Should you buy VTSAX or VTI in a taxable account?

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teelainen
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Should you buy VTSAX or VTI in a taxable account?

Post by teelainen » Thu Jun 13, 2019 9:49 pm

Should you buy VTSAX or VTI in a taxable account?

I have heard different things from different people. I talked to a couple of CPAs and they both said that VTI is better for a taxable account.

But then I talked to a very seasoned financial advisor at Edward Jones and he said VTSAX is better for a taxable account. The financial advisor showed me this link:

Vanguard Patented a Way to Avoid Taxes on Mutual Funds
https://www.bloomberg.com/graphics/2019 ... tax-dodge/

So honestly, I don't know who to trust. What is the Boglehead consensus on this? Thank you.

vu8
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by vu8 » Thu Jun 13, 2019 9:52 pm

They gonna do the same in the long run. Sadly VTI will have slightly lower cost in the future I think...

22twain
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by 22twain » Thu Jun 13, 2019 9:54 pm

VTI and VTSAX are merely different share classes of the same fund. Therefore I would expect any tax advantages of VTSAX to carry over to VTI, or vice versa.
My investing princiPLEs do not include absolutely preserving princiPAL.

MotoTrojan
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by MotoTrojan » Thu Jun 13, 2019 9:55 pm

They are 100% the same except for how you buy/sell them and the ER (both cheap enough to ignore). Often times ETFs are more tax efficient but at VG they are both equivalent due to a patented trick of theirs.

VTSAX is easier in that you can buy in automated contributions and in whole dollar amounts. VTI can be traded during the day but only in increments of its share price.

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ReformedSpender
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by ReformedSpender » Fri Jun 14, 2019 8:10 am

vu8 wrote:
Thu Jun 13, 2019 9:52 pm
Sadly VTI will have slightly lower cost in the future I think...
Currently by one-hundredth of a percentage point...

Nothing to lose sleep over

:beer
Last edited by ReformedSpender on Fri Jun 14, 2019 8:51 am, edited 1 time in total.
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UpperNwGuy
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by UpperNwGuy » Fri Jun 14, 2019 8:17 am

MotoTrojan wrote:
Thu Jun 13, 2019 9:55 pm
VTSAX is easier in that you can buy in automated contributions and in whole dollar amounts. VTI can be traded during the day but only in increments of its share price.
VTSAX, because you can keep more of your money invested when you don't have to buy whole shares.

livesoft
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by livesoft » Fri Jun 14, 2019 8:27 am

You should buy both. Then after one year, you will know which one you like better. As far as performance and taxes go, they will be substantially identical and you will not notice a difference. They differ in other ways though which you will probably only discover by owning both of them because most of those other ways are psychological and have to do with your brain. That is, they don't have to do with my brain, the brain of the EJ salesrep, the brains of people at Bloomerg.com, nor the brains of anybody else reading this.
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lostdog
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by lostdog » Fri Jun 14, 2019 8:39 am

As others said, they're the same.

The difference is psychological. If you value simplicity, VTSAX is the way to go. ETF's are slightly more complicated.
I don't invest looking in the rear view mirror and I know absolutely nothing about the future.

Topic Author
teelainen
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by teelainen » Fri Jun 14, 2019 8:52 am

lostdog wrote:
Fri Jun 14, 2019 8:39 am
The difference is psychological. If you value simplicity, VTSAX is the way to go. ETF's are slightly more complicated.
Hi lostdog, can you explain how ETFs are more complicated?

retiringwhen
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by retiringwhen » Fri Jun 14, 2019 8:58 am

Buy VTSAX because you won't have buyer's remorse unless you don't want a total US stock market fund.

If you find you need/desire VTI (the ETF) in the future, you can always do a tax-free conversion.

It only works in one direction.

Otherwise there is no fundamental reason to pick one over the other.

My solution let's you defer the decision for as long as necessary.

This is my strategy BTW and I am perfectly happy with it.

lostdog
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by lostdog » Fri Jun 14, 2019 8:59 am

teelainen wrote:
Fri Jun 14, 2019 8:52 am
lostdog wrote:
Fri Jun 14, 2019 8:39 am
The difference is psychological. If you value simplicity, VTSAX is the way to go. ETF's are slightly more complicated.
Hi lostdog, can you explain how ETFs are more complicated?
Sure. For me, I like investing the entire amount of money I'm willing to invest that day. I can buy $100 worth of VTSAX because I'm allowed to buy fractional shares. With VTI I cannot invest my $100 because I cannot invest in fractional shares. So my $100 is going to sit there not working for me.

I also can buy shares of VTSAX after hours. The order won't go through util the next business day but I enjoy the convenience.

I also can setup automatic investing into VTSAX. You cannot do that with ETF's.

Psychologically I'm not going to worry about what time of the day I'm going to buy shares of VTSAX. With ETF's there could be some big swings depending on when you buy shares during market hours.

For some, this stuff is minor but for me I enjoy the simplicity.
I don't invest looking in the rear view mirror and I know absolutely nothing about the future.

quisp65
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by quisp65 » Fri Jun 14, 2019 10:35 am

I would worry about Vanguards trick to be ended with future reg changes over ETF tax efficiency to be ended with new regs. Though I have no info to go on other than my prejudice and Vanguards trick impacts less people and thus makes it a bit easier to change.

jdilla1107
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by jdilla1107 » Fri Jun 14, 2019 11:00 am

A lot of the information on this forum about ETFs vs mutual funds is wrong or half-wrong. People display cognitive bias when debating this.(ie: whatever they have picked is objectively better.)

The short answer is that it doesn't really matter. You should spend about 15 minutes looking into this and then move on to far more important decisions like asset allocation and assessing your risk tolerance. Just pick what makes more sense to you.

EyeDee
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by EyeDee » Fri Jun 14, 2019 1:04 pm

.
Teelainen,

There is probably not a consensus answer as there are pluses and minuses to both choices.

If your spouse might be the one who has to sell the fund later and they do not know how to handle the various types of brokerage orders, you might want to consider using the traditional fund instead of the ETF.
teelainen wrote:
Thu Jun 13, 2019 9:49 pm
Should you buy VTSAX or VTI in a taxable account?
. . .
So honestly, I don't know who to trust. What is the Boglehead consensus on this? Thank you.
Randy

smalliebigs
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by smalliebigs » Fri Jun 14, 2019 1:12 pm

MotoTrojan wrote:
Thu Jun 13, 2019 9:55 pm
Often times ETFs are more tax efficient but at VG they are both equivalent due to a patented trick of theirs.
Saw this mentioned twice today now. What's this "patented trick" that you're referring to?

cheezit
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Re: Should you buy VTSAX or VTI in a taxable account?

Post by cheezit » Fri Jun 14, 2019 1:20 pm

smalliebigs wrote:
Fri Jun 14, 2019 1:12 pm
MotoTrojan wrote:
Thu Jun 13, 2019 9:55 pm
Often times ETFs are more tax efficient but at VG they are both equivalent due to a patented trick of theirs.
Saw this mentioned twice today now. What's this "patented trick" that you're referring to?
Here's an article describing it

smalliebigs
Posts: 69
Joined: Wed Jan 04, 2017 10:48 am

Re: Should you buy VTSAX or VTI in a taxable account?

Post by smalliebigs » Fri Jun 14, 2019 1:24 pm

Thank you. That's incredibly interesting.

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