Converting Vanguard Mutual fund shares to ETF -- cost basis?

[Gigihsu]

I recently received an email from Vanguard informing me that I can now convert my mutual fund shares to ETFs online. Previously, we would have had to call Vanguard to do this. The email also stated that, in order to convert my shares, I would need to revoke the average cost method and apply the First In First Out (FIFO) cost basis method.

I am wondering if there are any drawbacks to using the FIFO cost basis method. Other than no automatic dividend reinvestment, are there any other drawbacks to converting our mutual fund shares to ETFs?

[mhc]

Here is a wiki page that covers ETF vs Mutual Fund: https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds

I would not use FIFO. I would only use specific ID. Specific ID is better for tax loss harvesting and controlling taxes.

[exodusNH]

I recently received an email from Vanguard informing me that I can now convert my mutual fund shares to ETFs online. Previously, we would have had to call Vanguard to do this. The email also stated that, in order to convert my shares, I would need to revoke the average cost method and apply the First In First Out (FIFO) cost basis method.

I am wondering if there are any drawbacks to using the FIFO cost basis method. Other than no automatic dividend reinvestment, are there any other drawbacks to converting our mutual fund shares to ETFs?

Vanguard supports automatic dividend investment on all of their ETFs and many other highly-traded ones.

[MrJedi]

Where is the online conversion option? Or is this a limited trial run or staggered roll out?

[Gigihsu]

Where is the online conversion option? Or is this a limited trial run or staggered roll out?

I clicked on the e-mail Vanguard sent me, and it took me straight to the conversion page.

I also noticed my brokerage account page layout was different than before after logging in.

[MrJedi]

Where is the online conversion option? Or is this a limited trial run or staggered roll out?

I clicked on the e-mail Vanguard sent me, and it took me straight to the conversion page.

I also noticed my brokerage account page layout was different than before after logging in.

Hmm. I didn't get an email, so maybe a staggered roll out? I dug around on the website but couldn't find anything. I also only have IRA accounts at Vanguard which only do average cost method for mutual funds. I assume you're talking about a taxable account because they want you to switch to FIFO.

For your actual question, I agree with mhc that SpecID is best. If for some reason you can't select SpecID and do the conversion, you could maybe change to FIFO first to make the conversion, and then change after conversion to SpecID. I personally would never use average cost for a taxable account...too restrictive.