Are Vanguard Mutual Funds dying?

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international001
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Are Vanguard Mutual Funds dying?

Post by international001 » Tue Mar 12, 2019 4:23 am

It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely

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Mountain Doc
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Re: Are Vanguard Mutual Funds dying?

Post by Mountain Doc » Tue Mar 12, 2019 5:06 am

Trillions of dollars are invested in Vanguard mutual funds. That money is not going to jump ship to ETFs for a few basis points in expense ratio. The mutual funds aren't going anywhere.

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Re: Are Vanguard Mutual Funds dying?

Post by racy » Tue Mar 12, 2019 5:47 am

I hope not. I have an automatic withdrawal for monthly income set up from one of my mutual funds. Per Vanguard: "You can't make automatic investments or withdrawals into or out of ETFs."
https://investor.vanguard.com/etf/etf-vs-mutual-fund

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F150HD
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Re: Are Vanguard Mutual Funds dying?

Post by F150HD » Tue Mar 12, 2019 6:06 am

international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely
Purchase $200 worth of VTI at the opening bell today and let us know how it goes.

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Re: Are Vanguard Mutual Funds dying?

Post by mokaThought » Tue Mar 12, 2019 6:19 am

F150HD wrote:
Tue Mar 12, 2019 6:06 am
international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely
Purchase $200 worth of VTI at the opening bell today and let us know how it goes.
I wonder at what point they do a 2 for 1 split.
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Re: Are Vanguard Mutual Funds dying?

Post by whodidntante » Tue Mar 12, 2019 6:22 am

It's possible, but I would guess that it requires a generational shift to see much movement. Money is sticky, and people will go to great lengths to justify prior choices.
Usually with a flippant tone, or at least with a satisfied grin.

Do young people prefer these new fangled ETFs? I guess I will ask next time before I tell them to get off my lawn. :beer

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Re: Are Vanguard Mutual Funds dying?

Post by nisiprius » Tue Mar 12, 2019 6:29 am

Those seedlings will be taller than the redwoods, and the redwoods will not be able to survive in their shade...

First, I don't know why you single out "Vanguard" mutual funds.

Second, I don't know exactly where the "mutual funds are dying," "mutual funds are dinosaurs" meme keeps coming from, or whether there are self-interested reasons for some people to promote it, but the actual data is not hard to find.

Investment Company Institute 2018 Factbook

Image

It has now been ten years since 2009, a year in which Ric Edelman said that mutual funds were dinosaurs and would be gone in ten years, fully supplanted by ETFs. (I believe he continues to say that mutual funds "well be gone in ten years.") (Ric Edelman also has said that Vanguard index funds are hiding 1.4% per year in expenses that do not show up in their expense ratios; he says a lot of things).

It is correct that ETFs have been growing more rapidly than mutual funds, but they are starting from a far smaller asset base, and as we all know things grow faster when they are small. I don't care to do the work again but the last time I tried projecting growth rates, it appeared that if current growth rates were sustained, it would take until the late 2030s for the assets in ETFs even to match those in mutual funds.

Third, exactly who cares, and why? Why does this matter? Suppose I believed that mutual funds would be gone by 2050, would that be a reason for me to switch to ETFs now?
Last edited by nisiprius on Tue Mar 12, 2019 6:45 am, edited 4 times in total.
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Re: Are Vanguard Mutual Funds dying?

Post by obafgkm » Tue Mar 12, 2019 6:32 am

Mountain Doc wrote:
Tue Mar 12, 2019 5:06 am
Trillions of dollars are invested in Vanguard mutual funds. That money is not going to jump ship to ETFs for a few basis points in expense ratio. The mutual funds aren't going anywhere.
"How do we make money doing this? The answer is simple. Volume."

(from a classic Saturday Night Live skit)

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Re: Are Vanguard Mutual Funds dying?

Post by whodidntante » Tue Mar 12, 2019 6:34 am

F150HD wrote:
Tue Mar 12, 2019 6:06 am
international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely
Purchase $200 worth of VTI at the opening bell today and let us know how it goes.
Try investing a $200 initial investment in any admiral shares fund at the opening bell and tell us how it goes. :happy

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Re: Are Vanguard Mutual Funds dying?

Post by whodidntante » Tue Mar 12, 2019 6:37 am

nisiprius wrote:
Tue Mar 12, 2019 6:29 am

It has now been ten years since 2009, a year in which Ric Edelman said that mutual funds were dinosaurs and would be gone in ten years, fully supplanted by ETFs.
Maybe it's just a particularly long 10 years.

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Re: Are Vanguard Mutual Funds dying?

Post by Geologist » Tue Mar 12, 2019 6:38 am

Vanguard has mutual fund share classes that are cheaper than ETF's in the same funds, so there is no "automatic" that ETF's are cheaper to maintain. Further, at current expenses, the dollar levels are not significant among these.

There are also many mutual funds that have no ETF equivalents (consider the wide range of municipal bond funds at Vanguard). There are of course actively managed funds at Vanguard and elsewhere, whether you invest in them or not.

I don't see that mutual funds are going away anytime soon.

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Re: Are Vanguard Mutual Funds dying?

Post by fortyofforty » Tue Mar 12, 2019 6:44 am

I recently moved a chunk from ETFs into MFs. I prefer them, since they reduce the amount of money I have floating around in the Federal Money Market settlement fund. Plus, I am not a day trader so not worrying about when to buy or sell an ETF during market activity reminds me to focus on the long term. If I bought at 10:00 am, and the ETF dropped another couple of dollars, I'd feel like I missed the lower purchase price. If I sold at 2:00 pm and the ETF price climbed another few dollars, I regretted missing the the higher sale price.
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Re: Are Vanguard Mutual Funds dying?

Post by jeffyscott » Tue Mar 12, 2019 8:09 am

international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)
Perhaps cheaper, but not free. So who is paying the cost, since Vanguard brokerage is charging nothing?

Elisabeth Kashner, head of ETF research at FactSet, confirmed that ETFs are less expensive for Vanguard because it saves the administrative costs around record-keeping, which gets transferred from the asset manager to the brokerage firm.

The ETFs are not paying these administrative costs as mutual funds do, so where is the money coming from to pay for record-keeping related to ETFs?

In addition, Vanguard saves money on not taking client calls on Vanguard ETFs held at non-Vanguard brokerage firms, according to John Rekenthaler, vice president of research at Morningstar.

Sure, but some people do hold ETFs at Vanguard brokerage, where is the money coming from to pay for client services related to these ETFs? Also, Vanguard is not charging for other company's ETFs held/traded at Vanguard brokerage, so any savings from Vanguard ETFs held elsewhere is offset by other ETF that are held at Vanguard.
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Re: Are Vanguard Mutual Funds dying?

Post by ohai » Tue Mar 12, 2019 8:20 am

I doubt that a majority of investors will migrate to a different asset class for zero expense ratio compared to 0.05%...

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Re: Are Vanguard Mutual Funds dying?

Post by StandingRock » Tue Mar 12, 2019 8:34 am

What about the 401K plans etc. that automatically invest every pay period? How is that going to work with no mutual funds around?

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Re: Are Vanguard Mutual Funds dying?

Post by hlinee » Tue Mar 12, 2019 8:45 am

racy wrote:
Tue Mar 12, 2019 5:47 am
I hope not. I have an automatic withdrawal for monthly income set up from one of my mutual funds. Per Vanguard: "You can't make automatic investments or withdrawals into or out of ETFs."
https://investor.vanguard.com/etf/etf-vs-mutual-fund
I really don't understand why companies like Vanguard can't set it up so this is possible. Also, other things like buying fractional shares for ETFs.

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Re: Are Vanguard Mutual Funds dying?

Post by SlowMovingInvestor » Tue Mar 12, 2019 8:50 am

F150HD wrote:
Tue Mar 12, 2019 6:06 am
international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely
Purchase $200 worth of VTI at the opening bell today and let us know how it goes.
You can do that with open on market orders.

But ..

1) 401k plans will likely still be mostly MFs (even with BrokerageLink style accounts)
2) I know there are active ETFs around, but I always wonder about price/NAV for those.
3) There are lots of embedded gains in existing MFs in taxable accounts which people will be reluctant to sell.
4) Size is even more crucial for ETFs than MFs because smaller ETFs may simply lack liquidity and be non viable for that reason.
Last edited by SlowMovingInvestor on Tue Mar 12, 2019 8:54 am, edited 1 time in total.

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Re: Are Vanguard Mutual Funds dying?

Post by StormShadow » Tue Mar 12, 2019 8:51 am

international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely
:oops: dying??? Hyperbole much?

Get a grip people. Mutual funds aren't going anywhere.

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Re: Are Vanguard Mutual Funds dying?

Post by SGM » Tue Mar 12, 2019 9:25 am

I have some ETFs in a non Vanguard brokerage. Some ETFs don't have a additional charges like Vanguards emerging market MF once had or still has. The charge didn't go to Vanguard but to all owners of the MF. Still I didn't like paying it. I have been very happy with my Vanguard MFs in my Vanguard account. This is a lot of noise. I don't pay much attention to what Rick Edelman says on his radio show.

I don't reinvest dividends anymore except in a Vanguard Roth account and that is smooth with MFs. In my Vanguard taxable account I buy small amounts of MFs when deposits come into my bank every month. That would be a little messy with ETF to my way of looking at things. Simple is good at this stage of retirement. Automate activities so that other family members can continue to invest without much hassle. They don't find all this to be as much fun as I do.

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Re: Are Vanguard Mutual Funds dying?

Post by SlowMovingInvestor » Tue Mar 12, 2019 9:46 am

I remember Edelman saying around 20 years back that index funds were terrible. I stopped listening to him then, even if he has changed his POV to be more favorable to index ETFs.

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Re: Are Vanguard Mutual Funds dying?

Post by abuss368 » Tue Mar 12, 2019 9:59 am

Perhaps over time anything is possible. A new generation of investors will come on board and may have different investment needs or wants. Vanguard has been pushing the general direction towards ETFs with the upgrade account feature when logging in. It does not make much difference to me as we do not day trade.

What would bother me is the account statement for brokerage does not provide one simple year to date statement (that contains all transactions) as discussed on other related threads. Perhaps Vanguard will change this in time.
John C. Bogle: "Simplicity is the master key to financial success."

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Re: Are Vanguard Mutual Funds dying?

Post by ohai » Tue Mar 12, 2019 10:05 am

hlinee wrote:
Tue Mar 12, 2019 8:45 am
racy wrote:
Tue Mar 12, 2019 5:47 am
I hope not. I have an automatic withdrawal for monthly income set up from one of my mutual funds. Per Vanguard: "You can't make automatic investments or withdrawals into or out of ETFs."
https://investor.vanguard.com/etf/etf-vs-mutual-fund
I really don't understand why companies like Vanguard can't set it up so this is possible. Also, other things like buying fractional shares for ETFs.
You cannot deposit money into a company and get ETFs. For mutual funds, yes this works - the investment company just issues you new shares of the fund. For ETFs, this concept does not exist - someone must receive your money into your brokerage account, and then buy ETF shares on the open market. If you want this to be automated, someone must have trading discretion on your brokerage account. I guess it would be possible to set this up, but there are probably a lot of regulatory and cost issues that makes this not worth it.

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Re: Are Vanguard Mutual Funds dying?

Post by software » Tue Mar 12, 2019 10:07 am

SlowMovingInvestor wrote:
Tue Mar 12, 2019 8:50 am
F150HD wrote:
Tue Mar 12, 2019 6:06 am
international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely
Purchase $200 worth of VTI at the opening bell today and let us know how it goes.
You can do that with open on market orders.

But ..

1) 401k plans will likely still be mostly MFs (even with BrokerageLink style accounts)
2) I know there are active ETFs around, but I always wonder about price/NAV for those.
3) There are lots of embedded gains in existing MFs in taxable accounts which people will be reluctant to sell.
4) Size is even more crucial for ETFs than MFs because smaller ETFs may simply lack liquidity and be non viable for that reason.
I think the point was that VTI is trading for about 143, so you’d have 57 dollars left over and the subsequent cash drag from that.

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Re: Are Vanguard Mutual Funds dying?

Post by quantAndHold » Tue Mar 12, 2019 10:08 am

Most 401k’s still use mutual funds, as far as I know, and most people still do most of their investing in their 401k. I don’t see mutual funds dying anytime soon.

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Re: Are Vanguard Mutual Funds dying?

Post by inverter » Tue Mar 12, 2019 10:11 am

I'm a millennial (although all of that generation bashing / stereotyping is pointless IMO) and I use mutual funds because of the automatic investment feature. Frankly, I don't think most investors care what "vehicles" they invest through, as long as the customer service, features, etc. are there.

If Vanguard added automatic investment and withdrawal to ETFs, then I would be fine with those.

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Re: Are Vanguard Mutual Funds dying?

Post by abuss368 » Tue Mar 12, 2019 10:21 am

whodidntante wrote:
Tue Mar 12, 2019 6:34 am
Try investing a $200 initial investment in any admiral shares fund at the opening bell and tell us how it goes. :happy
Is that because one can only buy ETF's by share (i.e. not fractional shares) and not a fixed dollar amount? Unlike mutual funds where one can invest a fixed dollar amount.
John C. Bogle: "Simplicity is the master key to financial success."

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Re: Are Vanguard Mutual Funds dying?

Post by unknownfuture » Tue Mar 12, 2019 10:43 am

ETFs can be MUCH more tax efficient than mutual funds: if there is turnover, an ETF can avoid capital gains almost completely through the fund redemption/creation process.

For example, I like to invest in minimum volatility funds. Vanguard's VMNVX has about 20% turnover, which results in significant capital gains every year. The similar ETFs can avoid that almost completely.

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Re: Are Vanguard Mutual Funds dying?

Post by furwut » Tue Mar 12, 2019 12:01 pm

I think most people invest in the market via 401k retirement accounts. Most 401ks don’t have brokerage windows to allow EFT purchases and most people will stick to the default mutual fund offerings anyway.

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Re: Are Vanguard Mutual Funds dying?

Post by arf30 » Tue Mar 12, 2019 12:14 pm

The average "investor" funds their 401k and gives any extra money to a (non robo) advisor. Both scenarios are overwhelmingly mutual fund only.

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Re: Are Vanguard Mutual Funds dying?

Post by JerryB » Tue Mar 12, 2019 12:47 pm

Is there some additional risk in ETF's vs. MF's in terms of operation if markets become volatile?

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Re: Are Vanguard Mutual Funds dying?

Post by pdavi21 » Tue Mar 12, 2019 12:58 pm

Yes. ALL mutual funds are dying.

Why wouldn't they?
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Re: Are Vanguard Mutual Funds dying?

Post by pdavi21 » Tue Mar 12, 2019 1:08 pm

JerryB wrote:
Tue Mar 12, 2019 12:47 pm
Is there some additional risk in ETF's vs. MF's in terms of operation if markets become volatile?
Not really. The ETF share price will differ from Net Asset Value, but neither price is a 100% accurate estimate of value.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

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Re: Are Vanguard Mutual Funds dying?

Post by nisiprius » Tue Mar 12, 2019 1:25 pm

JerryB wrote:
Tue Mar 12, 2019 12:47 pm
Is there some additional risk in ETF's vs. MF's in terms of operation if markets become volatile?
The Flash Crash of 2010 was a obviously additional risk in ETFs that affected many ETFs at the same time, and did not affect mutual funds. But it was a rare event--I am not clear on whether or not it has actually been "explained" convincingly--that probably can't happen again in exactly the same way. And I don't think a single person in this forum has ever said they were personally affected by it, i.e. nobody in this forum actually transacted an order during the thirty-six minutes during which was occurring.

The collapse of the Reserve Primary Money Market fund in 2008, and the collapse of the Third Avenue Focussed Credit Fund in 2015, both represent additional risks in mutual funds that do not affect ETFs. Both were caused by investors failing to believe that the fund's holdings were worth the stated NAV. Mutual funds promise to redeem at NAV, so if the declared NAV diverges from the market value, a situation resembling a "run on a bank" can occur. Since the Investment Company Act of 1940 has liquidity requirements that are supposed to protect against such events, either the regulations themselves, or the regulators' enforcement of them, fell short.

Again, I do not recall a single forum poster saying they had been personally affected by these events.

So, what to say? The risk profiles are different, there are low-probability high-consequences events that affect ETFs but not mutual funds, and there are low-probability high-consequences events that affect mutual funds but not ETFs.
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Re: Are Vanguard Mutual Funds dying?

Post by Thesaints » Tue Mar 12, 2019 1:29 pm

In 2001 mutual funds distributed high capital gains to many investors who had instead just experienced a capital loss. Such a thing does not happen with ETF's, although certainly they have higher trading costs for individual investors.

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Re: Are Vanguard Mutual Funds dying?

Post by JerryB » Tue Mar 12, 2019 1:50 pm

nisiprius wrote:
Tue Mar 12, 2019 1:25 pm
JerryB wrote:
Tue Mar 12, 2019 12:47 pm
Is there some additional risk in ETF's vs. MF's in terms of operation if markets become volatile?
The Flash Crash of 2010 was a obviously additional risk in ETFs that affected many ETFs at the same time, and did not affect mutual funds. But it was a rare event--I am not clear on whether or not it has actually been "explained" convincingly--that probably can't happen again in exactly the same way. And I don't think a single person in this forum has ever said they were personally affected by it, i.e. nobody in this forum actually transacted an order during the thirty-six minutes during which was occurring.

The collapse of the Reserve Primary Money Market fund in 2008, and the collapse of the Third Avenue Focussed Credit Fund in 2015, both represent additional risks in mutual funds that do not affect ETFs. Both were caused by investors failing to believe that the fund's holdings were worth the stated NAV. Mutual funds promise to redeem at NAV, so if the declared NAV diverges from the market value, a situation resembling a "run on a bank" can occur. Since the Investment Company Act of 1940 has liquidity requirements that are supposed to protect against such events, either the regulations themselves, or the regulators' enforcement of them, fell short.

Again, I do not recall a single forum poster saying they had been personally affected by these events.

So, what to say? The risk profiles are different, there are low-probability high-consequences events that affect ETFs but not mutual funds, and there are low-probability high-consequences events that affect mutual funds but not ETFs.
Would it be prudent then to diversify between MF's and ETF's?

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Re: Are Vanguard Mutual Funds dying?

Post by ColoradoRick » Tue Mar 12, 2019 2:05 pm

I'll be the last one out of Vanguard mutual funds. I don't like it that ETFs can and do trade at a surplus/deficit to Net Asset Value (NAV) in times of turbulence. When investors panic and sell the ETF ends up below NAV. Instead of trying to buy the ETF then, I look for best of breed in the ETF and buy that stock (Johnson & Johnson/TJX). I realize that when they trade below NAV some will buy and that EVENTUALLY it will get to equilibrium. Vanguard and Warren Buffet don't want traders they want investors. I agree with them. I'm a dinosaur I know. Be gentle with your criticism as I am a SNAG (sensitive new age guy). I often disagree with the world but that doesn't make me uncomfortable until I'm proven drastically wrong, which happens sometimes but not always.

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Re: Are Vanguard Mutual Funds dying?

Post by ZLMARK » Tue Mar 12, 2019 2:12 pm

Vanguard?? Growing faster than all the others combined. $4.5 trillion in assets!
https://www.nytimes.com/2017/04/14/busi ... rowth.html

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Re: Are Vanguard Mutual Funds dying?

Post by Halicar » Tue Mar 12, 2019 3:43 pm

StormShadow wrote:
Tue Mar 12, 2019 8:51 am
international001 wrote:
Tue Mar 12, 2019 4:23 am
It seems Vanguard is going to keep reducing ETFs fees (because they are cheaper to mantain)

https://www.etf.com/sections/index-inve ... tual-funds

So I wonder if in a matter of years MFs will disapear completely
:oops: dying??? Hyperbole much?

Get a grip people. Mutual funds aren't going anywhere.
Yet another example of Betteridge's Law of Headlines. https://en.wikipedia.org/wiki/Betteridg ... _headlines

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Re: Are Vanguard Mutual Funds dying?

Post by lws » Tue Mar 12, 2019 4:00 pm

They are not dying.

Nevertheless, if Vanguard mutual funds die off, others will provide mutual funds. If there is a need for mutual funds it will be filled.

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Re: Are Vanguard Mutual Funds dying?

Post by beyou » Tue Mar 12, 2019 4:00 pm

ETFs are not even a new idea (at least not completely new).

Closed end funds, which share the attribute of trading on the exchange through the day like ETFs, have been around since before the 1929 crash.
They differ in that they do not accept new money after an initial subscription period, but you can buy and sell them NOW at a broker same as an ETF, and this has been available for 100 years almost (except the web based brokerage part maybe :-)

So if open end funds didn't completely get rid of closed end funds then why will ETFs cause open end funds to vanish ?
Both forms of ownership appeal to investors for different reasons.
What matters are what's inside the fund, and the expenses, not the form of buy/selling shares,if you are a long term investor.
If you are a day trader, you can trade closed end funds or ETFs,close cousins.

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Re: Are Vanguard Mutual Funds dying?

Post by vineviz » Tue Mar 12, 2019 4:16 pm

JerryB wrote:
Tue Mar 12, 2019 1:50 pm
nisiprius wrote:
Tue Mar 12, 2019 1:25 pm
JerryB wrote:
Tue Mar 12, 2019 12:47 pm
Is there some additional risk in ETF's vs. MF's in terms of operation if markets become volatile?
The Flash Crash of 2010 was a obviously additional risk in ETFs that affected many ETFs at the same time, and did not affect mutual funds. But it was a rare event--I am not clear on whether or not it has actually been "explained" convincingly--that probably can't happen again in exactly the same way. And I don't think a single person in this forum has ever said they were personally affected by it, i.e. nobody in this forum actually transacted an order during the thirty-six minutes during which was occurring.

The collapse of the Reserve Primary Money Market fund in 2008, and the collapse of the Third Avenue Focussed Credit Fund in 2015, both represent additional risks in mutual funds that do not affect ETFs. Both were caused by investors failing to believe that the fund's holdings were worth the stated NAV. Mutual funds promise to redeem at NAV, so if the declared NAV diverges from the market value, a situation resembling a "run on a bank" can occur. Since the Investment Company Act of 1940 has liquidity requirements that are supposed to protect against such events, either the regulations themselves, or the regulators' enforcement of them, fell short.

Again, I do not recall a single forum poster saying they had been personally affected by these events.

So, what to say? The risk profiles are different, there are low-probability high-consequences events that affect ETFs but not mutual funds, and there are low-probability high-consequences events that affect mutual funds but not ETFs.
Would it be prudent then to diversify between MF's and ETF's?
No
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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vineviz
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Re: Are Vanguard Mutual Funds dying?

Post by vineviz » Tue Mar 12, 2019 4:31 pm

ColoradoRick wrote:
Tue Mar 12, 2019 2:05 pm
I don't like it that ETFs can and do trade at a surplus/deficit to Net Asset Value (NAV) in times of turbulence.
Except this virtually never happens. In the rare cases when it appears that the ETF is trading at a premium or discount to NAV it is virtually always the case that it is is the ETF price (not the NAV) that is more accurate.

Mutual fund prices are virtually always accurate as well, but they are set by the fund managers whereas ETF prices are set by buyers and sellers. Managers are usually ethical but they don't have the same powerful incentives to be right about mutual fund prices that the market has about ETF prices.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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international001
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Re: Are Vanguard Mutual Funds dying?

Post by international001 » Tue Mar 12, 2019 5:21 pm

Nobody answered my OP question

This is strictly related to Vanguard Admiral Funds vs ETFs. For a typical BH BH (buy-and-hold boglehead) investor, why would you pay extra ER when holding a MF?

Some have talked about spread and the inability to create new shares. But I think this is mostly a small extra charge only when you buy it. Also talked about convenience of auto-investment-withdraw. But eventually this could be done with ETFs as well. I believe it doesn't happen at Vanguard but some brokers do it.

Geologist
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Re: Are Vanguard Mutual Funds dying?

Post by Geologist » Tue Mar 12, 2019 5:28 pm

international001 wrote:
Tue Mar 12, 2019 5:21 pm
Nobody answered my OP question

This is strictly related to Vanguard Admiral Funds vs ETFs. For a typical BH BH (buy-and-hold boglehead) investor, why would you pay extra ER when holding a MF?

Some have talked about spread and the inability to create new shares. But I think this is mostly a small extra charge only when you buy it. Also talked about convenience of auto-investment-withdraw. But eventually this could be done with ETFs as well. I believe it doesn't happen at Vanguard but some brokers do it.
I don't see that you asked a question in your original post. In any case, in my post, I pointed out that the dollars involved in the expenses between Vanguard share classes (of mutual funds or ETF's) are really not significant.

quantAndHold
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Re: Are Vanguard Mutual Funds dying?

Post by quantAndHold » Tue Mar 12, 2019 5:41 pm

international001 wrote:
Tue Mar 12, 2019 5:21 pm
Nobody answered my OP question

This is strictly related to Vanguard Admiral Funds vs ETFs. For a typical BH BH (buy-and-hold boglehead) investor, why would you pay extra ER when holding a MF?

Some have talked about spread and the inability to create new shares. But I think this is mostly a small extra charge only when you buy it. Also talked about convenience of auto-investment-withdraw. But eventually this could be done with ETFs as well. I believe it doesn't happen at Vanguard but some brokers do it.
Ummmm, we did answer your question.

I would use a mutual fund because most of my investing is via my employer’s 401k, which uses Vanguard mutual funds. 20% of retirement investments in the US are in 401k’s and the like, and 2/3 of that is in mutual funds. It doesn’t matter if ETF’s are better/stronger/faster, if my tax advantaged option is to use mutual funds, I’m going to use mutual funds.

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Re: Are Vanguard Mutual Funds dying?

Post by averagedude » Tue Mar 12, 2019 5:44 pm

SlowMovingInvestor wrote:
Tue Mar 12, 2019 9:46 am
I remember Edelman saying around 20 years back that index funds were terrible. I stopped listening to him then, even if he has changed his POV to be more favorable to index ETFs.
I stopped listening to him also. Mainly because he tells people to save as much as possible because you are going to live to 110 to 120 years old. This is possible one day in the future, but i personally doubt it. I am certain that it is not going to happen to people in my generation (49 years old).

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Re: Are Vanguard Mutual Funds dying?

Post by SlowMovingInvestor » Tue Mar 12, 2019 5:57 pm

nisiprius wrote:
Tue Mar 12, 2019 1:25 pm
So, what to say? The risk profiles are different, there are low-probability high-consequences events that affect ETFs but not mutual funds, and there are low-probability high-consequences events that affect mutual funds but not ETFs.
I am not sure I can come up with a scenario that would impact a mutual fund but not an ETF with the same holdings or same class of holdings. It may be that you are less likely to see active ETFs or some other types of ETFs than you are to see MFs of that type, but that is a different issue.

That being said, if a MF's holdings become illiquid, it could stop redemptions (as happened to one of the Third Avenue funds). So the actual end result of MF problems may not be too different. In an ETF, you'd see iliquidity or huge divergences in the marketplace, an MF might just clamp down on redemptions by fiat.


But I can think of an ETF advantage: If there is a wide divergence between NAV and ETF price, it may be the market saying we don't really trust the ETFs computed NAV. By contrast, in a MF, well connected investors have an advantage if they think MFs are mispricing NAV-- they can just sell out at NAV and leave those who remain holding the bag.

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Phineas J. Whoopee
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Re: Are Vanguard Mutual Funds dying?

Post by Phineas J. Whoopee » Tue Mar 12, 2019 7:48 pm

nisiprius wrote:
Tue Mar 12, 2019 6:29 am
...
Third, exactly who cares, and why? Why does this matter? Suppose I believed that mutual funds would be gone by 2050, would that be a reason for me to switch to ETFs now?
Of course not. By 2050 ETFs will likely be the dinosaurs that are only held by crotchety old investors who don't understand [whatever replaces technology] and continue to believe "disruptive" is cool. What a bunch of geezers.

And also they selfishly messed everything up, so now we have to fix it.

PJW

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fortyofforty
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Re: Are Vanguard Mutual Funds dying?

Post by fortyofforty » Tue Mar 12, 2019 7:59 pm

Phineas J. Whoopee wrote:
Tue Mar 12, 2019 7:48 pm
nisiprius wrote:
Tue Mar 12, 2019 6:29 am
...
Third, exactly who cares, and why? Why does this matter? Suppose I believed that mutual funds would be gone by 2050, would that be a reason for me to switch to ETFs now?
Of course not. By 2050 ETFs will likely be the dinosaurs that are only held by crotchety old investors who don't understand [whatever replaces technology] and continue to believe "disruptive" is cool. What a bunch of geezers.

And also they selfishly messed everything up, so now we have to fix it.

PJW
:sharebeer
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rgs92
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Re: Are Vanguard Mutual Funds dying?

Post by rgs92 » Tue Mar 12, 2019 8:11 pm

I love my Vanguard Balanced Index fund. There is really nothing like it from any other company as an ETF (or even as a mutual fund!).
You can now invest in the Admiral version through Fidelity and Schwab.
(The old investors version is closed.)

There are target funds, but there is no simple balanced index fund anywhere I am aware of.

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