ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

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bogglewer
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ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by bogglewer »

My retirement funds are maxed out so I would like to invest around 10k to 20k in a taxable brokerage at Fidelity (where all my other accounts are). This is not my emergency fund, it is just extra retirement money or possibly to be used for a house down payment 5 to 10 years from now.

I would like to invest it in a total US index product of some sort. My question is, are there any major pros/cons between purchasing ITOT, VTI, FSKAX, FZROX, or VTSAX?

So far this is what (I think) I know:
I have read that ETFs have tax advantages over index funds, but also you cannot automatically reinvest dividends so I supposed that could be a bit inconvenient? ITOT and VTI both seem to have the same ER (0.03%) and if I'm not mistaken, both would be commission-free at Fidelity. FXKAX has and ER of 0.015% but I might pay more in taxes compared to an ETF? Also VTSAX has an ER of 0.04%, but because of Vanguards patent, the tax is comparable to an ETF, however I would pay a fee to hold it at Fidelity?

Are all my conclusions correct? What other things do I need to consider? Anything major I am missing?
as9
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by as9 »

I know some people use FSKAX in taxable, but the general recommendation is going to be ITOT or VTI. I think you're splitting hairs between those two.
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jason2459
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by jason2459 »

I personally went with ITOT in my taxable account only because it's slightly more tax efficient and has slightly more holdings. I went with vtsax/vti in my rIRA as a TLH pairing.

Otherwise I don't think you can go wrong either way.
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02nz
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by 02nz »

bogglewer wrote: Thu Jul 02, 2020 11:08 am I have read that ETFs have tax advantages over index funds, but also you cannot automatically reinvest dividends so I supposed that could be a bit inconvenient? ITOT and VTI both seem to have the same ER (0.03%) and if I'm not mistaken, both would be commission-free at Fidelity. FXKAX has and ER of 0.015% but I might pay more in taxes compared to an ETF? Also VTSAX has an ER of 0.04%, but because of Vanguards patent, the tax is comparable to an ETF, however I would pay a fee to hold it at Fidelity?
You can absolutely have ETF dividends automatically reinvested.

Index ETFs are generally more tax-efficient than equivalent mutual funds, with the exception of Vanguard index funds (e.g., VTSAX is as tax-efficient as VTI.)

I don't think it costs anything to hold Vanguard mutual funds at Fidelity (e.g., if you transfer them in) but I think buying new shares will cost you. So use the ETF equivalents instead. Either Vanguard or iShares index ETFs should be more tax-efficient than a Fidelity mutual fund like FXKAX or FZROX. Note also that FZROX can only be held at Fidelity, so I probably wouldn't recommend in taxable, as you cannot transfer them to any other brokerage without liquidating and incurring tax consequences.
bluewater23t
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by bluewater23t »

it will cost you $75 every time you purchase a Vanguard mutual fund at Fidelity. This is really insignificant. ER for VTSAX is higher than FSKAX. I dont see how you could go wrong with either
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bogglewer
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by bogglewer »

02nz

I read an article that stated:
"Dividend distributions compound the issue of the differences between how ETFs and index funds are bought and sold. Dividends paid by index mutual funds can be automatically invested (fee-free!) into more shares of the fund. However, when an ETF pays a dividend, you'll need to use the proceeds to buy more shares, incurring additional commissions and wasted time logging in to your account to make a quick trade."

https://www.fool.com/investing/how-to-i ... -fund.aspx

Is that incorrect?
02nz
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by 02nz »

bluewater23t wrote: Thu Jul 02, 2020 11:25 am it will cost you $75 every time you purchase a Vanguard mutual fund at Fidelity. This is really insignificant. ER for VTSAX is higher than FSKAX. I dont see how you could go wrong with either
$75 will make a pretty significant difference unless the sum is very large. And there's a significant difference in tax-efficiency between the two. Neither is a good choice given what the OP is trying to optimize (low cost and tax efficiency in a Fidelity taxable account).
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by jason2459 »

bogglewer wrote: Thu Jul 02, 2020 11:27 am 02nz

I read an article that stated:
"Dividend distributions compound the issue of the differences between how ETFs and index funds are bought and sold. Dividends paid by index mutual funds can be automatically invested (fee-free!) into more shares of the fund. However, when an ETF pays a dividend, you'll need to use the proceeds to buy more shares, incurring additional commissions and wasted time logging in to your account to make a quick trade."

https://www.fool.com/investing/how-to-i ... -fund.aspx

Is that incorrect?


Back when commissions were a thing. Many brokers will support automatic DRIP with ETFs with no commissions. Fidelity will do so.
Last edited by jason2459 on Thu Jul 02, 2020 11:33 am, edited 1 time in total.
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02nz
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by 02nz »

bogglewer wrote: Thu Jul 02, 2020 11:27 am 02nz

I read an article that stated:
"Dividend distributions compound the issue of the differences between how ETFs and index funds are bought and sold. Dividends paid by index mutual funds can be automatically invested (fee-free!) into more shares of the fund. However, when an ETF pays a dividend, you'll need to use the proceeds to buy more shares, incurring additional commissions and wasted time logging in to your account to make a quick trade."

https://www.fool.com/investing/how-to-i ... -fund.aspx

Is that incorrect?
Absolutely, totally incorrect (or at least out of date). ETF dividends can be reinvested automatically. Mine get reinvested all the time - just had $25.20 in VTI dividends automatically reinvested into a fraction of a share in a Fidelity HSA. Same at Merrill Edge, TD Ameritrade, and I imagine every other brokerage. (To be clear, placing an order for fractional shares of ETFs is a new thing and still limited.)
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bogglewer
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by bogglewer »

So I think I can eliminate VTSAX from the table because the extra fees and I don't think I will leave Fidelity anytime soon.

Any idea of the magnitude of the tax benefit for ITOT/VTI over FSKAX/FZROX? Does it out way the higher ER (0.03 for both ETFs vs 0.015/0.0 for FSKAX/FZROX)?

Thanks for all the comments/advice!!
02nz
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by 02nz »

bogglewer wrote: Thu Jul 02, 2020 11:43 am So I think I can eliminate VTSAX from the table because the extra fees and I don't think I will leave Fidelity anytime soon.

Any idea of the magnitude of the tax benefit for ITOT/VTI over FSKAX/FZROX? Does it out way the higher ER (0.03 for both ETFs vs 0.015/0.0 for FSKAX/FZROX)?

Thanks for all the comments/advice!!
I think you can look up after-tax performance on Morningstar (it assumes highest federal tax bracket and no state tax) and compare that way, or looking at past capital gain distributions (which only the mutual funds will have) will give you an idea as well. Unless perhaps you're in the 0% LTCG bracket, the tax efficiency of the ETFs will absolutely overcome that insignificant difference in ER.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by jason2459 »

The tax advantages changes slightly each year based on turn over and QDI percentages. Like do a Google search for ITOT QDI and you'll get at the top of the search the past couple years of QDI rates. Each year that I looked at they were ever so slightly ahead of VTI. It's not much.

You can also find expected tax loss from sites like Morning star. With my E-Trade it pulls it up in the research. These would be based on the top federal tax brackets and no state.

Itot:"Investors should be aware that ITOT has better tax characteristics than other Large Blend category funds. Both the
Capital Gains
Exposure and Tax Cost Ratio are below the industry norm. In fact, only 0.53% of the investors assets are expected to be lost to taxes over a 5-year holding period.
Potential Capital Gains Exposure
-6.08%
Low
-
+
High
Out of 1232 Funds
"


VTI:"Investors in VTI should be aware that, relative to other members of the Large Blend category, this fund has significant capital gains and the investor may be responsible for taxes on income beyond what was earned by the investment. However, the Tax Cost Ratio, which implies that 0.58% of the investors assets could be lost to taxes over a 5-year holding period, is below normal for this category.
Potential Capital Gains Exposure
42.34%
Low
-
+
High
Out of 1232 Funds"
Last edited by jason2459 on Thu Jul 02, 2020 11:54 am, edited 1 time in total.
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ChiKid24
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by ChiKid24 »

I prefer ETFs in my taxable over mutual funds. For me, I find them easier to trade and tax loss harvest as needed. Mutual funds are only traded once a day at the end of day price. Some prefer that, I prefer the ability to make the trade ASAP at any point during the day. Among the ETFs, I rotate between ITOT, VTI and SCHB when I tax loss harvest to avoid wash sales. ERs are comparable. I'm currently holding ITOT, but have done 3 TLH transactions this year. As others have mentioned, no issue with dividend reinvestment on ETFs in Fidelity. Trades are commission free.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by ruralavalon »

bogglewer wrote: Thu Jul 02, 2020 11:08 am My retirement funds are maxed out so I would like to invest around 10k to 20k in a taxable brokerage at Fidelity (where all my other accounts are). This is not my emergency fund, it is just extra retirement money or possibly to be used for a house down payment 5 to 10 years from now.

I would like to invest it in a total US index product of some sort. My question is, are there any major pros/cons between purchasing ITOT, VTI, FSKAX, FZROX, or VTSAX?

So far this is what (I think) I know:
I have read that ETFs have tax advantages over index funds, but also you cannot automatically reinvest dividends so I supposed that could be a bit inconvenient? ITOT and VTI both seem to have the same ER (0.03%) and if I'm not mistaken, both would be commission-free at Fidelity. FXKAX has and ER of 0.015% but I might pay more in taxes compared to an ETF? Also VTSAX has an ER of 0.04%, but because of Vanguards patent, the tax is comparable to an ETF, however I would pay a fee to hold it at Fidelity?

Are all my conclusions correct? What other things do I need to consider? Anything major I am missing?
In a taxable brokerage account at Fidelity use stock index ETFs for better tax-efficiency.

Either Vanguard Total Stock Market ETF (VTI) ER 0.03% or iShares Core S&P Total US Stock Market ETF (ITOT) ER 0.03% would be good.

Good tax efficiency is more important than miniscule differences in expense ratios.

My personal preference is regular mutual funds rather than ETFs, but would not pay a fee to buy Vanguard Total Stock Market Index Fund (VTSAX) in an account at Fidelity.
Last edited by ruralavalon on Thu Jul 02, 2020 12:02 pm, edited 1 time in total.
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Affable at 50
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by Affable at 50 »

bogglewer wrote: Thu Jul 02, 2020 11:43 am So I think I can eliminate VTSAX from the table because the extra fees and I don't think I will leave Fidelity anytime soon.

Any idea of the magnitude of the tax benefit for ITOT/VTI over FSKAX/FZROX? Does it out way the higher ER (0.03 for both ETFs vs 0.015/0.0 for FSKAX/FZROX)?

Thanks for all the comments/advice!!
I invest at Fidelity and own both FZROX and ITOT. The performance of ITOT and VTI are very comparable so you’ll be well served with either one when choosing an ETF for your portfolio.

I like that ETFs are slightly more tax efficient than traditional index funds so I have used ITOT when I have had larger lump sums to invest.

I like traditional index funds like FZROX or FSKAX for scheduling automatic monthly investments.

My dividends for both ITOT and FZROX are automatically reinvested.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by nix4me »

ITOT or VTI. Dividends are automatically reinvested.

If you don’t want to use ETFs and you never plan on moving to another brokerage - FZROX

If you just hate ETFs, then use FSKAX.
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bogglewer
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by bogglewer »

ruralavalon wrote: Thu Jul 02, 2020 11:58 am My personal preference is regular mutual funds rather than ETFs, but would not pay a fee to buy Vanguard Total Stock Market Index Fund (VTSAX) in an account at Fidelity.
What factors contribute to your preference for mutual funds over ETFs? Would you recommend FSKAX instead of an ETF then?
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bogglewer
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by bogglewer »

nix4me wrote: Thu Jul 02, 2020 12:08 pm If you just hate ETFs, then use FSKAX.
Why does some people "just hate ETFs"? I don't think I do (haha), but it seems some people would rather avoid them and I would like to better understand what factors they are taking into account.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by jason2459 »

bogglewer wrote: Thu Jul 02, 2020 12:10 pm
ruralavalon wrote: Thu Jul 02, 2020 11:58 am My personal preference is regular mutual funds rather than ETFs, but would not pay a fee to buy Vanguard Total Stock Market Index Fund (VTSAX) in an account at Fidelity.
What factors contribute to your preference for mutual funds over ETFs? Would you recommend FSKAX instead of an ETF then?
Historically, Vanguard mutual funds have been much more tax efficient then other company mutual funds. In my tax advantaged account I know my Fidelity mutual funds are constantly throwing off cap gains and I don't remember the last time the Vanguard mutual fund has.

Edit: to specify my Fidelity funds are also passive index MF. If they were actively managed would probably make them even worse.

But I agree with some of the above that I wouldn't pay a commission fee for the Vanguard mutual fund at Fidelity. Which leaves the ETFs as my choice. Even over the 0 ER Fidelity funds which if it was in a tax advantaged account I think would be a fine fund to invest in.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by Affable at 50 »

bogglewer wrote: Thu Jul 02, 2020 12:14 pm
nix4me wrote: Thu Jul 02, 2020 12:08 pm If you just hate ETFs, then use FSKAX.
Why does some people "just hate ETFs"? I don't think I do (haha), but it seems some people would rather avoid them and I would like to better understand what factors they are taking into account.
Some prefer traditional index funds because you can schedule automatIc purchases. If you don’t mind logging into during the day to execute the trades, ETFs are excellent alternatives.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by jason2459 »

There are some places you can do automatic ETF dollar based investing. I'm a big fan of it. But some are also against or "meh" don't see the use of it. I use M1 financial for this.

I do like that Fidelity has started dollar based ETF investing (app only access to it). I hope they start allowing automatic as well.


I believe there's certainly an advantage to automatic set and forget investing and mutual funds have basically always allowed this. Some hate the restriction of only once a day trading but doesn't bother me because I'm investing and not trading.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by neverpanic »

bluewater23t wrote: Thu Jul 02, 2020 11:25 am it will cost you $75 every time you purchase a Vanguard mutual fund at Fidelity. This is really insignificant.
I did not realize this. So, does that mean lower-income earners should only buy VTI and never VTSAX if their brokerage is with Fidelity and they're buying with each paycheck?
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by jason2459 »

neverpanic wrote: Thu Jul 02, 2020 12:47 pm
bluewater23t wrote: Thu Jul 02, 2020 11:25 am it will cost you $75 every time you purchase a Vanguard mutual fund at Fidelity. This is really insignificant.
I did not realize this. So, does that mean lower-income earners should only buy VTI and never VTSAX if their brokerage is with Fidelity and they're buying with each paycheck?
If you're being charged a $75 fee Everytime then I would not do it as a high or low income earner. I would definitely look at any other no load and no commission fee option.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by Affable at 50 »

jason2459 wrote: Thu Jul 02, 2020 12:37 pm There are some places you can do automatic ETF dollar based investing. I'm a big fan of it. But some are also against or "meh" don't see the use of it. I use M1 financial for this.

I do like that Fidelity has started dollar based ETF investing (app only access to it). I hope they start allowing automatic as well.
I know that some brokerages (M-1 Finance, Fidelity, others) now allow dollar based ETF trades but I did not think that there was a way to schedule those transactions. Since ETFs are bought and sold on the secondary market at market prices, I thought that you still need to decide how much you are willing to pay at a particular time during a trading day.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by bluewater23t »

neverpanic wrote: Thu Jul 02, 2020 12:47 pm
bluewater23t wrote: Thu Jul 02, 2020 11:25 am it will cost you $75 every time you purchase a Vanguard mutual fund at Fidelity. This is really insignificant.
I did not realize this. So, does that mean lower-income earners should only buy VTI and never VTSAX if their brokerage is with Fidelity and they're buying with each paycheck?
Sorry- by 'insignificant' I meant that for a one-time buy of 10k, or 100k, or whatever amount you are investing. I wouldnt be buying into VTSAX at Fidelity if I were wanting to make multiple purchases- that would just be a waste, when there are options with no fees. You can buy VTI at Fidelity for no surcharge or FSKAX, and choose whichever gives you the best tax advantage.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by jason2459 »

Affable at 50 wrote: Thu Jul 02, 2020 12:57 pm
jason2459 wrote: Thu Jul 02, 2020 12:37 pm There are some places you can do automatic ETF dollar based investing. I'm a big fan of it. But some are also against or "meh" don't see the use of it. I use M1 financial for this.

I do like that Fidelity has started dollar based ETF investing (app only access to it). I hope they start allowing automatic as well.
I know that some brokerages (M-1 Finance, Fidelity, others) now allow dollar based ETF trades but I did not think that there was a way to schedule those transactions. Since ETFs are bought and sold on the secondary market at market prices, I thought that you still need to decide how much you are willing to pay at a particular time during a trading day.

I have automatic deposits and investing into ITOT and IXUS at M1. I love it. Others may hate it because it has trading windows. Meaning if I wanted to buy more beyond my automatic setup I would have to put in the order to buy more and wait for the next window. Basically making the ETFs work like mutual fund. Perfect for the buy and hold investor.

This was my missing link so all of my tax advantaged and taxable investments are all on auto pilot now.

Other features I really like is I can set the desired asset allocations and all new money going in or being taken out will work towards meeting that desired allocation. If for some reason there are market shifts that the new money going in can't keep up with the desired allocations you can press a rebalance button and they will automatically rebalance your profile to your desired allocation.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by sycamore »

OP, you've gotten good suggestions already.

Here's another very small "pro" in favor of ETFs or Vanguard mutual funds over Fidelity's mutual fund version of Total stock market. As noted, the ETFs and Vanguard MFs (and ETFs) have no capital gain distributions but FSKAX does. With FSKAX, besides paying a bit more in taxes, it also means a bit more time and effort dealing and verifying the cap gains reporting on my tax return. All things equal, simpler tax reporting is a good thing.

FSKAX: https://fundresearch.fidelity.com/mutua ... /315911693
VTSAX: https://fundresearch.fidelity.com/mutua ... =sq-NavBar
ITOT: https://screener.fidelity.com/ftgw/etf/ ... mbols=ITOT
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by ruralavalon »

bogglewer wrote: Thu Jul 02, 2020 12:10 pm
ruralavalon wrote: Thu Jul 02, 2020 11:58 am My personal preference is regular mutual funds rather than ETFs, but would not pay a fee to buy Vanguard Total Stock Market Index Fund (VTSAX) in an account at Fidelity.
What factors contribute to your preference for mutual funds over ETFs? Would you recommend FSKAX instead of an ETF then?
My personal preference for regular mutual funds is for convenience. You can buy fractional shares of regular mutual funds, it's easy to set up automatic investments, it's easy to set up automatic reinvestment of dividends, and trading mechanics are simpler. Wiki article, "ETFs vs mutual funds" .

At some brokerages like Fidelity you can now buy fractional shares of ETFs, so that reduces much of the inconvenience of ETFs.

Because of tax-efficiency I do not recommend Fidelity Total Market Index Fund (FSKAX) over the ETFs which I mentioned, being Vanguard Total Stock Market ETF (VTI) ER 0.03% and iShares Core S&P Total US Stock Market ETF (ITOT) ER 0.03%.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by CyclingDuo »

Affable at 50 wrote: Thu Jul 02, 2020 12:57 pm
jason2459 wrote: Thu Jul 02, 2020 12:37 pm There are some places you can do automatic ETF dollar based investing. I'm a big fan of it. But some are also against or "meh" don't see the use of it. I use M1 financial for this.

I do like that Fidelity has started dollar based ETF investing (app only access to it). I hope they start allowing automatic as well.
I know that some brokerages (M-1 Finance, Fidelity, others) now allow dollar based ETF trades but I did not think that there was a way to schedule those transactions. Since ETFs are bought and sold on the secondary market at market prices, I thought that you still need to decide how much you are willing to pay at a particular time during a trading day.
You can do automatic transfers and investing at M1 (say the three fund portfolio). It's dollar based (not share based). Their regular account now invests at market open (9:30 AM EST) and the Plus Account allows for afternoon trading window as well.

OP is already at Fidelity, so the iShares or VTI/VXUS seems like the most tax efficient, low cost way to do it even though it would involve the additional step of logging in with the mobile app for dollar based purchases once his automatic transfer from his bank account arrives each week/month.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by 1789 »

If you like MFs, then FSKAX. If you like ETFs and have some love for Vanguard, then VTI.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by drumboy256 »

To your question, I am currently using VTI across my tax advantaged accounts (personal and wifes) and for our joint we're using ITOT for funding future purchases as well as TLH opportunities if need be. Good luck!
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by cabfranc »

Affable at 50 wrote: Thu Jul 02, 2020 12:33 pm
bogglewer wrote: Thu Jul 02, 2020 12:14 pm
nix4me wrote: Thu Jul 02, 2020 12:08 pm If you just hate ETFs, then use FSKAX.
Why does some people "just hate ETFs"? I don't think I do (haha), but it seems some people would rather avoid them and I would like to better understand what factors they are taking into account.
Some prefer traditional index funds because you can schedule automatIc purchases. If you don’t mind logging into during the day to execute the trades, ETFs are excellent alternatives.
I think the fact that ETFs can be bought and sold at any time during the day and the fact that there are many speciality ETFs that don't have a place in a 3-fund portfolio may lead some Boglehead-ish passive investor to be skeptical of them. I have both ITOT and IXUS in my Fidelity account, not because I prefer ETFs over MF or want to day trade, but rather because they are more tax efficient than Fidelity's MFs. I use them just as I would MFs.
Northern Flicker
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by Northern Flicker »

Either VTI or ITOT is an excellent choice in a taxable account. VTI was slightly more tax efficient in 2019.

VTI 93.79% QDI
ITOT 91.47% QDI

https://www.ishares.com/us/literature/t ... 088762.pdf

https://advisors.vanguard.com/VGApp/iip ... endfigures

Vanguard is more conservative in securities kending, but returns 100% of securities lending revenue to investors vs. 80% for iShares.

But the difference overall is tiny and both are excellent.

The OP might also consider locating int'l equities in a taxable account instead to get the foreign tax credit.
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SnowBog
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by SnowBog »

I prefer ETF's in taxable accounts for tax-efficiency and portability. Funds like FZROX cannot be transferred "in-kind" anywhere, so should you ever want to leave Fidelity you'll be forced to sell and deal with any tax complications.

That said, I primarily use FZROX in my tax-advantaged accounts at Fidelity. There are no tax-implications should I ever want to move my 401k/IRA to another brokerage, so no concerns there. Additionally, by using FZROX exclusively in my tax-advantaged space - I never need to worry about conflicts with Tax Loss Harvesting (TLH) the "same" fund in taxable and tax-advantaged (as I hold different funds).

One other point - which is both blessing and curse - ETF's can "instantly trade." During our recent down market, it was easy to go in and TLH any ETF's in my taxable accounts (actually I set limit sell automatically to TLH at thresholds, as I didn't have time to watch during the day). I had previously consolidated my Vanguard accounts into Fidelity, so I also held some VTSAX. Doing a TLH on a mutual fund like VTSAX exposes you to unexpected results - as any "buy/sell" occur at the end of the day (which could have had a late rally/fall - and if you aren't able to "watch" - you may end up having a "gain" that was expected to be a "loss"), and if you are converting from a mutual fund to an ETF, that could take 2+ days (and a lot can happen in those days). The counter argument is that mutual funds don't have bid/ask spreads, etc.

Regarding a specific fund choice, my advice - don't get too attached... My "preference" would be VTI in taxable, but with doing TLH earlier this year I went through VSTAX/VTI, SCHB, ITOT, SPTM, and ended up with SCHX - which now has enough "gains" that I'll be holding it for the foreseeable future. For incremental purchases, I'm just adding to SCHX now. And I'm debating if my next "big" taxable investment will add more to SCHX, or start a new holding of VTI (I like the simplicity of a single holding, but like the broader index of VTI/ITOT/etc.). Bottom line is you'll likely end up with more than one fund, so have a list of ones you like, and be adaptable.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by ruralavalon »

cabfranc wrote: Fri Jul 03, 2020 10:14 pm . . . . . .
I have both ITOT and IXUS in my Fidelity account, not because I prefer ETFs over MF or want to day trade, but rather because they are more tax efficient than Fidelity's MFs. I use them just as I would MFs.
That is an excellent reason to use ETFs in a taxable account at Fidelity.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by TheDDC »

One strike against ETFs in taxable is the T+2 day settlement time. With mutual funds it is T+1 (one day) until you get cash from the sale. So in a week’s time you only have three trading days instead of four in which you could actually get your cash back before a weekend. That would be a factor in my decision.

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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by vineviz »

bogglewer wrote: Thu Jul 02, 2020 12:14 pm
nix4me wrote: Thu Jul 02, 2020 12:08 pm If you just hate ETFs, then use FSKAX.
Why does some people "just hate ETFs"? I don't think I do (haha), but it seems some people would rather avoid them and I would like to better understand what factors they are taking into account.
Some people hate ETFs for the same reason that some people "hate" dark chocolate, strong coffee, and country music.

The rest of the people who hate ETFs do so because they don't understand how they work.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by CashFlo »

Fidelity allows you to reinvest ITOT (and Fidelity ETF's) dividends automatically. As best I can tell, the new shares are purchased at 12 noon on the day the dividends are paid.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by ruralavalon »

CashFlo wrote: Sat Jul 04, 2020 10:22 am Fidelity allows you to reinvest ITOT (and Fidelity ETF's) dividends automatically. As best I can tell, the new shares are purchased at 12 noon on the day the dividends are paid.
That's good news.

Does Fidelity also allow automatic reinvestment of the dividends of Vanguard ETFs?
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by 02nz »

ruralavalon wrote: Sat Jul 04, 2020 11:23 am
CashFlo wrote: Sat Jul 04, 2020 10:22 am Fidelity allows you to reinvest ITOT (and Fidelity ETF's) dividends automatically. As best I can tell, the new shares are purchased at 12 noon on the day the dividends are paid.
That's good news.

Does Fidelity also allow automatic reinvestment of the dividends of Vanguard ETFs?
Yes, as I noted above. I think pretty much all brokerages allow automatic reinvestment of dividends of all ETFs and stocks.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by hihillary »

02nz wrote: Thu Jul 02, 2020 11:21 am Either Vanguard or iShares index ETFs should be more tax-efficient than a Fidelity mutual fund like FXKAX or FZROX.
Both ETFs and mutual fund have dividend yield and could be reinvested, and I think capital gains from mutual fund are auto-reinvested. Why ETFs are more tax-efficient in this case?

And some vanguard mutual fund are as tax efficient as ETFs because of no capital gain. Does that mean owning a vanguard mutual fund earn less than a Fidelity mutual fund?
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by Northern Flicker »

hihillary wrote: Both ETFs and mutual fund have dividend yield and could be reinvested, except Fidelity mutual fund has capital gains but i think it's small during short period? Also, I think capital gains are auto-reinvested. Why ETFs are more tax-efficient in this case?
You can reinvest the capital gains distribution, but it is still a taxable distribution that will be reported on your 1099. Any taxes you pay on it is cash you could have invested in the fund instead, so these are a slight headwind on return.
hihillary wrote: And some vanguard mutual fund are as tax efficient as ETFs because of no capital gain. Does that mean owning a vanguard mutual fund earn less than a Fidelity mutual fund?
No, it means the Vanguard index mutual funds and ETFs use techniques that avoid having to distribute any of their capital gains to investors as taxable income, as would be required by the IRS if the techniques were not employed. Capital gains are realized by a fund when the fund sells a appreciated security, as could happen when a stock leaves an index as one example. A mutual fund must distribute net gains realized by selling securities internally to investors at least annually.
Last edited by Northern Flicker on Sat Jul 04, 2020 5:00 pm, edited 1 time in total.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by ruralavalon »

hihillary wrote: Sat Jul 04, 2020 1:13 pm
02nz wrote: Thu Jul 02, 2020 11:21 am Either Vanguard or iShares index ETFs should be more tax-efficient than a Fidelity mutual fund like FXKAX or FZROX.
Both ETFs and mutual fund have dividend yield and could be reinvested, and I think capital gains from mutual fund are auto-reinvested. Why ETFs are more tax-efficient in this case?
Because you owe tax on the distributed capital gain even if it is reinvested.
hihillary wrote: Sat Jul 04, 2020 1:13 pmAnd some vanguard mutual fund are as tax efficient as ETFs because of no capital gain. Does that mean owning a vanguard mutual fund earn less than a Fidelity mutual fund?
No.
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Re: ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage

Post by epictetus »

i would go with vti. that way you are buying a vanguard product.

and that is what i did in same situation you are in (Fidelity brokerage account).

and that is what i did even though i would rather use a MF than ETF so i could do scheduled purchases automatically. that is one drawback at this point with etfs at fidelity. hopefully that will change at some point.

after researching it a lot that is the direction i went in.

the difference in how MF (except for some of Vanguard's) and ETF handle capital gains is what tipped me in that direction.
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