VTSAX VS VFIAX in Roth

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lmldm
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VTSAX VS VFIAX in Roth

Post by lmldm »

Hello,

Super simple question. I currently hold the majority of my roth in VTSAX. I was wondering if I should sell my holdings and change to VFIAX since I will have no tax disadvantage? Thoughts? Do you believe there will be a better return on the S & P fund vs VTSAX?

Thanks
absolute zero
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Re: VTSAX VS VFIAX in Roth

Post by absolute zero »

VFIAX is *slightly* less diversified than VTSAX. But they are practically the same thing. And no, you shouldn’t expect a higher return from VFIAX.
Hyperchicken
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Re: VTSAX VS VFIAX in Roth

Post by Hyperchicken »

If you have taxable account, make sure you have different holdings in taxable and in Roth IRA, to avoid wash sale. E.g. VFIAX in taxable and VTSAX in Roth IRA. VFIAX is very slightly more tax efficient than VTSAX.
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anon_investor
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Re: VTSAX VS VFIAX in Roth

Post by anon_investor »

lmldm wrote: Wed Oct 07, 2020 11:57 am Hello,

Super simple question. I currently hold the majority of my roth in VTSAX. I was wondering if I should sell my holdings and change to VFIAX since I will have no tax disadvantage? Thoughts? Do you believe there will be a better return on the S & P fund vs VTSAX?

Thanks
No one knows, but the difference will likely be very little if any. Long term they have had a basically identical return.
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lmldm
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Re: VTSAX VS VFIAX in Roth

Post by lmldm »

Hyperchicken wrote: Wed Oct 07, 2020 12:09 pm If you have taxable account, make sure you have different holdings in taxable and in Roth IRA, to avoid wash sale. E.g. VFIAX in taxable and VTSAX in Roth IRA. VFIAX is very slightly more tax efficient than VTSAX.


Interesting because I have a large chunk of my taxable in VTSAX as well. I didn't realize that VFIAX is slightly more tax efficient. I guess it would make sense to change this to the S&P. So many differing opinions. A lot of posters told me to just have VTSAX in both accounts (which I do), but I'm willing to sell out the VTSAX for VFIAX. Also, do you think the ETF for VFIAX makes more sense, or just keep the mutual fund?

Thank you!
Hyperchicken
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Re: VTSAX VS VFIAX in Roth

Post by Hyperchicken »

You can keep everything as is. It's just that if you have to sell some VTSAX in taxable, it is more tax efficient to sell lots with the highest cost basis. Then if this makes you realize losses, and you happen to buy VTSAX in Roth IRA around the same time (plus or minus 30 days), you have a wash sale and are unable to take tax advantage of the realized losses (or a portion of it). Dividends reinvestment in Roth IRA counts too.

It's not a huge deal, and I would not make any changes just for that. But it is easier to have one set of funds in tax-advantaged accounts, and a different set in taxable. Then you don't need to worry about wash sale should you need to sell funds in taxable at a loss.
Last edited by Hyperchicken on Wed Oct 07, 2020 12:28 pm, edited 2 times in total.
whereskyle
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Re: VTSAX VS VFIAX in Roth

Post by whereskyle »

lmldm wrote: Wed Oct 07, 2020 12:18 pm
Hyperchicken wrote: Wed Oct 07, 2020 12:09 pm If you have taxable account, make sure you have different holdings in taxable and in Roth IRA, to avoid wash sale. E.g. VFIAX in taxable and VTSAX in Roth IRA. VFIAX is very slightly more tax efficient than VTSAX.


Interesting because I have a large chunk of my taxable in VTSAX as well. I didn't realize that VFIAX is slightly more tax efficient. I guess it would make sense to change this to the S&P. So many differing opinions. A lot of posters told me to just have VTSAX in both accounts (which I do), but I'm willing to sell out the VTSAX for VFIAX. Also, do you think the ETF for VFIAX makes more sense, or just keep the mutual fund?

Thank you!
No good reason to exchange imo, so don't do it. (I do not see why VFIAX would be noticeably more tax efficient.) Inactivity is your friend, not activity. You are all set with VTSAX, so just leave it alone.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Mullins
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Re: VTSAX VS VFIAX in Roth

Post by Mullins »

According to Vanguard, for 2020 as of this date VTSAX is estimated so far to be 97.09% Qualified Dividends, VFIAX is 99.80%.
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lmldm
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Re: VTSAX VS VFIAX in Roth

Post by lmldm »

Hyperchicken wrote: Wed Oct 07, 2020 12:26 pm You can keep everything as is. It's just that if you have to sell some VTSAX in taxable, it is more tax efficient to sell lots with the highest cost basis. Then if this makes you realize losses, and you happen to buy VTSAX in Roth IRA around the same time (plus or minus 30 days), you have a wash sale and are unable to take tax advantage of the realized losses (or a portion of it). Dividends reinvestment in Roth IRA counts too.
Thank you. I am still trying to figure our the best cost basis method. I am not looking to sell any VTSAX. Its a long term investment in my taxable. Its actually the bulk of my taxable along with VTMFX (tax purposes), and 4 single stocks (TSLA, AAPL, TDOC and IIPR).

My Roth majority is VTSAX and VNQ (which has really sucked, and I'd love to sell it) :dollar

Thanks for the input!
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anon_investor
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Re: VTSAX VS VFIAX in Roth

Post by anon_investor »

Mullins wrote: Wed Oct 07, 2020 12:29 pm According to Vanguard, for 2020 as of this date VTSAX is estimated so far to be 97.09% Qualified Dividends, VFIAX is 99.80%.
VTSAX has some Section 199A Deductions (from Reits) so I think tax efficiency wise it is even closer than that, and basically a wash.
sycamore
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Re: VTSAX VS VFIAX in Roth

Post by sycamore »

lmldm wrote: Wed Oct 07, 2020 12:18 pm ... Also, do you think the ETF for VFIAX makes more sense, or just keep the mutual fund?
lmldm, you may find this BH wiki article comparing MFs and ETFs helpful: https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds
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Re: VTSAX VS VFIAX in Roth

Post by ruralavalon »

lmldm wrote: Wed Oct 07, 2020 11:57 am Hello,

Super simple question. I currently hold the majority of my roth in VTSAX. I was wondering if I should sell my holdings and change to VFIAX since I will have no tax disadvantage? Thoughts? Do you believe there will be a better return on the S & P fund vs VTSAX?

Thanks
Vanguard Total Stock Market Index Fund (VTSAX) is a little more diversified than Vanguard 500 Index Fund (VFIAX). No you should not expect higher performance with VFIAX.

I would not switch to VFIAX in a Roth IRA, in general I prefer the slightly more diversified VTSAX whenever available.

The funds are near duplicates, a S&P 500 index fund covers over 80% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies.

Over the 28 years since the creation of the first total stock market index fund the two types of funds have had almost identical performance. Portfolio Visualizer, 1993-2020. Some years VFIAX did a little better, some years VTSAX did a little better. They have never been far apart.

lmldm wrote: Wed Oct 07, 2020 12:18 pm
Hyperchicken wrote: Wed Oct 07, 2020 12:09 pm If you have taxable account, make sure you have different holdings in taxable and in Roth IRA, to avoid wash sale. E.g. VFIAX in taxable and VTSAX in Roth IRA. VFIAX is very slightly more tax efficient than VTSAX.


Interesting because I have a large chunk of my taxable in VTSAX as well. I didn't realize that VFIAX is slightly more tax efficient. I guess it would make sense to change this to the S&P. So many differing opinions. A lot of posters told me to just have VTSAX in both accounts (which I do), but I'm willing to sell out the VTSAX for VFIAX. Also, do you think the ETF for VFIAX makes more sense, or just keep the mutual fund?

Thank you!
I think it's fine to also have VTSAX in the taxable account.

I would not bother to switch to the ETF version.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: VTSAX VS VFIAX in Roth

Post by abuss368 »

lmldm wrote: Wed Oct 07, 2020 11:57 am Hello,

Super simple question. I currently hold the majority of my roth in VTSAX. I was wondering if I should sell my holdings and change to VFIAX since I will have no tax disadvantage? Thoughts? Do you believe there will be a better return on the S & P fund vs VTSAX?

Thanks
Over the very long term the difference in Total Stock and the S&P 500 is a rounding error. That is because Total Stock holds most of their weight of the S&P 500. The remaining companies are small.

Either fund is an excellent choice.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: VTSAX VS VFIAX in Roth

Post by abuss368 »

I have actually owned both at the same time and was very happy. I invested in Total Stock in the taxable and IRAs. My employer plan at the time had a very low cost S&P 500 so I selected that. I would be fine either way.
John C. Bogle: “Simplicity is the master key to financial success."
Mode32
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Re: VTSAX VS VFIAX in Roth

Post by Mode32 »

To take advantage of TLH and avoid wash sales, wouldnt it be beneficial to separate funds into taxable and retirement (Ira & 401k)...so hold vtsax in taxable (since majority is vtsax already), and hold Vfiax in retirement accounts (so exchange vtsax for Vfiax which would be a non-taxable event)? I don’t see too many retirement accts offering total stock market funds (other than IRA’s), so again, keep vtsax in taxable. What are people’s thoughts?
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Re: VTSAX VS VFIAX in Roth

Post by tibbitts »

lmldm wrote: Wed Oct 07, 2020 12:18 pm Interesting because I have a large chunk of my taxable in VTSAX as well. I didn't realize that VFIAX is slightly more tax efficient. I guess it would make sense to change this to the S&P. So many differing opinions. A lot of posters told me to just have VTSAX in both accounts (which I do), but I'm willing to sell out the VTSAX for VFIAX. Also, do you think the ETF for VFIAX makes more sense, or just keep the mutual fund?

Thank you!
It's not that interesting, and no it wouldn't make sense to change anything for that reason. On the other hand do be careful of wash sales if you tax loss harvest. In that case you might want to have different funds rather than two of the same in two different accounts.

Incidentally what are these account balances? You'd need very large balances for tiny differences such as are being discussed here to be significant.
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JoMoney
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Re: VTSAX VS VFIAX in Roth

Post by JoMoney »

I hold VFIAX (and other S&P 500 funds).
I do think there will be occasional slight differences between VFIAX and VTSAX, sometimes one will do slightly better than the other, in some other time period the other might do slightly better... I don't think you can predict which will be on top over any particular time period but broadly I would expect their results will be very much the same.

It doesn't change my answer, but I do think it's worth noting that you didn't specify what the time period was where you wanted an answer about which might have higher returns.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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lmldm
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Re: VTSAX VS VFIAX in Roth

Post by lmldm »

It's not that interesting, and no it wouldn't make sense to change anything for that reason. On the other hand do be careful of wash sales if you tax loss harvest. In that case you might want to have different funds rather than two of the same in two different accounts.

Incidentally what are these account balances? You'd need very large balances for tiny differences such as are being discussed here to be significant.
I have about $35.5k in my ROTH in VTSAX and $27.3k in my TAXABLE of VTSAX. I just sold two other funds in my ROTH to make it ALL VTSAX which should be around $43k total. Im still on the fence about changing it all to VFIAX. Again, I know the differences are minimal. I'm not contributing anything to my ROTH as I have no income. My husband and I contribute to his i401k. Wish we could max that out, but who has $55k a year to be able to do that?

We're in our mid forties and have about $122k combined in retirement, with two small kids. His job is commission based and has taken a hit by covid. Fortunately, we have a large emergency savings fund for this, but we could probably put some of that money into retirement. It's just scary because we have VERY high expenses!

Thanks for the info, and sorry to go off subject a little...
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Re: VTSAX VS VFIAX in Roth

Post by Northern Flicker »

Why should VFIAX have a higher future return? We would expect the inclusion of midcaps and smallcaps to give the total market fund a slightly higher expected return, and the 28.5 years for which both funds have existed has corroborated that:

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

It also has corroborated that it probably won't make more than a very small difference either way.

Moving forward, nobody knows what will happen, and both are fine investments, but over the long term, there is more reason to project that VTSAX will win by a small amount than the other way around.
Risk is not a guarantor of return.
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