages either won't be able to hold VLCAX or won't allow you to buy more of it.
Geologist
Posts: 1507
Joined: Fri Jan 02, 2009 7:35 pm

Re: Worth it to convert VLCAX to VV for the lower expense ratio?

Post by Geologist »

A 0.01% difference in expense ratio for an account of $350k is $35/year. The difference therefore in dollars and cents is not significant. Therefore, you should be determining mutual fund versus ETF for other reasons.
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