Anyone Regret Converting Mutual Fund to ETF?

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Kookaburra
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Anyone Regret Converting Mutual Fund to ETF?

Post by Kookaburra »

I’d be interested to hear the experiences of folks who owned mutual funds and decided at some point to convert them to their ETF version, and ultimately wished they hadn’t or could go back. If so, what were the reasons?
Goal33
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by Goal33 »

Not quite a regret... I had no choice. I had to convert to an ETF for portability to move to a different brokerage to meet an asset-based relationship for a better rate on a jumbo mortgage.

I find tax loss harvesting easier with mutual funds, prefer that it can be bought in dollar amounts easily, like that the dividends can be sent directly to checking... basically, the arguments for mutual funds is what I miss.

There's no world in which I wouldn't do it again, though, for the better mortgage rate.

Had I known I'd refinance 4 months later for a non-jumbo loan, I wouldn't have bothered with the asset-based relationship loan. But that's not predictable...
totality
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by totality »

Goal33 wrote: Thu Oct 22, 2020 11:16 pm I find tax loss harvesting easier with mutual funds, prefer that it can be bought in dollar amounts easily, like that the dividends can be sent directly to checking... basically, the arguments for mutual funds is what I miss.
Wait, ETF dividends can't be sent to a checking account? I suppose they must go to a settlement account first, then?
Goal33
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by Goal33 »

totality wrote: Thu Oct 22, 2020 11:23 pm
Goal33 wrote: Thu Oct 22, 2020 11:16 pm I find tax loss harvesting easier with mutual funds, prefer that it can be bought in dollar amounts easily, like that the dividends can be sent directly to checking... basically, the arguments for mutual funds is what I miss.
Wait, ETF dividends can't be sent to a checking account? I suppose they must go to a settlement account first, then?
yes, at least at vanguard. I moved the ETFs back to vanguard after the mortgage closed.
Pegasus_RPG
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by Pegasus_RPG »

Any reason you couldn't sell all shares of an ETF then buy the mutual fund version? Assuming tax-advantaged account or little capital gains.
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anon_investor
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by anon_investor »

Pegasus_RPG wrote: Thu Oct 22, 2020 11:48 pm Any reason you couldn't sell all shares of an ETF then buy the mutual fund version? Assuming tax-advantaged account or little capital gains.
You can. The taxable event in a taxable account is what prevents people from doing it.
frugaltigris
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by frugaltigris »

No. No regrets at all. Never going back that trajectory till ETFs trade free.
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WoodSpinner
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by WoodSpinner »

frugaltigris wrote: Fri Oct 23, 2020 4:25 am No. No regrets at all. Never going back that trajectory till ETFs trade free.
Well they trade free at Fidelity .....
markjk
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by markjk »

I'm a mutual fund investor. I tried going down the ETF path a few years ago but reverted back to mutual funds for a few reasons.

The lack of ability to buy fractional shares was an issue. I like that I can put a set amount of money into the mutual fund regardless if it lines up with whole shares or not. That may not be an issue anymore as I know it's possible to buy fractional shares depending on brokerage. At that time I couldn't so it was a downside.

I also didn't like having the ability to "trade" during the day. This is strictly a behavior thing but knowing I could possibly trade based on intraday market swings was too appealing. I look at the mutual funds as a commitment device in some ways as it removes that day trading option entirely.

From a practical perspective the ETF is the better option. It's more flexible (assuming you can buy fractional shares), trading costs are $0 now in most cases and the expense ratio is usually a bit lower. But at this point I'll continue to go with mutual funds unless the costs diverge drastically or there is some other extremely compelling reason to switch.
arf30
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by arf30 »

I converted a chunk of funds to ETF with the smallest cost basis in case I wanted to sell and go back to mutual funds (which I will end up doing). I found fractional shares to be annoying, they're routed through a different clearing house so you get a separate tax lot with a slightly different price for the fractional share. Also most order types are not supported yet with fractional, just the basic ones. Having to transfer money into the settlement fund manually and then execute and monitor the trade during business hours is also annoying, with mutual funds you can just place an order at any time and it'll automatically pull money from your bank and invest it on the next available business day.
JustinR
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by JustinR »

markjk wrote: Fri Oct 23, 2020 5:39 am I'm a mutual fund investor. I tried going down the ETF path a few years ago but reverted back to mutual funds for a few reasons.

The lack of ability to buy fractional shares was an issue. I like that I can put a set amount of money into the mutual fund regardless if it lines up with whole shares or not. That may not be an issue anymore as I know it's possible to buy fractional shares depending on brokerage. At that time I couldn't so it was a downside.

I also didn't like having the ability to "trade" during the day. This is strictly a behavior thing but knowing I could possibly trade based on intraday market swings was too appealing. I look at the mutual funds as a commitment device in some ways as it removes that day trading option entirely.

From a practical perspective the ETF is the better option. It's more flexible (assuming you can buy fractional shares), trading costs are $0 now in most cases and the expense ratio is usually a bit lower. But at this point I'll continue to go with mutual funds unless the costs diverge drastically or there is some other extremely compelling reason to switch.
You can convert your current shares to ETFs, but still buy new shares with mutual funds.
absolute zero
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by absolute zero »

WoodSpinner wrote: Fri Oct 23, 2020 4:59 am
frugaltigris wrote: Fri Oct 23, 2020 4:25 am No. No regrets at all. Never going back that trajectory till ETFs trade free.
Well they trade free at Fidelity .....
Free at vanguard too
idiotinvestor2
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by idiotinvestor2 »

I think I have some ocpd but at least in my taxable account, I only buy etfs in 200 or 1,000 share increments...would use margin or leave excess funds in cash to make sure I have an amount of shares that looks nice...maybe I should switch to mutual funds....
Goal33
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by Goal33 »

idiotinvestor2 wrote: Fri Oct 23, 2020 11:16 pm I think I have some ocpd but at least in my taxable account, I only buy etfs in 200 or 1,000 share increments...would use margin or leave excess funds in cash to make sure I have an amount of shares that looks nice...maybe I should switch to mutual funds....
I think what you’re doing is fine.
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by jeffyscott »

JustinR wrote: Fri Oct 23, 2020 6:01 am
markjk wrote: Fri Oct 23, 2020 5:39 am I'm a mutual fund investor. I tried going down the ETF path a few years ago but reverted back to mutual funds for a few reasons.

The lack of ability to buy fractional shares was an issue. I like that I can put a set amount of money into the mutual fund regardless if it lines up with whole shares or not. That may not be an issue anymore as I know it's possible to buy fractional shares depending on brokerage. At that time I couldn't so it was a downside.

I also didn't like having the ability to "trade" during the day. This is strictly a behavior thing but knowing I could possibly trade based on intraday market swings was too appealing. I look at the mutual funds as a commitment device in some ways as it removes that day trading option entirely.

From a practical perspective the ETF is the better option. It's more flexible (assuming you can buy fractional shares), trading costs are $0 now in most cases and the expense ratio is usually a bit lower. But at this point I'll continue to go with mutual funds unless the costs diverge drastically or there is some other extremely compelling reason to switch.
You can convert your current shares to ETFs, but still buy new shares with mutual funds.
I've avoided ETFs so far, but would be tempted to do it that way were I ever to switch for the cost savings, except my understanding is that you would then have to make a phone call every time you wanted to convert mutual fund shares to ETFs as Vanguard does not allow online conversion.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
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anon_investor
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by anon_investor »

jeffyscott wrote: Sat Oct 24, 2020 7:57 am
JustinR wrote: Fri Oct 23, 2020 6:01 am
markjk wrote: Fri Oct 23, 2020 5:39 am I'm a mutual fund investor. I tried going down the ETF path a few years ago but reverted back to mutual funds for a few reasons.

The lack of ability to buy fractional shares was an issue. I like that I can put a set amount of money into the mutual fund regardless if it lines up with whole shares or not. That may not be an issue anymore as I know it's possible to buy fractional shares depending on brokerage. At that time I couldn't so it was a downside.

I also didn't like having the ability to "trade" during the day. This is strictly a behavior thing but knowing I could possibly trade based on intraday market swings was too appealing. I look at the mutual funds as a commitment device in some ways as it removes that day trading option entirely.

From a practical perspective the ETF is the better option. It's more flexible (assuming you can buy fractional shares), trading costs are $0 now in most cases and the expense ratio is usually a bit lower. But at this point I'll continue to go with mutual funds unless the costs diverge drastically or there is some other extremely compelling reason to switch.
You can convert your current shares to ETFs, but still buy new shares with mutual funds.
I've avoided ETFs so far, but would be tempted to do it that way were I ever to switch for the cost savings, except my understanding is that you would then have to make a phone call every time you wanted to convert mutual fund shares to ETFs as Vanguard does not allow online conversion.
Yeah you have to call. They had a pilot program where some account holders were given the option to convert online. My account didn't have it but my spouse's did, but it only let you convert all your shares, not just a partial amount, so we did not try it. The online option is no longer available.
jocdoc
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by jocdoc »

I invest automatically weekly into mutual funds in my Vanguard taxable account and this way my contributions are on autopilot. It lets me set it and forget it. Unless you use M1 there is no way to do this with ETFs without paying a management fee such as betterment, even vanguard digital advisor. Tax loss harvesting is easier with the mutual funds.( difficult to do at M1) No ask bid spreads. The vanguard mutual funds are also as tax efficient as their ETF equivalents. I did convert once a few years back for a lower ER vs the mutual fund and regretted it when I tax loss harvested. It was a pain to sell the etf, wait until the trade settles and buy the new ETF.

This is what keeps me at Vanguard. Low cost, convenience. Simplicity.
JC
stan1
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by stan1 »

idiotinvestor2 wrote: Fri Oct 23, 2020 11:16 pm I think I have some ocpd but at least in my taxable account, I only buy etfs in 200 or 1,000 share increments...would use margin or leave excess funds in cash to make sure I have an amount of shares that looks nice...maybe I should switch to mutual funds....
Same, although I will accept a 100 share purchase. Agree its probably OCPD with not wanting to see cents on my account balance.

I guess mutual funds would force you to get over it, but then you'd probably want to buy only in $10,000 units so your cost basis looked pretty.
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by pokebowl »

jeffyscott wrote: Sat Oct 24, 2020 7:57 am
I've avoided ETFs so far, but would be tempted to do it that way were I ever to switch for the cost savings, except my understanding is that you would then have to make a phone call every time you wanted to convert mutual fund shares to ETFs as Vanguard does not allow online conversion.
Takes less than 3 minutes to do. Only way I can see it being annoying is if you are daily converting those funds, but once a month, quarter, year its nothing in my opinion. You call the help line, tell the robot the key words "sell stocks" and it takes you to the team that does the conversion. They read a quick script of consent and confirm the trade numbers and account, you agree then its done. :beer
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by placeholder »

In my non 401k accounts I've been all ETF since I did TLH on the remaining taxable ones in 2009 because ETFs made it so easy to hold the funds you wanted at the best ERs at the custodians you prefer which allowed generating good bonus money like my old buddy Earl described: viewtopic.php?f=10&t=196884
JustinR
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by JustinR »

jeffyscott wrote: Sat Oct 24, 2020 7:57 am
JustinR wrote: Fri Oct 23, 2020 6:01 am
markjk wrote: Fri Oct 23, 2020 5:39 am I'm a mutual fund investor. I tried going down the ETF path a few years ago but reverted back to mutual funds for a few reasons.

The lack of ability to buy fractional shares was an issue. I like that I can put a set amount of money into the mutual fund regardless if it lines up with whole shares or not. That may not be an issue anymore as I know it's possible to buy fractional shares depending on brokerage. At that time I couldn't so it was a downside.

I also didn't like having the ability to "trade" during the day. This is strictly a behavior thing but knowing I could possibly trade based on intraday market swings was too appealing. I look at the mutual funds as a commitment device in some ways as it removes that day trading option entirely.

From a practical perspective the ETF is the better option. It's more flexible (assuming you can buy fractional shares), trading costs are $0 now in most cases and the expense ratio is usually a bit lower. But at this point I'll continue to go with mutual funds unless the costs diverge drastically or there is some other extremely compelling reason to switch.
You can convert your current shares to ETFs, but still buy new shares with mutual funds.
I've avoided ETFs so far, but would be tempted to do it that way were I ever to switch for the cost savings, except my understanding is that you would then have to make a phone call every time you wanted to convert mutual fund shares to ETFs as Vanguard does not allow online conversion.
I only do it once in a while, after amassing a good amount of that mutual fund.

I actually timed the calls and they average ~10 minutes, and only because I specify specific lots I want to convert. So 10 minutes every few months isn't that bad.
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wander
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by wander »

Regret? Not at all. I like ETFs.
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ClevrChico
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by ClevrChico »

Before I found the three fund portfolio, I had an ETF of two, and I was glad to be able to get rid of them. I see the advantages of an ETF, but I like the simplicity of mutual funds for long term buy and hold.

I also don't like the idea of the pushing the complexity of trading to spouse in an inheritance situation. (Should I include instructions on bid/ask spreads and marketable limit orders in my will? :D That's an opportunity for things to get messed up or have someone punt to an expensive advisor.)
stan1
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by stan1 »

ClevrChico wrote: Sun Oct 25, 2020 9:24 am Before I found the three fund portfolio, I had an ETF of two, and I was glad to be able to get rid of them. I see the advantages of an ETF, but I like the simplicity of mutual funds for long term buy and hold.

I also don't like the idea of the pushing the complexity of trading to spouse in an inheritance situation. (Should I include instructions on bid/ask spreads and marketable limit orders in my will? :D That's an opportunity for things to get messed up or have someone punt to an expensive advisor.)
Bid ask spreads and marketable limit orders are minor points that generally don't need to be considered for Vanguard ETFs at a reputable brokerage (Vanguard, Fidelity, Schwab). Try doing some buy and sell transactions with market orders to see if you get grifted if you don't believe me.

I do agree if the need is to withdraw $10,000 it is easier to go into a taxable account and sell $10,000 worth of a mutual fund than it is to calculate how many shares of an ETF need to be sold to net $10,000. Also nice to be able to place the transaction at any time of the day including when the market is closed.
Last edited by stan1 on Sun Oct 25, 2020 9:37 am, edited 1 time in total.
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jeffyscott
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by jeffyscott »

JustinR wrote: Sun Oct 25, 2020 8:50 am
jeffyscott wrote: Sat Oct 24, 2020 7:57 am
JustinR wrote: Fri Oct 23, 2020 6:01 am
markjk wrote: Fri Oct 23, 2020 5:39 am I'm a mutual fund investor. I tried going down the ETF path a few years ago but reverted back to mutual funds for a few reasons.

The lack of ability to buy fractional shares was an issue. I like that I can put a set amount of money into the mutual fund regardless if it lines up with whole shares or not. That may not be an issue anymore as I know it's possible to buy fractional shares depending on brokerage. At that time I couldn't so it was a downside.

I also didn't like having the ability to "trade" during the day. This is strictly a behavior thing but knowing I could possibly trade based on intraday market swings was too appealing. I look at the mutual funds as a commitment device in some ways as it removes that day trading option entirely.

From a practical perspective the ETF is the better option. It's more flexible (assuming you can buy fractional shares), trading costs are $0 now in most cases and the expense ratio is usually a bit lower. But at this point I'll continue to go with mutual funds unless the costs diverge drastically or there is some other extremely compelling reason to switch.
You can convert your current shares to ETFs, but still buy new shares with mutual funds.
I've avoided ETFs so far, but would be tempted to do it that way were I ever to switch for the cost savings, except my understanding is that you would then have to make a phone call every time you wanted to convert mutual fund shares to ETFs as Vanguard does not allow online conversion.
I only do it once in a while, after amassing a good amount of that mutual fund.

I actually timed the calls and they average ~10 minutes, and only because I specify specific lots I want to convert. So 10 minutes every few months isn't that bad.
Thanks, for me just the phone call requirement, whether 10 minutes or 3 minutes, means that I'd just buy the ETFs directly were I ever to switch teams.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
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F150HD
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by F150HD »

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Last edited by F150HD on Sun Oct 25, 2020 1:21 pm, edited 1 time in total.
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F150HD
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Re: Anyone Regret Converting Mutual Fund to ETF?

Post by F150HD »

can you sell fractional ETF shares or only whole shares? like if you have an RMD and only want to withdraw the exact amount that could come into play.
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