Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
whereskyle
Posts: 43
Joined: Wed Jan 29, 2020 10:29 am

Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by whereskyle » Tue Feb 11, 2020 1:59 pm

Hello all,

I started investing at the beginning of 2019, and I have maintained a practice of making weekly low-dollar investments into a Betterment Account. Wanting to avoid Betterment's fees, I opened a Vanguard account this year and selected a number of ETFs that help me diversify the weights in my Betterment portfolio. But now that I've done this, I'm frankly disappointed that Vanguard does not allow me to buy fractional shares of their ETFs. I prefer making weekly small-dollar contributions because I'm a relatively low earner, I don't feel the loss of these small, regular transactions, and I consistently benefit from dollar-cost averaging. To keep this practice going, I'm starting to think I should open a Fidelity account, so that I can contribute the same amount of money regularly without feeling the need to look on Vanguard's website for an ETF share that I can afford. Would anyone hesitate to advise me to open a Fidelity account so that I can buy fractional shares? Is it only a matter of time before Vanguard will allow users to do this? I like my Vanguard ETFs (currently holding ESGV, VGT, and VIG). Should I doubt that Fidelity will sell me these ETFs at the same price or offer suitable alternatives?

Thanks, all! Any other considerations you think I should have in mind are welcome!

KlangFool
Posts: 15098
Joined: Sat Oct 11, 2008 12:35 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by KlangFool » Tue Feb 11, 2020 2:04 pm

OP,

I believe you could solve the problem easily by buying Vanguard Mutual fund instead.

KlangFool

Topic Author
whereskyle
Posts: 43
Joined: Wed Jan 29, 2020 10:29 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by whereskyle » Tue Feb 11, 2020 2:09 pm

Thanks, Klangfool. I have sent in the paperwork to roll over my retirement account to VTSAX . The ETFs I'm referring to here are in my taxable account. I do not currently plan to make a contibution sizable enough to allow me to buy into a mutual fund in the coming months. I'd prefer to continue making my small-dollar contributions, and I'd prefer that those contributions not have to change based on the value of the ETF on trading day.

KlangFool
Posts: 15098
Joined: Sat Oct 11, 2008 12:35 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by KlangFool » Tue Feb 11, 2020 2:19 pm

whereskyle wrote:
Tue Feb 11, 2020 2:09 pm
Thanks, Klangfool. I have sent in the paperwork to roll over my retirement account to VTSAX . The ETFs I'm referring to here are in my taxable account. I do not currently plan to make a contibution sizable enough to allow me to buy into a mutual fund in the coming months. I'd prefer to continue making my small-dollar contributions, and I'd prefer that those contributions not have to change based on the value of the ETF on trading day.
whereskyle,

<< I do not currently plan to make a contribution sizable enough to allow me to buy into a mutual fund in the coming months. >>

I do not understand that statement. Please state the mutual fund name and the current amount in your ETFs.

A) You can sell your ETF and buy the mutual fund.

B) You can contribute your small amount into the mutual fund.

KlangFool

Topic Author
whereskyle
Posts: 43
Joined: Wed Jan 29, 2020 10:29 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by whereskyle » Tue Feb 11, 2020 2:45 pm

VGT costs $268.30 per share. VITAX requires a $100,000 minimum investment. I would like to contribute about $100/month to a broad tech index, but without fractional shares I would only be able to buy a share of VGT every 3 months.

Admiral
Posts: 2781
Joined: Mon Oct 27, 2014 12:35 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by Admiral » Tue Feb 11, 2020 2:53 pm

May I ask:

If you just started investing last year, what is your reason/rationale for choosing a non-diversified fund (VITAX) versus, say, Total Stock Market or another much more broadly diversified fund?

You will also note that the S&P 500 holds many of the larger tech companies, including all of these, which make up 57% of VITAX:

Apple Inc.
Microsoft Corp.
Visa Inc.
Mastercard Inc.
Intel Corp.
Cisco Systems Inc.
Adobe Inc.
NVIDIA Corp.
salesforce.com Inc.
Accenture plc

KlangFool
Posts: 15098
Joined: Sat Oct 11, 2008 12:35 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by KlangFool » Tue Feb 11, 2020 2:58 pm

Admiral wrote:
Tue Feb 11, 2020 2:53 pm
May I ask:

If you just started investing last year, what is your reason/rationale for choosing a non-diversified fund (VITAX) versus, say, Total Stock Market or another much more broadly diversified fund?

You will also note that the S&P 500 holds many of the larger tech companies, including all of these, which make up 57% of VITAX:

Apple Inc.
Microsoft Corp.
Visa Inc.
Mastercard Inc.
Intel Corp.
Cisco Systems Inc.
Adobe Inc.
NVIDIA Corp.
salesforce.com Inc.
Accenture plc
+1,000.

I work in the IT/Data Comm/Telecom industry for 30+ years. It is a bad idea to put a lot of your money into this sector fund.

See "Telecom Bust".

KlangFool

MotoTrojan
Posts: 8210
Joined: Wed Feb 01, 2017 8:39 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by MotoTrojan » Tue Feb 11, 2020 3:01 pm

I would simplify your portfolio as people have mentioned above. Seems like you are picking funds that have done well over the last decade; performance chasing is a good way to underperform the market.

As to ETFs at Fidelity though, you can trade essentially any ETF out there for free these days, so trading these Vanguard ETFs will be no different at VG vs. Fidelity. Can transfer in-kind to Fidelity and start again there.

MotoTrojan
Posts: 8210
Joined: Wed Feb 01, 2017 8:39 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by MotoTrojan » Tue Feb 11, 2020 3:03 pm

whereskyle wrote:
Tue Feb 11, 2020 2:45 pm
VGT costs $268.30 per share. VITAX requires a $100,000 minimum investment. I would like to contribute about $100/month to a broad tech index, but without fractional shares I would only be able to buy a share of VGT every 3 months.
Why tech? Genuinely curious your rationale.

mega317
Posts: 3254
Joined: Tue Apr 19, 2016 10:55 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by mega317 » Tue Feb 11, 2020 3:04 pm

Fidelity has a technology index ETF, FTEC. Is this what you came to ask us?
whereskyle wrote:
Tue Feb 11, 2020 1:59 pm
Any other considerations you think I should have in mind are welcome!
Since you asked, I think you should consider not investing in individual sectors but rather own the whole market. What I usually recommend to people with small taxable accounts, and especially if they want to invest small amounts frequently, is just save up in the settlement fund until you get to $3000 then buy a mutual fund like VTSAX.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

Admiral
Posts: 2781
Joined: Mon Oct 27, 2014 12:35 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by Admiral » Tue Feb 11, 2020 3:05 pm

I also see you own VTSAX in your retirement account, so you'd be overweight in the tech sector with this fund.

User avatar
Wiggums
Posts: 2741
Joined: Thu Jan 31, 2019 8:02 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by Wiggums » Tue Feb 11, 2020 3:10 pm

OP, Problem solved?

Topic Author
whereskyle
Posts: 43
Joined: Wed Jan 29, 2020 10:29 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by whereskyle » Tue Feb 11, 2020 3:25 pm

Thanks for checking in about my selection of ETFs. Let me explain my rationale. I haven't yet given up on my Betterment account, which is basically a global-market cap portfolio with a tilt towards value stocks, so I am seeking to complement that portfolio by tilting towards growth and domestic. I share Bogle's and Buffett's skepticism of international markets, so I would like to deemphasize the global weighting (I think my preference would keep International at 20% rather than 40%). The plurality of the Betterment portfolio is VTI, so I already own shares of that, and I wanted to complement the tilt in the rest of the portfolio. I am shamelessly bullish on Tech and felt that VGT would complement the value tilt with growth, so I felt entitled to buy VGT even though I admit that I am chasing performance based on my belief in the economics of the future, which I admit is not very Bogleheaded. As for VIG, I think it's wise for me as a younger and lower earner to seek dividends, so I can reinvest them, so I bought it. I couldn't afford another share of VTI with one of my smaller contributions, so I bought ESGV, which was a third of the price and in my opinion is basically VTI minus VIG. I admit that this is a complicated way of doing things, and as I mentioned, my IRA will just be VTSAX. To be honest, this construction of the portfolio has resulted from the fact that I couldn't just buy fractional shares, so I made purchases based on how I perceived the purchase would complement my Betterment portfolio and what I had to contribute at the time. I also made the purchases in the belief that as long as I'm buying an index, the only thing that matters is that I hold on to the ETFs as long as possible. [See Common Sense on Mutual Funds @ Part Where Bogle tells the story of the investor who only followed buy recommendations and never sold]. With Betterment, I would make the same contribution every week, and Betterment would do the AA for me by purchasing fractional shares.

I agree that my approach right now is overcomplicated, but my real question is about fractional shares. Even assuming that I give up my attempt to complement the Betterment portfolio, I would like to buy VTI regularly in a taxable account without having to buy full shares. If that is my goal, is there any reason I would choose Vanguard over Fidelity?

Thanks!

Gleevec
Posts: 329
Joined: Sun Mar 03, 2013 11:25 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by Gleevec » Tue Feb 11, 2020 4:08 pm

I buy fractional Vanguard ETFs at Fidelity and it is transformative. Vanguard funds are great but have to be at Vanguard, and most of my other finances are with Fidelity so just easier to keep there. Next step is create our own direct index at Fidelity with monthly investment of fractional shares, which would be great for me in terms of tax optimization.

Still cant buy BRKA though as a fractional share!

Topic Author
whereskyle
Posts: 43
Joined: Wed Jan 29, 2020 10:29 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by whereskyle » Tue Feb 11, 2020 4:24 pm

Gleevec wrote:
Tue Feb 11, 2020 4:08 pm
I buy fractional Vanguard ETFs at Fidelity and it is transformative. Vanguard funds are great but have to be at Vanguard, and most of my other finances are with Fidelity so just easier to keep there. Next step is create our own direct index at Fidelity with monthly investment of fractional shares, which would be great for me in terms of tax optimization.

Still cant buy BRKA though as a fractional share!
Thanks for the input. It seems that for me to recreate what Betterment offers without having to pay their fee, follow their tilt, and meet Vanguard's minimum-contribution requirements (which from a practical view is all a "share" of an ETF really is), I'll need the flexibility to buy fractional shares. It seems like there is no added cost to buy each of my Vanguard ETFs at Fidelity. So, it seems like I'll just use Vanguard for retirement and use Fidelity for my taxable account. Please chime in if anyone thinks I'm missing something!

Thanks all.

User avatar
Cheez-It Guy
Posts: 598
Joined: Sun Mar 03, 2019 4:20 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by Cheez-It Guy » Tue Feb 11, 2020 8:09 pm

If you are otherwise satisfied with Vanguard and investing only small amounts, I would avoid jumping around too much. Things are changing rapidly, and I expect Vanguard will offer fractional ETF shares before long. Just seems like that will be the expectation.

AlohaJoe
Posts: 5144
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by AlohaJoe » Tue Feb 11, 2020 8:42 pm

Cheez-It Guy wrote:
Tue Feb 11, 2020 8:09 pm
If you are otherwise satisfied with Vanguard and investing only small amounts, I would avoid jumping around too much.
The cost to "jump around" is vanishingly small -- a few minutes to fill out forms online. You should jump around as much as possible to whoever is best at any given moment to enforce competition in an industry that was stagnant for many years until pretty recently.

Unless you are using a specific Vanguard mutual fund that doesn't have a corresponding ETF, Fidelity is -- right now -- superior in every way to Vanguard. So I vote for switching to Fidelity. If Vanguard ever becomes better (and not simply "catches up") then you can easily switch back.

User avatar
Cheez-It Guy
Posts: 598
Joined: Sun Mar 03, 2019 4:20 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by Cheez-It Guy » Tue Feb 11, 2020 8:50 pm

Fine if you want to do that. I am trying to simplify my life, not complexify it. I'm not jumping around unless it's truly worth my time and hassle.

User avatar
abuss368
Posts: 18070
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by abuss368 » Tue Feb 11, 2020 9:25 pm

I would stay the course. At some point Vanguard (and others) will provide this.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success." || Buy Total Stock until it hurts. Then find a way to buy even more!

Topic Author
whereskyle
Posts: 43
Joined: Wed Jan 29, 2020 10:29 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by whereskyle » Wed Feb 12, 2020 1:14 pm

AlohaJoe wrote:
Tue Feb 11, 2020 8:42 pm
Cheez-It Guy wrote:
Tue Feb 11, 2020 8:09 pm
If you are otherwise satisfied with Vanguard and investing only small amounts, I would avoid jumping around too much.
The cost to "jump around" is vanishingly small -- a few minutes to fill out forms online. You should jump around as much as possible to whoever is best at any given moment to enforce competition in an industry that was stagnant for many years until pretty recently.

Unless you are using a specific Vanguard mutual fund that doesn't have a corresponding ETF, Fidelity is -- right now -- superior in every way to Vanguard. So I vote for switching to Fidelity. If Vanguard ever becomes better (and not simply "catches up") then you can easily switch back.
Thanks, everyone, for the input. I went ahead and opened a Fidelity account, and I bought my first share of VTI. Already, I'm much happier with the User Interface. I am considering transferring my other ETFs from Vanguard. I agree that Vanguard will eventually allow me to buy fractional shares, and because I am currently rolling over into VTSAX, I will continue to use Vanguard at least for my IRA. If I transfer my other ETFs from Vanguard to Fidelity, what am I looking at exactly? Are the shares off the market while the transfer is happening (I've heard it can take two weeks)? Or do the ETFs continue to change in value according to the market during that process? Thanks, all!

retired@50
Posts: 1364
Joined: Tue Oct 01, 2019 2:36 pm

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by retired@50 » Wed Feb 12, 2020 1:25 pm

whereskyle wrote:
Wed Feb 12, 2020 1:14 pm
If I transfer my other ETFs from Vanguard to Fidelity, what am I looking at exactly? Are the shares off the market while the transfer is happening (I've heard it can take two weeks)? Or do the ETFs continue to change in value according to the market during that process? Thanks, all!
If you transfer the ETFs "in-kind", then you'll still own the same number of shares before the transfer process started. In other words, if you own 10 shares of VTI at Vanguard, and transfer to Fidelity, when all is said and done, you'll own 10 shares of VTI at Fidelity. The only limitation to this is that you cannot transact on your share balance during the transfer process. So, no new purchases or sales of your 10 shares of VTI.

Regards,
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

Topic Author
whereskyle
Posts: 43
Joined: Wed Jan 29, 2020 10:29 am

Re: Regular but small contributions - Fidelity over Vanguard for Fractional Shares?

Post by whereskyle » Thu Feb 13, 2020 8:43 am

retired@50 wrote:
Wed Feb 12, 2020 1:25 pm
whereskyle wrote:
Wed Feb 12, 2020 1:14 pm
If I transfer my other ETFs from Vanguard to Fidelity, what am I looking at exactly? Are the shares off the market while the transfer is happening (I've heard it can take two weeks)? Or do the ETFs continue to change in value according to the market during that process? Thanks, all!
If you transfer the ETFs "in-kind", then you'll still own the same number of shares before the transfer process started. In other words, if you own 10 shares of VTI at Vanguard, and transfer to Fidelity, when all is said and done, you'll own 10 shares of VTI at Fidelity. The only limitation to this is that you cannot transact on your share balance during the transfer process. So, no new purchases or sales of your 10 shares of VTI.

Regards,
Thanks very much. I think it's the right call for me.

Post Reply