Which Taxable Acct Type: Mutual Fund vs. Brokerage?

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ronin
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Which Taxable Acct Type: Mutual Fund vs. Brokerage?

Post by ronin » Wed May 11, 2011 11:27 pm

My apologies if this topic has already been beaten to death -- I don't find the search functionality on the site to be always be reliable.

Being a very satisfied Vanguard customer of their retirement accounts, I am now looking to expand my portfolio to include a taxable account. With that, I would like to stick with Vanguard and am trying to determine whether to open a mutual fund or a brokerage account. Considering I most likely would be investing in Vanguard funds/ETFs what should I be considering in this decision? I would mainly be looking to invest in tax efficient stock index funds.

Thank you in advance for sharing your thoughts.

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Langkawi
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Post by Langkawi » Wed May 11, 2011 11:35 pm

If you're going to buy ETFs (Vanguard or otherwise), that will require a brokerage account. You cannot open a brokerage account at Vanguard without also getting a mutual fund account.

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grabiner
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Re: Which Taxable Acct Type: Mutual Fund vs. Brokerage?

Post by grabiner » Wed May 11, 2011 11:48 pm

ronin wrote:Being a very satisfied Vanguard customer of their retirement accounts, I am now looking to expand my portfolio to include a taxable account. With that, I would like to stick with Vanguard and am trying to determine whether to open a mutual fund or a brokerage account. Considering I most likely would be investing in Vanguard funds/ETFs what should I be considering in this decision? I would mainly be looking to invest in tax efficient stock index funds.
The decision is based on what you are going to hold. If you are holding ETFs, you need a brokerage account, so you have to see how much benefit you get from ETFs.

If you are going to hold tax-efficient stock index funds, that may mean Total Stock Market Index and Total International, in which case you have no need for a brokerage account because the Admiral shares have the same cost as the ETF. If you plan to hold a lot of Emerging Markets Index, you may want to hold the ETF in order to avoid the purchase fee. If you plan to hold FTSE All-World Ex-US Small-Cap, you almost certainly want the ETF because there is a large expense difference.
Wiki David Grabiner

natureexplorer
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Re: Which Taxable Acct Type: Mutual Fund vs. Brokerage?

Post by natureexplorer » Thu May 12, 2011 8:53 am

ronin wrote:My apologies if this topic has already been beaten to death -- I don't find the search functionality on the site to be always be reliable.

Being a very satisfied Vanguard customer of their retirement accounts, I am now looking to expand my portfolio to include a taxable account. With that, I would like to stick with Vanguard and am trying to determine whether to open a mutual fund or a brokerage account. Considering I most likely would be investing in Vanguard funds/ETFs what should I be considering in this decision? I would mainly be looking to invest in tax efficient stock index funds.

Thank you in advance for sharing your thoughts.
What type of account do you use for your retirement accounts?

ronin
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Joined: Wed Apr 22, 2009 9:17 pm

Post by ronin » Thu May 12, 2011 9:44 pm

Thanks you for the comments so far. My retirement accounts with Vanguard include a company 401k as well as Roth IRA mutual fund accounts for my spouse and me.

I do see myself most likely leaning to the simplicity of funds, but wasn't sure if there would be a good reason to consider the brokerage account with the plan to use Vanguard's ETFs instead. Grabiner is suggesting that decision may depend on the specific fund/ETFs I'm interested in. At this point I mos t likely would stick to Total Stock Market or Total International Stock.

SHould I be concerned with bid/ask spreads assuming I'm not in this for trading purposes?

Thanks again.

natureexplorer
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Post by natureexplorer » Thu May 12, 2011 10:03 pm

It sounds like mutual funds should do in your case. The one reason why a brokerage account might be advantageous for a taxable account is better cost basis tracking.

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