Vanguard Total Stock Market Index: ETFs Exceed Admiral for the First Time?

[CloudConsulting]

Hey folks,

Based on the latest portfolio compositions (updated 10/31/2023) for the Vanguard Total Stock Market Index, it appears that the ETF share class has exceeded the Admiral share class for the first time -

VTI (ETF): $297.9B
VTSAX (Admiral): $296.6B

Sources:
https://investor.vanguard.com/investmen ... omposition
https://investor.vanguard.com/investmen ... omposition

I suppose this was a long time comin' given the soaring popularity of ETFs over the past two decades or so. I imagine the Vanguard 500 Index Fund may follow suit. Of course, time will tell...

Cheers,

CC

[pizzy]

Cool stat. We are 100% mutual funds. Happy to stay here.

[Wiggums]

I’m sticking with mutual funds as well.

[Geologist]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

[prd1982]

I wonder what percentage of the ETF is held at brokers other than VG. I would think most people would use the ETF if they use another brokerage because of the fees.

[the_wiki]

Seems like all of the robo advisors use VTI as their primary core holding. And many of the new brokerages do not support mutual funds. I am not surprised it is growing quickly.

[LaramieWind]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

Thanks

[UpperNwGuy]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

[alex_686]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

ETFs are a hair cheaper to run than mutual funds. For context I used to work in brokerage operations and mutual fund accounting.

They are portable so you are not tied to a single brokerage. You have access to options which is a advantage to some.

There are other minor differences and they all are slightly in favor of ETFs rather than mutual funds.

[Mattman25]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

ETFs are a hair cheaper to run than mutual funds. For context I used to work in brokerage operations and mutual fund accounting.

They are portable so you are not tied to a single brokerage. You have access to options which is a advantage to some.

There are other minor differences and they all are slightly in favor of ETFs rather than mutual funds.

I would also love to hear from the “old guard” why you are staying with mutual funds (apart from the obvious unrealized gains and possible tax consequences of switching). I know Bogle didn’t like them at first because he thought it would encourage active trading instead of buy-and-hold but you can definitely still buy-and-hold with ETFs.

[UpperNwGuy]

Bogle didn’t like them at first because he thought it would encourage active trading instead of buy-and-hold but you can definitely still buy-and-hold with ETFs.

Bogle was just plain wrong about ETFs.

[alex_686]

I would also love to hear from the “old guard” why you are staying with mutual funds (apart from the obvious unrealized gains and possible tax consequences of switching). I know Bogle didn’t like them at first because he thought it would encourage active trading instead of buy-and-hold but you can definitely still buy-and-hold with ETFs.

I will second that Bogle was wrong and a little bit incoherent on the subject.

On mutual funds, I do think they are a fine product. It is just when you compare the two ETFs eek out ahead in almost every aspect.

For example, cost. I think ETFs have a lower cost structure of both explicit and implicit expenses of around 0.01% to 0.03%.

Some people like how funds trade versus ETFs. I would argue that they have never seen the sausage being made.

Some like the ability to automatically invest a fixed dollar amount. Technology is solving that issue.

To be blunt, we are debating over mole hills, not mountains. If you are more comfortable using mutual funds you should use them.

I think they are going to be a valid choice for the next 20 years.

[pizzy]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

Thanks

I don’t believe there are any compelling reasons to start using ETFs.

[anagram]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

ETFs are a hair cheaper to run than mutual funds. For context I used to work in brokerage operations and mutual fund accounting.

They are portable so you are not tied to a single brokerage. You have access to options which is a advantage to some.

There are other minor differences and they all are slightly in favor of ETFs rather than mutual funds.

Not according to Dr Bernstein.

[nedsaid]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

Don't think mutual funds will go away, I do think ETFs will be the preferred investment vehicle. I have both mutual funds and ETFs.

[mmse]

Some people like how funds trade versus ETFs. I would argue that they have never seen the sausage being made.

I am one of these people, especially when it comes to rebalancing across taxable and tax-advantaged accounts in lock-step. Can you please share your knowledge of some negatives of MF trading? Is this about implementation of Fair Value Rules?

https://www.morningstar.com/articles/37 ... its-needed
https://www.ici.org/system/files/2021-1 ... primer.pdf

[Beensabu]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

Because the tax efficiency of ETFs means nothing in a tax-advantaged account.

Can you imagine the kerfuffle if they started taxing capital gains on in-kind redemptions in the future?

[alex_686]

Not according to Dr Bernstein.

Would you please give specifics.

[anon_investor]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

Because the tax efficiency of ETFs means nothing in a tax-advantaged account.

Can you imagine the kerfuffle if they started taxing capital gains on in-kind redemptions in the future?

The brokerage portability of ETFs is undervalued.

[Silverado]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

Thanks

Early lesson of “don’t invest in anything you don’t understand”. That ruled out ETFs for me for a long time, and maybe even still.

[alex_686]

Some people like how funds trade versus ETFs. I would argue that they have never seen the sausage being made.

I am one of these people, especially when it comes to rebalancing across taxable and tax-advantaged accounts in lock-step. Can you please share your knowledge of some negatives of MF trading? Is this about implementation of Fair Value Rules?

https://www.morningstar.com/articles/37 ... its-needed
https://www.ici.org/system/files/2021-1 ... primer.pdf

Sort of.

To quote from Morningstar’s article: Funds and/or their outside services make their best estimates of what the stock or stocks are worth every day, using whatever information they can find.

So ETFs use market pricing. Mutual funds use NAV - which is just a accountant’s best estimate of what the price is. So different measuring sticks. As such you are going to have differences.

Now some people think that a accountant’s estimate is the most correct for some reason. It is clean and unambiguous with no bid/ask spreads.

The issue isn’t exactly fair value pricing. The problem is that the market is complex and nuanced. Fair value pricing does refine a accountant’s estimate, but NAV remains just a estimate.

The last good example was in 2020 when the bond market became illiquid. i.e. nothing was trading so you didn’t have any price data. There were big differences between mutual funds and ETFs.

Accountants, being conservative, used actual data that was stale by a few days. I mean, they used fair value pricing but were not aggressive enough in a falling price environment.

The ETF baskets still traded, since estimating the value of a basket is easier then valuating thousands of underlying bonds. Maybe. There are alternative explanations.

Anyways, I tend to think that market ETF prices are better than a accountant’s estimate - 7 times out of 10.

[CloudConsulting]

Cool stat. We are 100% mutual funds. Happy to stay here.

Why MFs over ETFs?

ETFs are a hair cheaper to run than mutual funds. For context I used to work in brokerage operations and mutual fund accounting.

They are portable so you are not tied to a single brokerage. You have access to options which is a advantage to some.

There are other minor differences and they all are slightly in favor of ETFs rather than mutual funds.

I would also love to hear from the “old guard” why you are staying with mutual funds (apart from the obvious unrealized gains and possible tax consequences of switching). I know Bogle didn’t like them at first because he thought it would encourage active trading instead of buy-and-hold but you can definitely still buy-and-hold with ETFs.

The one-way conversion of share classes from VTSAX (Admiral) to VTI (ETF) isn't a taxable event. In turn, unrealized gains and possible tax consequences are a moot point in this context.

Keep me honest here though.

[nisiprius]

The small differences do not all favor ETFs.

1) ETF mavens strongly advise placing ETF trades only when the market is open, and to monitor for price movements so that you don't trade at an unfavorable time... so it takes a little time and attention. If you work during those hours, you have to take your attention away from your work for a little while, which is inconsiderate to your employer.

2) Some ETF mavens recommend strongly against placing market orders. But most? all? other kinds of order are not guaranteed to execute, so if you place them, you have to hang around and pay attention for a bit to see if they executed and decide what to do if they didn't.

3) Rick Ferri wrote about Solving the bond ETF discount problem, i.e. he regards it as a problem:

Bond exchange-traded funds can be tricky to trade at times. Although these securities trade within a reasonable range of their net-asset value (NAV) most days, there are those periods when the ETF market just doesn’t want to cooperate....

Alex_686, as he explains above, thinks this problem is illusory. By using a bond mutual fund I don't have to figure out who's right.

4) Bid-asked spread may not be an important issue, but it's something you're told that you need to keep an eye on, so that's yet another attention drain.

5) Similarly, it appears that the price you actually pay or receive for odd lots is often less favorable than the round-lot price. That's another little detail you don't have to worry about with mutual funds.

6) If you are all mutual funds or all ETFs, you use a single procedure and workflow for all transactions. Neither one is hard to get the hang of, but they are different. If you have a mixture of mutual funds and ETFs, you need to learn two slightly different procedures. That's not hard when you are doing it yourself several times a year, but it could be confusing to a spouse or family member who needs to take over management of the account.

7) A decent number of interesting mainstream products are available only as mutual funds. (And a decent number are available only as ETFs). If you already hold and are happy with a mutual fund that has no near-clone ETF counterpart, it's unlikely that there is a compelling reason to switch.

[billaster]

There is zero, zip, nada, not a shred of evidence that the hypothetical cost savings of ETFs accrue to investors. They may save mutual fund companies money but they don't save investors money.

[nisiprius]

Not according to Dr Bernstein.

Would you please give specifics.

I don't know if this is what anagram is thinking about, but: (all quotations from Four Pillars, second edition):

You should, though, pay attention to the number of securities held by any fund, open-end or ETF. As of this book’s writing, the Schwab International (open-end) Index Fund owns only 855 names, versus 1,527 for its ETF version. Vanguard’s offerings own 7,881 names. Even this large difference has little effect on long-term returns, since the missing names in the Schwab funds are of firms with small market capitalizations.

Always place ETF trades as a limit order, and avoid buying and selling during the first and last 30 minutes of the trading day, when pricing and spreads can be erratic. Pay special attention to the price spreads, which I’ve listed in this chapter’s tables, particularly for smaller funds.

That's not exactly a knock on ETFs, but it confirms what I mentioned earlier. Trading ETFs does require more attention and know-how than transacting mutual funds.

The biggest difference between open-end funds and ETFs is their trading psychology. In terms of long-period returns, it matters little which of the two wrappers you choose. The choice will depend on how you deal with the psychology of open-end funds’ end-of-day pricing versus ETFs’ continuous pricing. With an open-end fund, you get the closing price of its underlying securities, while an ETF trades continuously throughout the day and you decide when to pull the trigger. Both of these situations can cause a small amount of stress, and which you prefer is a personal matter.

He isn't knocking ETFs, but he certainly isn't saying that they are Just Plain Better in every way.

[nisiprius]

I will also mention that according to the latest data available from the Investment Company Institute (ICI) in the 2023 Factbook,

US-registered investment company total net assets: $28.9 trillion
Mutual funds: $22.1 trillion
Exchange-traded funds: $6.5 trillion
Closed-end funds: $252 billion
Unit investment trusts: $73 million

I expect ETFs to pass mutual funds, but it should not be overlooked that as of year-end 2022, the vast majority of fund assets--76%--was in mutual funds, not ETFs.

VTI may have overtaken VTSAX, but ETFs have not overtaken mutual funds. (As Geologist pointed out, there are multiple mutual fund share classes of Total Stock, and others are bigger than VTSAX. In fact, the ratio of ETF-to-mutual funds in Total Stock looks to be about the same as all-ETFs-to-all-mutual-funds).

[rob]

I have not heard of any 401K/403B/alike plans swapping to ETF (sans a brokerage window which most people don't use or know about and is not universally allowed) - a stack of $ in those.

[Northern Flicker]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

Mutual funds work for a much broader class of investment products than ETFs. They are here to stay. Index funds could move to an all-ETF format in theory.

[nisiprius]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

Source



If two investors had each invested $10,000 into the ETF and Admiral share classes of Total Stock at inception of the Admiral class, the "less efficient" mutual fund investor would have ended up with $68 more than the "more efficient" ETF investor.

You take your "efficiency," I'll take the cash.

(I don't believe anybody should switch from ETFs to mutual funds on the basis of this example, but it shows that things aren't as cut-and-dried as all that. I am willing to grant that in theory the ETF investor ought to have ended up with more money, but in practice they didn't. Funny, that. What it probably means is that all of the supposed ETF benefits are just a featherweight on the scales, and can be outweighed by a score of other, hard-to-identify factors).

[Taylor Larimore]

Bogleheads:

Mr. Bogle is not against ETFs properly used. In his Little Book of Common Sense Investing -- 2017 edition (page 180)" he wrote:

"But let me be clear. There is nothing wrong with investing in those indexed ETFs that track the broad stock market, just so long as you don't trade them."

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: “People should invest in total market stock and bond funds for the long term. Total market indexing is the gold standard. Anything else, like sector investing, is a dilution of that standard.”

[CloudConsulting]

Bogleheads:

Mr. Bogle is not against ETFs properly used. In his Little Book of Common Sense Investing -- 2017 edition (page 180)" he wrote:

"But let me be clear. There is nothing wrong with investing in those indexed ETFs that track the broad stock market, just so long as you don't trade them."

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: “People should invest in total market stock and bond funds for the long term. Total market indexing is the gold standard. Anything else, like sector investing, is a dilution of that standard.”

Taylor:

I'd be remiss if I didn't mention it - as a long-time reader of Bogleheads (and a few-time poster), it's an honor to have you comment and share your wisdom on this thread.

Best wishes.
CC

[beyou]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

Mutual funds work for a much broader class of investment products than ETFs. They are here to stay. Index funds could move to an all-ETF format in theory.

It is true that there are far more niche funds out that now but that is only for historical reasons.
It costs big bucks for a fund manager to create a new fund, and creating an ETF for each and every historical niche fund equivalent would
be quite a huge cost to them (legal and other one time fees, then ongoing fixed fees that are not justified if insufficient assets gathered). Many of the older mutual funds have very little assets and are unprofitable, hence many of the consolidations of funds (both due to bad performance maybe, but that bad performance leads to small asset base paying a high fixed cost, same problem for new funds and older poorly performing funds).

ETFs will be created where there is demand for specific products, just as was the case with open end funds for the last century.
Will take a very long time and likely never fully catch up other than by having the open end funds continue to close due to losing assets to ETFs.

Personally the first thing I did when Vanguard pushed the transition from a fund only "platform" to the new brokerage platform was to convert my Admiral Total Stock to VTI ETF, and my Total International to VXUS. Then proceeded to replace many Vanguard funds with non-Vanguard ETFs. ETFs give a low cost frictionless way to get the best funds out there from any manager all in one brokerage acct. Yes I can buy open end funds from other fund managers at most brokers, but the process is often clunky, slower and for many funds at many brokers, fees that you don't pay for ETF trades. I now can see a real time value of my portfolio, all holdings as of current market conditions, not a mixture of prior night close and intraday. I can port to any broker. I found among all the ETF publishers every and any asset class I want at a reasonable price. I own Vanguard, Schwab and iShares ETFs and have no open end funds other than my Vanguard MMKT funds for cash. I could even replace those with SGOV from ishares, which while not technically a mmkt fund, almost as good for purposes of a safe place to park cash if I really wanted all ETF without any caveat (but who cares about real time for cash, and portability is less an issue with cash too).

Note I worked in the fund industry in technology. I actually worked on automation of many aspects of mutual funds, including how open end funds are sold via brokers, and the interface between fund managers and brokers. It is ugly and the industry utility was the reason for the scandal 20 years back for late trading mutual fund shares , a problem that has never been an issue for ETFs since they leverage the highly efficient and automated equity trading and backoffice systems at all brokers and exchanges.

https://en.wikipedia.org/wiki/2003_mutual_fund_scandal

The only new tech for ETFs was really the creation/destruction of shares for large trades from major brokers, something that does not really affect retail investor systems interfaces at all.

[beyou]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

[alex_686]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

I believe that the target date funds still use the investor class funds.

[CloudConsulting]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

Source



If two investors had each invested $10,000 into the ETF and Admiral share classes of Total Stock at inception of the Admiral class, the "less efficient" mutual fund investor would have ended up with $68 more than the "more efficient" ETF investor.

You take your "efficiency," I'll take the cash.

(I don't believe anybody should switch from ETFs to mutual funds on the basis of this example, but it shows that things aren't as cut-and-dried as all that. I am willing to grant that in theory the ETF investor ought to have ended up with more money, but in practice they didn't. Funny, that. What it probably means is that all of the supposed ETF benefits are just a featherweight on the scales, and can be outweighed by a score of other, hard-to-identify factors).

Backtesting reflects that VTI outperformed VTSAX by $270 (or 0.02% CAGR) since inception, no? Perhaps I'm missing something here...

Source:
https://www.portfoliovisualizer.com/bac ... RT9RuucOYN

[Geologist]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

Maybe you ought to read Annual and Semi-Annual reports. Investor shares certainly do still exist. As of June 30, 2023, the Investor share class had more than $20 billion in assets.

[beyou]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

Maybe you ought to read Annual and Semi-Annual reports. Investor shares certainly do still exist. As of June 30, 2023, the Investor share class had more than $20 billion in assets.

Well maybe there is some legacy reason and sold via some other channel other than directly from Vanguard.
If you look for the Total Stock fund info page they have removed references to the investor shares.
If you go to other brokers like Etrade, they only sell the Admiral shares, years ago they only sold Investor shares.

Scraped from Vanguard info page for this fund just now.

VTSAX
Vanguard Total Stock Market Index Fund Admiral Shares
Also available as an ETF (starting at the price of $1).

They EXIST but are no longer directly sold. As per my other discussion with Alex_686, they are sold indirectly on LifeStrategy funds.
Certainly not going to grow the Investor class if one can't buy it directly.
But VTI is certainly growing as the old Investor class is shrinking.

[Taylor Larimore]

CC:

Thank you for your kind words. I'll sleep well tonight.

Taylor

Jack Bogle's Words of Wisdom: "Not everything that counts can be counted, and not everything that can be counted counts.”

[beyou]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

I believe that the target date funds still use the investor class funds.

Yes that makes sense but not totally true. Just looked at 2045 target and it has

Vanguard Total Stock Market Index Fund Institutional Plus Shares
47.10%
Vanguard Total International Stock Index Fund Investor Shares

Same for a newer one like 2070

Vanguard Total Stock Market Index Fund Institutional Plus Shares
54.00%
Vanguard Total International Stock Index Fund Investor Shares

LIFESTRATEGY still holds Investor shares, so you can only buy these indirectly if you want Vanguard to maintain your asset allocation at higher cost to you.

[Geologist]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

Maybe you ought to read Annual and Semi-Annual reports. Investor shares certainly do still exist. As of June 30, 2023, the Investor share class had more than $20 billion in assets.

Well maybe there is some legacy reason and sold via some other channel other than directly from Vanguard.
If you look for the Total Stock fund info page they have removed references to the investor shares.
If you go to other brokers like Etrade, they only sell the Admiral shares, years ago they only sold Investor shares.

Scraped from Vanguard info page for this fund just now.

VTSAX
Vanguard Total Stock Market Index Fund Admiral Shares
Also available as an ETF (starting at the price of $1).

The website is not an official document. (Investor shares are also mentioned in the prospectus, which describes where they are used.) I didn't mention Investor shares arbitrarily in my initial post; I was looking at the Semi-Annual report. You jumped to an incorrect conclusion.

[spectec]

I’m leaning toward moving everything over to Fidelity (my fixed income allocation is already over there for the most part). If I further simplify things by making the move with my equity allocation, I’m glad I’ll be able to seamlessly buy VTI at Fidelity in the same manner as I do at Vanguard.

[beyou]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

Maybe you ought to read Annual and Semi-Annual reports. Investor shares certainly do still exist. As of June 30, 2023, the Investor share class had more than $20 billion in assets.

Well maybe there is some legacy reason and sold via some other channel other than directly from Vanguard.
If you look for the Total Stock fund info page they have removed references to the investor shares.
If you go to other brokers like Etrade, they only sell the Admiral shares, years ago they only sold Investor shares.

Scraped from Vanguard info page for this fund just now.

VTSAX
Vanguard Total Stock Market Index Fund Admiral Shares
Also available as an ETF (starting at the price of $1).

The website is not an official document. (Investor shares are also mentioned in the prospectus, which describes where they are used.) I didn't mention Investor shares arbitrarily in my initial post; I was looking at the Semi-Annual report. You jumped to an incorrect conclusion.

They are no longer directly sold and not a growing part of the asset base.

[retired@50]

They are no longer directly sold and not a growing part of the asset base.

Regarding Investor share class(es) at Vanguard.

Here's at least one example where Investor class shares are still for sale - VCITX. I suspect there are several more, with similar higher minimums for Admiral shares. See also: VCAIX, VMLTX, VWITX.

The Admiral class happens to have a $50,000 minimum. The Investor class has a $3,000 minimum.

Source: https://investor.vanguard.com/investmen ... file/vcitx

Regards,

[beyou]

They are no longer directly sold and not a growing part of the asset base.

Regarding Investor share class(es) at Vanguard.

Here's at least one example where Investor class shares are still for sale - VCITX. I suspect there are several more, with similar higher minimums for Admiral shares. See also: VCAIX

The Admiral class happens to have a $50,000 minimum. The Investor class has a $3,000 minimum.

Source: https://investor.vanguard.com/investmen ... file/vcitx

Regards,

This thread is about Total Stock Market Index.
I was not referring to ALL Investor/Admiral pairs.
Yes, I have used Muni funds in recent history and saw both existed, but not the topic here.
In those cases, many other brokers will only sell you the Investor shares, Vanguard wont let them sell. you Admiral shares.
But those like Total Stock Market, you can only buy Admiral (such as at Etrade where some buy Vanguard funds fee-free).

[retired@50]

I was not referring to ALL Investor/Admiral pairs.

Got it. Sorry for the confusion.

Regards,

[asset_chaos]

The big beast of the share classes is Institutional Plus with $100 million minimum and $534 billion in assets, about 50% more than either etf or admiral. The (merely) Institutional share class, with its paltry $5 million minimum, only has $71 billion in assets. Huh, there is $52 billion in the Institutional Select class which has a $5 billion (with a b) minimum. I assume Plus and Select are used by (big and even bigger) tax-sheltered plans.

[Northern Flicker]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

Mutual funds work for a much broader class of investment products than ETFs. They are here to stay. Index funds could move to an all-ETF format in theory.

It is true that there are far more niche funds out that now but that is only for historical reasons.
It costs big bucks for a fund manager to create a new fund, and creating an ETF for each and every historical niche fund equivalent would
be quite a huge cost to them (legal and other one time fees, then ongoing fixed fees that are not justified if insufficient assets gathered).

ETFs work because APs/market makers can arbitrage gaps between NAV and market value of the ETF. It is much harder for APs to function with active ETFs because the ETF creation basket will be shifting all the time.

It is not just a matter of waiting for the ETF products to be implemented. There are types of fund products that are less amenable to ETF containers.

One significant advantage of ETFs is that the investor is shielded from the effects of active traders of the fund. With a mutual fund, active traders and market timers can bleed cash out of the fund, at the expense of buy and hold investors. That is why fund companies have active trading policies for mutual funds. These help significantly, but do not eliminate the problem fully.

This is why Mr. Bogle said that ETFs have the benefit of giving active traders a vehicle to trade, which may help to keep them out of the mutual funds.

[nisiprius]

Of course, if you also account for the mutual fund share classes that are not Admiral (Investor and the various Institutional classes), the mutual fund classes still are far larger than the ETF share class. (Institutional share classes have assets in excess of $600 billion at June 30).

There are no more Investor shares, that was folded into Admiral shares.

Not so. It still exists and it has $18 billion in assets. I was going to mention that earlier but since it is so small relative to the Admiral and institutional share classes it seemed a little silly. But, yes, VTI is slightly smaller than the two retail classes, VTSMX and VTSAX combined.

Vanguard tries to hide VTSMX. The fund is of course closed to new purchases. I assume that they are trying to "promote" Investor shares to Admiral wherever they can. But $18 billion ain't hay.

Source

[nisiprius]

...One significant advantage of ETFs is that the investor is shielded from the effects of active traders of the fund. With a mutual fund, active traders and market timers can bleed cash out of the fund, at the expense of buy and hold investors. That is why fund companies have active trading policies for mutual funds. These help significantly, but do not eliminate the problem fully...

This is often said and it sounds plausible, and "costs to the fund" are commonly cited as the reason for active trading policies. But where's the real-world example of a closely-matched mutual fund/ETF pair where you can show convincingly that would-be buy-and-hold mutual fund investors were hurt by active traders? In dollars, please, or loss of a number of basis points of return.

I think this is one of these arguments where you can see qualitatively that some money is coming out of the fund, so logically it must be an expense paid by the rest of the fund... but how much is it?

There may be some funds demonstrably hurt by short-term trading, but I'll bet they are not the kinds of funds typical Bogleheads use.

As noted above, despite having an equal or greater expense ratio, over its lifetime VTSAX has outperformed VTI. VTSAX investors made $68 more than VTI investors. Without bad behavior by a few VTSAX short-term traders, would it have been $70? Without the drag of having to keep 0.5% in a redemption fund and only being 99.5% invested, would it have been $72?

[beyou]

This is good news! ETFs are the future of investing, and the sooner we can move beyond this MF-to-ETF transition period the more efficient our investing will be.

Mutual funds work for a much broader class of investment products than ETFs. They are here to stay. Index funds could move to an all-ETF format in theory.

It is true that there are far more niche funds out that now but that is only for historical reasons.
It costs big bucks for a fund manager to create a new fund, and creating an ETF for each and every historical niche fund equivalent would
be quite a huge cost to them (legal and other one time fees, then ongoing fixed fees that are not justified if insufficient assets gathered).

ETFs work because APs/market makers can arbitrage gaps between NAV and market value of the ETF. It is much harder for APs to function with active ETFs because the ETF creation basket will be shifting all the time.

It is not just a matter of waiting for the ETF products to be implemented. There are types of fund products that are less amenable to ETF containers.

One significant advantage of ETFs is that the investor is shielded from the effects of active traders of the fund. With a mutual fund, active traders and market timers can bleed cash out of the fund, at the expense of buy and hold investors. That is why fund companies have active trading policies for mutual funds. These help significantly, but do not eliminate the problem fully.

This is why Mr. Bogle said that ETFs have the benefit of giving active traders a vehicle to trade, which may help to keep them out of the mutual funds.

Before anyone ever sold an open end mutual fund, the market for funds was closed end funds, exchange traded and actively managed. These have been sold for a century in the US, were commonly highly leveraged helping to accelerate the 1929 crash. The reasons the faded were many, but in part due to lack if the improvements you speak of today, but also due to the bad reputation from 1929 leverage losses, and the relatively lower liquidity that led to large discounts. We still today have many closed end funds operating, and have discounts on what we call ETFs. Many fund managers are already working to create active ETFs, but in a time when the world is mostly moving away from even managed open end funds too. If people wont buy managed open end funds, will they buy managed ETFs in sufficient quantity to be worth the cost of creating these new funds, and getting them listed to trade, an extra expense greater than up front cost of creating new open end funds.

All that said, read this
https://www.morningstar.com/etfs/conste ... eoric-rise

Some important snippets

About active funds of all types
“ record $1 trillion exodus in 2022”

About rise of active ETFs
“ Nearly as many active ETFs launched from January 2022 through October (789) as the decade prior (810). Active ETF launches outnumbered index trackers 3 to 1 so far in 2023 …….Two related developments prompted the proliferation of active ETF“

“ Converting mutual funds to ETFs has become common practice”

Fidelity and many other active managers are coming out with Active ETFs as we speak. A former employer of mine who was 100% an active manager (offers NO index fund products) is creating ETFs today as we speak.

The article does discuss some disadvantages to ETF structure for active. Main point was inability to close a fund to new investors (when size becomes unwieldy to manage such as for small cap funds). After 40 years in the fund industry, I can assure you this “problem” is a rare concern outside a firm like Vanguard. Vast majority of managers worry about the opposite problem, being able to raise sufficient assets for have a viable fund. But is a valid concern for small cap stocks, and one where open end or closed end funds (closed day 1 rather than closed as needed for open end funds) do have an potential advantage for active strategies. Also it was noted that the ability to invest in illiquid private products is restricted in ETFs. How many retail investors are looking for private equity, and otc derivatives in their funds ? People demonize derivatives on this board, and some chastise Vanguard over the idea they may add private equity to their Target Date Funds ! All these asset managers trade otc derivatives and many private equity, but often in separate accounts for institutional clients who can he educated about the benefits, and have size to do so. Mutual funds can and do trade otc derivatives, as a small % of assets, to hedge certain risks, something ETFs may find challenging to do, since the problem is not just transparency. Active managers will be giving some transparency but that is of little help when you can’t easily determine the value of said assets. Any investment strategy that heavily relies on private, non exchange traded instruments are the worst candidates for ETF, even if allowed by law. But there are many active equity managers who do not use such products, as there is significant cost and expertise required to do so, investments in tech and staff that even Vanguard and Fidelity have only made in last few years, and few of the smaller asset managers. These products are in the realm of hedge funds, pensions and other large institutional investors primarily.

Active ETFs are growing somewhat even as active open end funds are shrinking rapidly in asset size.