Anyone in VFSVX? Why?
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Anyone in VFSVX? Why?
Anyone here use VFSVX (Vanguard FTSE All-World ex-US Small Cap Index Fund)? Why? For what purpose? Do the fees/ER bother you?
Also if anyone else wants to give a review of why they think it would be a better international fund choice than another, please do so.
Also if anyone else wants to give a review of why they think it would be a better international fund choice than another, please do so.
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The ETF (VSS) is less expensive with no purchase or redemption fee beyond the brokerage transaction cost, has identical holdings to VFSVX, and has about 3000 stocks. Over time it will likely perform similarly to the fund, perhaps slightly better due to lower costs (see 2010 comparative returns). Along with other ETFs, it seems a reasonable a choice for International Small Caps exposure in one fund, though there are invariably quibbles with how small or how value-ey one wishes to go.
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- Majormajor78
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+1 VSS is the ETF version of FTSE AllWorld - ex US Small Caplivesoft wrote:I use VSS instead (the ETF share class). I want to overweight small-cap international equities in my portfolio.
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Re: Anyone in VFSVX? Why?
1) yesEmptyWallet wrote:Anyone here use VFSVX? Why? For what purpose? Do the fees/ER bother you?
2) because VFWIX (FTSE Large) doesn't have Small Caps
3) overweight those Small Caps referenced in #2
4) no
Landy |
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- Aptenodytes
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An alternative to consider is the International Explorer fund (VINEX) It has an ER of .39, less than the FTSE fund. The average market cap is about the same as the FTSE fund. It takes a minimum of $25,000 to get in but if you hold for 2 months, getting out or getting further in is free.
It holds something like 370 issues as compared with 2700+ for the FTSE fund. The process by which these stocks are selected is a mysterious process called "active management" but I speculate that the number is large enough so that, effectively, the selected issues are a random sample from the asset class.
It holds something like 370 issues as compared with 2700+ for the FTSE fund. The process by which these stocks are selected is a mysterious process called "active management" but I speculate that the number is large enough so that, effectively, the selected issues are a random sample from the asset class.
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It was just kind of a shocker to see that ER and those fees, when I'm so used to everything in VG being low.honkeoki wrote:+1KyleAAA wrote:I own it because I want small international exposure. The ER seems perfectly reasonable to me.
OP, I take it you have concerns?
I noticed VG just dropped the ER to an even lower, .55
You have to look at it relative to the competition. Who else offers an ISC fund with an ER that low? It's an expensive asset class to invest in, no doubt.EmptyWallet wrote:It was just kind of a shocker to see that ER and those fees, when I'm so used to everything in VG being low.honkeoki wrote:+1KyleAAA wrote:I own it because I want small international exposure. The ER seems perfectly reasonable to me.
OP, I take it you have concerns?
I noticed VG just dropped the ER to an even lower, .55
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EmptyWallet wrote:It was just kind of a shocker to see that ER and those fees, when I'm so used to everything in VG being low.
Agreed that "you have to look at it relative to the competition." And "who else" charges a .75% fee on every dollar put into the fund, and another .75% fee on every dollar that comes out of the fund, regardless of how long the shares were held, but still tells customers that "it may look like a duck [in this case, a 'duck' being a 'load'] and quack like a duck, but it's not really a duck because even though you pay these fees to get into or out of the fund, we ourselves don't actually pocket the fees, we just charge them"? IMO that's splitting hairs, a distinction which makes no real difference. The fees may get recycled into the fund itself, but nevertheless, part of every transaction is lost (you send off $3000 but somewhat less than $3000 gets in invested in shares; you redeem shares and get back somewhat less than their actual sale price) and therefore, in my view VFSVX feels like a fund with small front–end and back–end loads.KyleAAA wrote:You have to look at it relative to the competition. Who else offers an [international small cap] fund with an ER that low?
Both the OP's introductory and follow–ups posts referred to the fund's operating expense ratio and its purchase/redemption fees, but most of the posts on this thread have focused only on the former. I find the expense ratio quite reasonable for this asset class, but find the fees quite annoying.
Harrumph.
Marc
Re: Anyone in VFSVX? Why?
The fees help the fund's inital growth in assets that every shareholder participates-in.MarcMyWord wrote:The fees may get recycled into the fund itself, but nevertheless, part of every transaction is lost (you send off $3000 but somewhat less than $3000 gets in invested in shares; you redeem shares and get back somewhat less than their actual sale price) and therefore, in my view VFSVX feels like a fund with small front–end and back–end loads.
Both the OP's introductory and follow–ups posts referred to the fund's operating expense ratio and its purchase/redemption fees, but most of the posts on this thread have focused only on the former. I find the expense ratio quite reasonable for this asset class, but find the fees quite annoying.
Annoying, yes.
$3,000 x 0.75% = $22.50.
Outrageous or even significant... ????
Also, the ETF (VSS) has no such fee.
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- Majormajor78
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You and everybody else. If you go into the vanguard site and hit the portfolio and management tab you'll see that the VFSVX share class total net assets is $224.5 million while the fund total assets are $1.1 billion. Only 20.41% of the funds assets are in the mutual fund, everything else is the ETF.livesoft wrote:Most of the responders use VSS (no purchase/redemption fees) and not VFSVX. The fees of VFSVX bother me.
On the other hand look at Vanguard Total International Stock Index Fund Investor Shares (VGTSX) which does not have these purchase fees and only an expiring redemption fee. Share class total net assets $44.1 billion out of Fund total net assets $53.8 billion or 81.97%. The admiral class has 6.69% of assets leaving only 11.34% of the fund being accounted for by the ETF class shares.
Hopefully soon the decision makers at Vanguard will wake up to the fact that even their most loyal followers are avoiding these new mutual funds like the plague. This is easily seen in the breakown of the cash flows into the various share classes. People can agrue the appropriateness of these fees all they want but for the first time, thanks to Vanguard's IDENTICAL funds with both mutual and ETF share classes investors are able to directly vote on what they find to be acceptable fees or not. The answer is a landslide victory for the share class without the fees.
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Why would anyone buy VFSVX outright then, when VSS is the same fund without the fees and lower ER?Majormajor78 wrote:You and everybody else. If you go into the vanguard site and hit the portfolio and management tab you'll see that the VFSVX share class total net assets is $224.5 million while the fund total assets are $1.1 billion. Only 20.41% of the funds assets are in the mutual fund, everything else is the ETF.livesoft wrote:Most of the responders use VSS (no purchase/redemption fees) and not VFSVX. The fees of VFSVX bother me.
On the other hand look at Vanguard Total International Stock Index Fund Investor Shares (VGTSX) which does not have these purchase fees and only an expiring redemption fee. Share class total net assets $44.1 billion out of Fund total net assets $53.8 billion or 81.97%. The admiral class has 6.69% of assets leaving only 11.34% of the fund being accounted for by the ETF class shares.
Hopefully soon the decision makers at Vanguard will wake up to the fact that even their most loyal followers are avoiding these new mutual funds like the plague. This is easily seen in the breakown of the cash flows into the various share classes. People can agrue the appropriateness of these fees all they want but for the first time, thanks to Vanguard's IDENTICAL funds with both mutual and ETF share classes investors are able to directly vote on what they find to be acceptable fees or not. The answer is a landslide victory for the share class without the fees.
I was going to post a thread titled "is there any reason NOT to use the ETF class of a fund that charges purchase/redemption fees?"
One would think that the costs should even out somehow; in the bid ask spread or something.
***
Does VGTSX (total international stock index fund) now have a tilt towards emerging markets given its 24% allocation? Or is it now equal to the total market?
I need to find out what % of my international allocation should be emerging.
EDIT:
>The ETF (VSS) is less expensive with no purchase or redemption fee beyond the brokerage transaction cost
>
Why does the description say that VSS has a .33 expense ratio? How is that extracted from your holdings?
https://personal.vanguard.com/us/funds/ ... st=tab%3A3
Also, its selling at a .54 premium. Hopefully when it goes up & you sell to rebalance the premium will be higher ?? You should never be selling when its lower because the fund is in a trough...
One would think that the costs should even out somehow; in the bid ask spread or something.
***
Does VGTSX (total international stock index fund) now have a tilt towards emerging markets given its 24% allocation? Or is it now equal to the total market?
I need to find out what % of my international allocation should be emerging.
EDIT:
>The ETF (VSS) is less expensive with no purchase or redemption fee beyond the brokerage transaction cost
>
Why does the description say that VSS has a .33 expense ratio? How is that extracted from your holdings?
https://personal.vanguard.com/us/funds/ ... st=tab%3A3
Also, its selling at a .54 premium. Hopefully when it goes up & you sell to rebalance the premium will be higher ?? You should never be selling when its lower because the fund is in a trough...
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ETF Hassles
.
In our case it is not so much a fear of ETFs as a desire to avoid the hassles of getting a brokerage account and learning about the in and outs of making orders properly. And even more importantly, I do not wish to leave the headache of ETFs and a brokerage for my wife.
Plus in my case I agree with Bongleur - I do not believe the ETF class share holders are getting a free ride, the purchase cost has to be picked up someplace by some ETF holders if not all.
In our case it is not so much a fear of ETFs as a desire to avoid the hassles of getting a brokerage account and learning about the in and outs of making orders properly. And even more importantly, I do not wish to leave the headache of ETFs and a brokerage for my wife.
Plus in my case I agree with Bongleur - I do not believe the ETF class share holders are getting a free ride, the purchase cost has to be picked up someplace by some ETF holders if not all.
Bongleur wrote:I was going to post a thread titled "is there any reason NOT to use the ETF class of a fund that charges purchase/redemption fees?"
One would think that the costs should even out somehow; in the bid ask spread or something.
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Re: ETF Hassles
Intuition and some knowledge of how Vanguard works tells me that the holders of VFSVX aren't actually being disadvantaged relative to VSS. It appears as thought they are due to the purchase and redemption fees and the higher expense ratio, but perhaps this is just a case of the expenses being more transparent in the mutual fund than with the ETF? Perhaps there is .75% buried somewhere the purchase/sale of the ETF? In the bid/ask spread perhaps, or in the premium to NAV?EyeDee wrote:I do not believe the ETF class share holders are getting a free ride, the purchase cost has to be picked up someplace by some ETF holders if not all.
I have a brokerage account and I'm not afraid of ETFs, but I would still prefer, all else being equal, to own the fund. In this case it appears all else is not equal, but I really wonder if this is actually true or just a perception. If it is true, why is it true? Why would the fund be more expensive than the ETF? Why would Vanguard create this price discrepancy? Why would they burden the buyers/sellers of the fund with paying fees they don't ask buyers/sellers of the ETF to pay? It doesn't make sense. I think there's something here we're just not seeing.
Re: ETF Hassles
The reason for the purchase and redemption fees is that Vanguard must trade in illiquid markets. If investors buy $6M of the fund and sell $3M, then Vanguard must use $3M to buy stock. If transaction costs are 2%, this means that $3M invested in the stock market gives Vanguard only $2.94M worth of stock, then the shareholders have lost $60K. By charging $67.5K in fees, Vanguard ensures that existing shareholders approximately break even. The fees are charged on both purchases and sales because either one could cause Vanguard to do extra trading; on another day, there might be $2M bought and $5M sold, and $52.5K in fees would again cause shareholders to approximately break even.haysdb wrote:Intuition and some knowledge of how Vanguard works tells me that the holders of VFSVX aren't actually being disadvantaged relative to VSS. It appears as thought they are due to the purchase and redemption fees and the higher expense ratio, but perhaps this is just a case of the expenses being more transparent in the mutual fund than with the ETF? Perhaps there is .75% buried somewhere the purchase/sale of the ETF? In the bid/ask spread perhaps, or in the premium to NAV?EyeDee wrote:I do not believe the ETF class share holders are getting a free ride, the purchase cost has to be picked up someplace by some ETF holders if not all.
In contrast, when you buy or sell an ETF, Vanguard doesn't have to do anything, because existing shareholders are not affected. The institution trading the ETF may eventually be long or short enough shares of the ETF that he wants to convert them to stock and then buy or sell the stock. If he does this, it still doesn't affect shareholders; he gives $3M of the ETF to Vanguard and Vanguard gives him $3M worth of stock, which he can sell for $2.94M. (Or, in the other direction, the trader buys $3M worth of stock for $3.06M, and then gives it to Vanguard to cover his short position in the ETF.) He will set a bid-ask spread at which he still expects to make a profit despite the need to redeem shares occasionally, but since the ETF shares are bought and sold many times and he is under no obligation to buy or sell at any one price, his spread will be smaller than Vanguard's. He might buy $63M at 0.1% below the market value, and sell $60M at 0.1% above the market value, making a profit of $123K on the 0.2% spread, which is still $63K after the transaction costs. (And he can stay balanced because he is not required to buy and sell at a particular discount or premium; if he has a long position and wants to sell, he can offer a good price to sell but not to buy, and let another trader offer a good price to buy.)
Re: Anyone in VFSVX? Why?
Yes, I do hold this fund in my portfolio for a reason.EmptyWallet wrote:Anyone here use VFSVX? Why? For what purpose? Do the fees/ER bother you?
Also if anyone else wants to give a review of why they think it would be a better international fund choice than another, please do so.
Re:
Ditto. I really hate looking at the spread, though.livesoft wrote:I use VSS instead (the ETF share class). I want to overweight small-cap international equities in my portfolio.
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)
Re: Anyone in VFSVX? Why?
OK, after scanning a few replies I see you are talking about VSS (the ticker I recognize).
Yes, I own some. Why? Owning some small cap international entered into my investing paradigm a couple of years ago, but I already had my AA, and wasn't motivated to change it. However, I assisted a couple of my children in setting up their portfolios, and we included VSS. As I watched their portfolios, I was jealous that I didn't own any VSS.
So, when the market tanked last year (or whenever it was), I entered some limit orders for VSS. I filled a couple of orders before things started picking up, and now I am the proud owner of VSS in the amount of about 5% of my international holdings, which are 40% of my stocks, which are 30% of my portfolio--so less than 1% of my total portfolio.
Kevin
EDIT: I didn't realize I was responding to an old post. Oops
Yes, I own some. Why? Owning some small cap international entered into my investing paradigm a couple of years ago, but I already had my AA, and wasn't motivated to change it. However, I assisted a couple of my children in setting up their portfolios, and we included VSS. As I watched their portfolios, I was jealous that I didn't own any VSS.
So, when the market tanked last year (or whenever it was), I entered some limit orders for VSS. I filled a couple of orders before things started picking up, and now I am the proud owner of VSS in the amount of about 5% of my international holdings, which are 40% of my stocks, which are 30% of my portfolio--so less than 1% of my total portfolio.
Kevin
EDIT: I didn't realize I was responding to an old post. Oops
If I make a calculation error, #Cruncher probably will let me know.
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Convert to VSS?
We have a fair amount of VFSVX in our taxable portfolio -- it would qualify for an Admiral share class, if there was one.
I anticipate holding it for the long-haul, and trying to minimize costs. The high ER bothers me. VSS (which we own in a few tax-advantaged accounts that are ineligible for mutual funds, like our health savings account) has a much lower ER. Currently, .19 versus .37. But, per https://advisors.vanguard.com/VGApp/iip ... daskspread, the average spread has been around .12.
I'm considering doing a tax-free one-way conversion from VFSVX to VSS.
(1) I'd like to make sure my math is correct Assuming the spread remains constant, and the ERs remain as is, then am I decreasing my cost from .37% to .19+.12=.31%? Or, should I really look at this as I'm decreasing my ER to .19%, which will impact compounded returns over time, and then I pay a one-time transactional cost based upon the spread? Or, am I supposed to look at it as a .31% ER because the market value is always going to be a bit lower than the NAV due to the spread?
(2) Venturing into predict-the-future ... who knows if there will be an Admiral share class. I'm assuming if there was one it will have an ER similar to the ETF, based upon ER for other Vanguard funds offered in investor, admiral, and etf forms. Is my logic wrong here?
(3) Any disadvantages to conversion? Other than dealing with an ETF...
thanks!
I anticipate holding it for the long-haul, and trying to minimize costs. The high ER bothers me. VSS (which we own in a few tax-advantaged accounts that are ineligible for mutual funds, like our health savings account) has a much lower ER. Currently, .19 versus .37. But, per https://advisors.vanguard.com/VGApp/iip ... daskspread, the average spread has been around .12.
I'm considering doing a tax-free one-way conversion from VFSVX to VSS.
(1) I'd like to make sure my math is correct Assuming the spread remains constant, and the ERs remain as is, then am I decreasing my cost from .37% to .19+.12=.31%? Or, should I really look at this as I'm decreasing my ER to .19%, which will impact compounded returns over time, and then I pay a one-time transactional cost based upon the spread? Or, am I supposed to look at it as a .31% ER because the market value is always going to be a bit lower than the NAV due to the spread?
(2) Venturing into predict-the-future ... who knows if there will be an Admiral share class. I'm assuming if there was one it will have an ER similar to the ETF, based upon ER for other Vanguard funds offered in investor, admiral, and etf forms. Is my logic wrong here?
(3) Any disadvantages to conversion? Other than dealing with an ETF...
thanks!
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Re: Convert to VSS?
The average spread is irrelevant if you are looking to make a single big move. The most recent spread info on morningstar lists VSS as having a premium of 1%. It moves arround a fair amount depending on market sentiment.jonathan2001 wrote: (1) I'd like to make sure my math is correct Assuming the spread remains constant, and the ERs remain as is, then am I decreasing my cost from .37% to .19+.12=.31%? Or, should I really look at this as I'm decreasing my ER to .19%, which will impact compounded returns over time, and then I pay a one-time transactional cost based upon the spread? Or, am I supposed to look at it as a .31% ER because the market value is always going to be a bit lower than the NAV due to the spread?
I assume you are correct but also have no way of knowing. Vanguard has a history of creating admiral class shares when a fund gets large enough and I believe the ETF's and admiral class have the same ER. If there are exceptions to this I'm sure somebody will chime in.jonathan2001 wrote: (2) Venturing into predict-the-future ... who knows if there will be an Admiral share class. I'm assuming if there was one it will have an ER similar to the ETF, based upon ER for other Vanguard funds offered in investor, admiral, and etf forms. Is my logic wrong here?
Does your broker allow a commission free DRIP with VSS (I know TD Ameritrade does). If not them compounding the very respectable dividends VSS pays out will be difficult.jonathan2001 wrote: (3) Any disadvantages to conversion? Other than dealing with an ETF...
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Re: Anyone in VFSVX? Why?
Our VSS held in accounts at TDAmeritrade gets reinvested no problem. Our VFSVX is held at Vanguard, and they'd reinvest w/o a problem.
I'm sorry for the naive question around ETFs ... we don't use them much, except within TDAmeritrade where we basically have no choice.
So, I gather that the right math for ETF ER is to look at a buy-and-hold ETF as simply the ER (.19%), and the hope that when I sell the premium vs NAV is pretty small since that's just a one-time event for me?
I'm sorry for the naive question around ETFs ... we don't use them much, except within TDAmeritrade where we basically have no choice.
So, I gather that the right math for ETF ER is to look at a buy-and-hold ETF as simply the ER (.19%), and the hope that when I sell the premium vs NAV is pretty small since that's just a one-time event for me?
Re: Anyone in VFSVX? Why?
I have a retirement account that only allows for Vanguard Investor Shares, which means no ETFs and no Admiral Funds. In that account, the 37bp cost of VFSVX is pretty good. The cheapest fund I can get there is Total Domestic Index for 17bp, but I have plenty of that in other accounts. Like others, I tilt to small and value.
Until recently, VFSVX had hefty purchase and redemption fees. This partly accounts for why so much more is in the VSS EFT than in the VFSVX Mutual Fund. Now there are no purchase/redemption fees at all! Some people mentioned above that there was still a fee, but there is not. Woohoo!
VINEX International Explorer is a mid-cap international fund, and VFSVX is a small-cap one. I use both in this one retirement account, but I don't consider one fund a replacement for the other, any more than I consider VOE (domestic mid-cap value) to be a replacement for VBR (domestic small-cap value).
As an aside, that particular retirement account is equal parts...
My M* Xray shows...
Until recently, VFSVX had hefty purchase and redemption fees. This partly accounts for why so much more is in the VSS EFT than in the VFSVX Mutual Fund. Now there are no purchase/redemption fees at all! Some people mentioned above that there was still a fee, but there is not. Woohoo!
VINEX International Explorer is a mid-cap international fund, and VFSVX is a small-cap one. I use both in this one retirement account, but I don't consider one fund a replacement for the other, any more than I consider VOE (domestic mid-cap value) to be a replacement for VBR (domestic small-cap value).
As an aside, that particular retirement account is equal parts...
- 1. VINEX International Explorer (mid-cap international).
2. VFSVX ex-US Small Cap .
3. VMVIX Domestic Mid Cap Value
4. VISVX Domestic Small Cap Value
My M* Xray shows...
- .........Value|Blend|Growth
Large....14....15....15
Mid......14....12....8
Small....11.....8....3
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Re: Anyone in VFSVX? Why?
You could just keep it simple, bite the bullet and get the ETF right away if you want or you could wait until the premium turns into a discount. Since you are not changing your asset allocation 1 iota it doesn't really matter when you make the trade so you could wait.jonathan2001 wrote: So, I gather that the right math for ETF ER is to look at a buy-and-hold ETF as simply the ER (.19%), and the hope that when I sell the premium vs NAV is pretty small since that's just a one-time event for me?
In your TD Ameritrade account go pull up VSS and look just above the chart. You chould see a row of data that looks like this:
The one you are interested in right now is IIV which stands for intraday indicative value.Bid________Ask________B/A Size________IIV_______High______Low________Volume
95.35______113.25______200x100________101.72___102.95____102.32______113,269 (Below Avg)
Basically this is a snapshot of the NAV for the ETF. The higher above, the higher the premium. If the ETF is trading at or below then you could argue that you are getting a bargain. Since VSS contains foreign securities whose markets are often closed when the US is open it's value is somewhat limited but this is the quickest and easiest way to double check that you're not getting gouged.Intraday Indicative Value (IIV)
The intraday indicative value is the total value per share of the securities and cash owned in the ETF. This value is calculated throughout the day and is also known as the Indicative Value (IV), Intraday Optimized Portfolio Value (IOPV), Intraday Portfolio Value (IPV), and Underlying Trading Value (UTV)
Edit: By the way, I own VSS at TD Ameritrade and VFSVX is in my wife's Roth.
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Re: Anyone in VFSVX? Why?
Woohoo indeed!!! I was happy when the fees got greatly reduced about a year ago but I had no idea that they terminated them completely. Probably the day after my wife's last ROTH deposit no doubt.William4u wrote: Until recently, VFSVX had hefty purchase and redemption fees. This partly accounts for why so much more is in the VSS EFT than in the VFSVX Mutual Fund. Now there are no purchase/redemption fees at all! Some people mentioned above that there was still a fee, but there is not. Woohoo!
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."
Re: Anyone in VFSVX? Why?
I believe the fees ended in August 2014. In 2013 VFSVX's purchases and redemption fees were reduced from 0.50% to 0.25%. Now there are zero fees to buy and sell. Hopefully your wife bought after August!Majormajor78 wrote:Woohoo indeed!!! I was happy when the fees got greatly reduced about a year ago but I had no idea that they terminated them completely. Probably the day after my wife's last ROTH deposit no doubt.William4u wrote: Until recently, VFSVX had hefty purchase and redemption fees. This partly accounts for why so much more is in the VSS EFT than in the VFSVX Mutual Fund. Now there are no purchase/redemption fees at all! Some people mentioned above that there was still a fee, but there is not. Woohoo!
Re: Convert to VSS?
The spread is a one-time cost, so you should amortize it over your holding period.jonathan2001 wrote:(1) I'd like to make sure my math is correct Assuming the spread remains constant, and the ERs remain as is, then am I decreasing my cost from .37% to .19+.12=.31%? Or, should I really look at this as I'm decreasing my ER to .19%, which will impact compounded returns over time, and then I pay a one-time transactional cost based upon the spread? Or, am I supposed to look at it as a .31% ER because the market value is always going to be a bit lower than the NAV due to the spread?
If you buy and immediately sell, you lose the whole spread. Since you are not buying and will only sell, you only lose half the spread, which is a cost of 0.06% on the conversion, and 0.12% on future purchases. But even the future purchases have a trivial cost; 0.12% over a 12-year holding period becomes 0.01%.
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Re: Anyone in VFSVX? Why?
Ah, of course : total long-term cost is based upon ER, and then the % is the premium paid upon purchase, as well as % premium to NAV at sale. Ideally buy-at-discount, sell at premium, if one can manage that.
But, I had sort of assumed mutual fund shares converting to ETF would be done at NAV. But are you saying that if VSS sells at a 1% premium over VFSVX, then I'm about to lose 1% during the conversion?
But, I had sort of assumed mutual fund shares converting to ETF would be done at NAV. But are you saying that if VSS sells at a 1% premium over VFSVX, then I'm about to lose 1% during the conversion?
Re: Anyone in VFSVX? Why?
There is no loss on a conversion, because nothing changes hands. X shares of VFSVX always converts to Y shares of VSS, where Y is determined by Vanguard based on what it puts in one share. If VSS is trading at a 1% premium when the conversion happens, the dollar value of Y shares of VSS will be 1% more than the dollar value of X shares of VFSVX.jonathan2001 wrote:But, I had sort of assumed mutual fund shares converting to ETF would be done at NAV. But are you saying that if VSS sells at a 1% premium over VFSVX, then I'm about to lose 1% during the conversion?
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Re: Anyone in VFSVX? Why?
I understand what you’re saying but I respectfully disagree with the conclusion – or at least would like to present my view for consideration. For example: I own 100 shares of the MF and the NAV is 100.00 – I exchange into VSS which has a closing price of 101.00 on the date of exchange which represents a NAV of 100.00 and a premium of 1.00. I now have 99.01 shares of VSS as opposed to 100.00 shares of the MF at an equivalent market value of 10000.00 – this is what you’re referring to. Let’s ignore the spread for the sake of simplicity.grabiner wrote:There is no loss on a conversion, because nothing changes hands. X shares of VFSVX always converts to Y shares of VSS, where Y is determined by Vanguard based on what it puts in one share. If VSS is trading at a 1% premium when the conversion happens, the dollar value of Y shares of VSS will be 1% more than the dollar value of X shares of VFSVX.jonathan2001 wrote:But, I had sort of assumed mutual fund shares converting to ETF would be done at NAV. But are you saying that if VSS sells at a 1% premium over VFSVX, then I'm about to lose 1% during the conversion?
The next day the premium disappears but the NAV of the underlying securities does not change from the close of the exchange date until the following day. If I held the MF share class I have my 100 shares valued at 100 dollars so my account value is 10000.00. Instead I hold the ETF and even though the underlying basket of securities has remained at the same 100.00 NAV as the prior day when the exchange was completed my account value is 9901.
I have an investment in the same basket of securities and the value of that basket of securities hasn’t changed at all but my account value has decreased due to the fluctuation of the premium. I believe that is what jonathan2001 was referring to.
- Majormajor78
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Re: Anyone in VFSVX? Why?
I was assuming the the conversion would occur by the sale of one and the purchase of another. After further reading on Vanguard's website it looks as is the shares are converted through a clerical process and no sale takes place rendering the premium/discount a moot point at least until you sell.jonathan2001 wrote:Ah, of course : total long-term cost is based upon ER, and then the % is the premium paid upon purchase, as well as % premium to NAV at sale. Ideally buy-at-discount, sell at premium, if one can manage that.
But, I had sort of assumed mutual fund shares converting to ETF would be done at NAV. But are you saying that if VSS sells at a 1% premium over VFSVX, then I'm about to lose 1% during the conversion?
It's never a wasted day if you learn something new. Thanks grabiner.
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."
Re: Anyone in VFSVX? Why?
Conversions are at NAV, i.e. in your example 100 shares MF @$100 converts to 100 shares of ETF.BBL wrote:I understand what you’re saying but I respectfully disagree with the conclusion – or at least would like to present my view for consideration. For example: I own 100 shares of the MF and the NAV is 100.00 – I exchange into VSS which has a closing price of 101.00 on the date of exchange which represents a NAV of 100.00 and a premium of 1.00. I now have 99.01 shares of VSS as opposed to 100.00 shares of the MF at an equivalent market value of 10000.00 – this is what you’re referring to. Let’s ignore the spread for the sake of simplicity.grabiner wrote:There is no loss on a conversion, because nothing changes hands. X shares of VFSVX always converts to Y shares of VSS, where Y is determined by Vanguard based on what it puts in one share. If VSS is trading at a 1% premium when the conversion happens, the dollar value of Y shares of VSS will be 1% more than the dollar value of X shares of VFSVX.jonathan2001 wrote:But, I had sort of assumed mutual fund shares converting to ETF would be done at NAV. But are you saying that if VSS sells at a 1% premium over VFSVX, then I'm about to lose 1% during the conversion?
Re: Anyone in VFSVX? Why?
I use VSS which has a .19% expense vs. VFSVX @ .37% expense. I use it because I want to overweight small international.