Vanguard ETFs or Mutual funds for accumulation?

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Houston101
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Vanguard ETFs or Mutual funds for accumulation?

Post by Houston101 » Sun Mar 13, 2011 11:08 am

I want to setup an automatic transfer of approximately $500 every month to be invested

50% in VEU / VFWIX
50% in VTI / VTSMX

I have two concerns

1) If I do auto-investing through Vanguard for low volume ETFs like VEU how will I know I am getting a good price?

2) My monthly amounts are less than the minimum amounts required for mutual funds.

What is the best way to achieve the auto-investing/contribution part monthly, please advise?

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bru
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Post by bru » Sun Mar 13, 2011 11:16 am

I was just reading an article by the very man whose name graces this site. If I understood correct he favors mutual funds over ETFs for the average investor. Although I'm sure many here may disagree. Wish I could remember where I saw the article :? .

If you don't have the $3K minimum for the funds I guess the ETF is the way to go. Some may say wait until you have the minimum. It's up to you.

Chipmaster
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Post by Chipmaster » Sun Mar 13, 2011 11:24 am

The minimum for mutual funds is $3k to start. After that, monthly contributions can be much less. I believe the minimum is something like $100.

As for knowing you'll be getting a good price on the ETFs, I'm not sure I understand why the price you'd be paying for them would be any worse of a price than when you pay for a mutual fund. I don't think there's any significance to the price at the close of the day (the price you pay for a mutual fund) to the price you'd pay throughout the day for an ETF.

livesoft
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Re: Vanguard ETFs or Mutual funds for accumulation?

Post by livesoft » Sun Mar 13, 2011 11:24 am

Houston101 wrote:I want to setup an automatic transfer of approximately $500 every month to be invested

50% in VEU / VFWIX I suggest you use VGTSX instead,
50% in VTI / VTSMX

I have two concerns

1) If I do auto-investing through Vanguard for low volume ETFs like VEU how will I know I am getting a good price?
You will not know, so do not use ETFs. Furthermore when you buy ETFs, you need to buy integral number of shares. It would be unusual to have $250 be exactly an integral number of shares of VTI or VXUS.
2) My monthly amounts are less than the minimum amounts required for mutual funds.
Do not confuse initial minimum with additional minimum.
What is the best way to achieve the auto-investing/contribution part monthly, please advise?
Buy the initial minimum in your funds (that's about $3000 each), then sign up for monthly additions. If you do not have $3000, then wait until you do. If you have $3000, but not $6000, then start with just one fund.

I assume this is a taxable account. If this was a tax-advantaged account, I might do something different.
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DSInvestor
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Post by DSInvestor » Sun Mar 13, 2011 11:28 am

Vanguard's minimum initial investment for VTSMX and VFWIX is $3000. Subsequent purchases can be smaller $100.

I would recommend Total International Stock Market VGTSX er=0.26% instead of VFWIX er=0.35%. Once you cross 10K in VGTSX, you'd be eligible for Admiral shares VTIAX with er=0.20%. Admiral shares are not available for VFWIX.

Total International includes more midcap and small cap stocks than VFWIX.

Several brokerages offer commission free trading of Vanguard ETFs but I'm not aware of a way to automate purchases of ETFs.

KyleAAA
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Post by KyleAAA » Sun Mar 13, 2011 11:34 am

FYI, the subsequent minimum investment for Vanguard funds is $1. Once you're in, you can add $1 at a time if you want.

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