Mutual Fund and ETF Performance Misunderstanding?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
theTRA
Posts: 30
Joined: Thu May 14, 2020 4:35 pm

Mutual Fund and ETF Performance Misunderstanding?

Post by theTRA » Sun May 31, 2020 2:51 pm

Hello all. I have some newbie questions about the Total Stock Market Index funds and ETF that Vanguard offers
The mutual fund and ETF performance is taken as of 3:30pm from the "stocks" app on my phone:

Vanguard Total Stock Market Index Fund
Mutual Fund:
VSMPX $140.47 (+0.49%) - Institutional Plus shares
VITSX $74.91 (+0.50%) - Institutional Shares
VTSAX $74.89 (+0.48%) - Admiral Shares

ETF:
VTI $153.71 (+0.33%)

1) Why is the price per share not identical between the three share classes of the mutual fund?
2) Why is the price per share of the mutual funds different from the ETF?
3) Why is there a performance variation of 2-3 basis points amongst the 3 share classes of that mutual fund?
4) Why is there a 15 basis point difference in performance between the ETF, and the Mutual funds?

I know there is a lot of misunderstanding on my side so just wanted to get some answers. Thank you for your time!

User avatar
Nate79
Posts: 6036
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by Nate79 » Sun May 31, 2020 3:33 pm

theTRA wrote:
Sun May 31, 2020 2:51 pm
Hello all. I have some newbie questions about the Total Stock Market Index funds and ETF that Vanguard offers
The mutual fund and ETF performance is taken as of 3:30pm from the "stocks" app on my phone:

Vanguard Total Stock Market Index Fund
Mutual Fund:
VSMPX $140.47 (+0.49%) - Institutional Plus shares
VITSX $74.91 (+0.50%) - Institutional Shares
VTSAX $74.89 (+0.48%) - Admiral Shares

ETF:
VTI $153.71 (+0.33%)

1) Why is the price per share not identical between the three share classes of the mutual fund?
2) Why is the price per share of the mutual funds different from the ETF?
3) Why is there a performance variation of 2-3 basis points amongst the 3 share classes of that mutual fund?
4) Why is there a 15 basis point difference in performance between the ETF, and the Mutual funds?

I know there is a lot of misunderstanding on my side so just wanted to get some answers. Thank you for your time!
Because most likely you are seeing the previous days return/closing price for the mutual funds and the ETF is for the current day.

I believe you need to wait until 7pm EST to get the days mutual fund closing NAV/return.

Topic Author
theTRA
Posts: 30
Joined: Thu May 14, 2020 4:35 pm

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by theTRA » Sun May 31, 2020 4:15 pm

Nate79 wrote:
Sun May 31, 2020 3:33 pm
theTRA wrote:
Sun May 31, 2020 2:51 pm
Hello all. I have some newbie questions about the Total Stock Market Index funds and ETF that Vanguard offers
The mutual fund and ETF performance is taken as of 3:30pm from the "stocks" app on my phone:

Vanguard Total Stock Market Index Fund
Mutual Fund:
VSMPX $140.47 (+0.49%) - Institutional Plus shares
VITSX $74.91 (+0.50%) - Institutional Shares
VTSAX $74.89 (+0.48%) - Admiral Shares

ETF:
VTI $153.71 (+0.33%)

1) Why is the price per share not identical between the three share classes of the mutual fund?
2) Why is the price per share of the mutual funds different from the ETF?
3) Why is there a performance variation of 2-3 basis points amongst the 3 share classes of that mutual fund?
4) Why is there a 15 basis point difference in performance between the ETF, and the Mutual funds?

I know there is a lot of misunderstanding on my side so just wanted to get some answers. Thank you for your time!
Because most likely you are seeing the previous days return/closing price for the mutual funds and the ETF is for the current day.

I believe you need to wait until 7pm EST to get the days mutual fund closing NAV/return.
Thanks for your comment! I went to look at how I may have compared incorrectly. According to my research on this, the stock markets are closed on the weekend. So the prices listed on tickers are for closing on Friday night. I do believe the stock performance I posted as of 3:30pm today is Friday closing prices.

Maybe I don't understand the math. Is the ETF underperforming relative to the Mutual Funds? Or is it all "normalized" in someway because the share prices are different?

software
Posts: 196
Joined: Tue Apr 18, 2017 2:02 pm

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by software » Sun May 31, 2020 4:23 pm

Regarding your question between the difference of the ETF and MF of the same share class, ETFs often (usually) trade at either a premium or discount to NAV. If you look at the NAV movement which can be found on Vanguards website, you will find they are identical at .48%

I’m not sure about the differences between share classes.

User avatar
Nate79
Posts: 6036
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by Nate79 » Sun May 31, 2020 4:24 pm

theTRA wrote:
Sun May 31, 2020 4:15 pm
Nate79 wrote:
Sun May 31, 2020 3:33 pm
theTRA wrote:
Sun May 31, 2020 2:51 pm
Hello all. I have some newbie questions about the Total Stock Market Index funds and ETF that Vanguard offers
The mutual fund and ETF performance is taken as of 3:30pm from the "stocks" app on my phone:

Vanguard Total Stock Market Index Fund
Mutual Fund:
VSMPX $140.47 (+0.49%) - Institutional Plus shares
VITSX $74.91 (+0.50%) - Institutional Shares
VTSAX $74.89 (+0.48%) - Admiral Shares

ETF:
VTI $153.71 (+0.33%)

1) Why is the price per share not identical between the three share classes of the mutual fund?
2) Why is the price per share of the mutual funds different from the ETF?
3) Why is there a performance variation of 2-3 basis points amongst the 3 share classes of that mutual fund?
4) Why is there a 15 basis point difference in performance between the ETF, and the Mutual funds?

I know there is a lot of misunderstanding on my side so just wanted to get some answers. Thank you for your time!
Because most likely you are seeing the previous days return/closing price for the mutual funds and the ETF is for the current day.

I believe you need to wait until 7pm EST to get the days mutual fund closing NAV/return.
Thanks for your comment! I went to look at how I may have compared incorrectly. According to my research on this, the stock markets are closed on the weekend. So the prices listed on tickers are for closing on Friday night. I do believe the stock performance I posted as of 3:30pm today is Friday closing prices.

Maybe I don't understand the math. Is the ETF underperforming relative to the Mutual Funds? Or is it all "normalized" in someway because the share prices are different?
Ah, ok. I thought you were commenting about prices during the week. There are daily differences between ETF and their mutual funds. If you look at the weekly/monthly/yearly numbers they should converge.

alex_686
Posts: 6351
Joined: Mon Feb 09, 2015 2:39 pm

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by alex_686 » Sun May 31, 2020 4:33 pm

Former mutual fund accountant here.

Prices for the 3 mutual fund share classes should be different. The expense ratio is changed daily to the fund, so prices will slowly diverge.

IIRC, NAV is report out to 6 to 8 decimal points, so you may have a rounding is as well.

ETF prices tend to be accurate during intraday pricing. Prices go a bit wonky at the close if there is any kind of inbalance issue.

I would be very relaxed about this.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.

User avatar
David Jay
Posts: 8673
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by David Jay » Sun May 31, 2020 6:06 pm

theTRA wrote:
Sun May 31, 2020 2:51 pm
VSMPX $140.47 (+0.49%) - Institutional Plus shares
VITSX $74.91 (+0.50%) - Institutional Shares

1) Why is the price per share not identical between the three share classes of the mutual fund?
Mutual funds are purchased “by the dollar” so the share price doesn’t matter. If you buy $100 of VSMPX OR $100 of VITSX, you get $100 worth of Total Market.

I have had some who couldn’t get their heads around the different share values, the best way I have found to explain it is as follows: A share is a “container” which holds a portion of “Total Stock”, but there is no universal agreement on container size. While the ratio is not precisely correct, you could think of a VSMPX share as holding a “gallon” of total stock and a VITSX share as holding a “half gallon” of total stock. Same stuff, but one is a bigger container so it costs more per container, but the price per ounce is the same.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

MotoTrojan
Posts: 9952
Joined: Wed Feb 01, 2017 8:39 pm

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by MotoTrojan » Sun May 31, 2020 6:09 pm

The ETFs error is due to a minor premium/discount but this error is not compounding, it’s just a minor oscillation between NAV and ETF price (sometimes positive sometimes negative).

With these liquid funds it’s nothing to be worried about.

User avatar
jeffyscott
Posts: 8866
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by jeffyscott » Sun May 31, 2020 9:47 pm

software wrote:
Sun May 31, 2020 4:23 pm
Regarding your question between the difference of the ETF and MF of the same share class, ETFs often (usually) trade at either a premium or discount to NAV. If you look at the NAV movement which can be found on Vanguards website, you will find they are identical at .48%
Vanguard's website also shows a different 5/29/2020 closing price for VTI, $154.02 (+0.61%). Other sources (M*, google) agree with the OP's figure of $153.71 and +0.33%.

Maybe showing fake higher returns for the ETF is part of their strategy to push ETFs :wink: .
Time is your friend; impulse is your enemy. - John C. Bogle

IndexCore
Posts: 153
Joined: Wed Mar 25, 2020 1:44 am

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by IndexCore » Mon Jun 01, 2020 8:01 am

The stock market will open 30 minutes from now, so it's a good time to check:

VTI, market +0.61%
VTI, NAV +0.48%
VTSAX, +0.48%
https://investor.vanguard.com/etf/profile/VTI
https://investor.vanguard.com/mutual-fu ... file/VTSAX

VTI is one of the largest, most popular ETFs in the world. So it's also possible the market price reflects "after hours" trading that is missing from the other prices. Normally it would never diverge by that much.

Mostly I agree with people who said not to worry about it. Take the 10 year performance of VTI vs VTSAX:
12.83% vs 12.81%
Unlikely to impact when you retire: if you compound a 0.02% difference over 50 years...
... it amounts to a 1% total difference.

User avatar
grabiner
Advisory Board
Posts: 27174
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by grabiner » Mon Jun 01, 2020 1:27 pm

theTRA wrote:
Sun May 31, 2020 2:51 pm
Hello all. I have some newbie questions about the Total Stock Market Index funds and ETF that Vanguard offers
The mutual fund and ETF performance is taken as of 3:30pm from the "stocks" app on my phone:

Vanguard Total Stock Market Index Fund
Mutual Fund:
VSMPX $140.47 (+0.49%) - Institutional Plus shares
VITSX $74.91 (+0.50%) - Institutional Shares
VTSAX $74.89 (+0.48%) - Admiral Shares
3) Why is there a performance variation of 2-3 basis points amongst the 3 share classes of that mutual fund?
Rounding. If a fund NAV goes from $79.996 to $80.004, that is a gain of 0.01%, but it rounds to zero because you could buy or sell the fund at $80 on both days. Another share class with a different price might report a gain from $39.993 to $39.997, which rounds to $39.99 becoming $40.00, a gain of 0.025% rounding to 0.03%.
Wiki David Grabiner

Topic Author
theTRA
Posts: 30
Joined: Thu May 14, 2020 4:35 pm

Re: Mutual Fund and ETF Performance Misunderstanding?

Post by theTRA » Thu Jun 04, 2020 9:00 pm

Thanks to all for the comments. It all makes sense now and definetly not anything to worry about.

Post Reply