ROTH IRA - VGSIX vs VNQ

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walletless
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ROTH IRA - VGSIX vs VNQ

Post by walletless » Tue Sep 09, 2014 12:09 pm

My wife's ROTH IRA currently has $5,500 invested in VGSIX (Vanguard real estate index). It seems to me that VNQ (Vanguard REIT ETF) is an almost identical ETF twin of that fund, except with a lower expense ration (0.10% vs 0.24%). Is there any reason I should not exchange the VGSIX with VNQ?

Logan T
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Re: ROTH IRA - VGSIX vs VNQ

Post by Logan T » Tue Sep 09, 2014 12:33 pm

Are you going to be putting more money into that fund? At $10,000, the fund will turn into Vanguard REIT Index Fund Admiral Shares and have the same 0.10% expense ratio.

Check out Vanguards ETF vs Mutual Fund pages: https://investor.vanguard.com/etf/etf-vs-mutual-fund
You really don't need to begin saving for retirement before you reach 60. At that point, simply save 250 percent of your income each year and you'll be able to retire comfortably at 70. -Jonathan Pond

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InvestorNewb
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Re: ROTH IRA - VGSIX vs VNQ

Post by InvestorNewb » Tue Sep 09, 2014 12:35 pm

Here is another page on ETFs vs. mutual funds:

http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

asif408
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Re: ROTH IRA - VGSIX vs VNQ

Post by asif408 » Tue Sep 09, 2014 12:38 pm

As long as you understand the differences between ETFs and mutual funds there's no compelling reason not to. If you expect that amount to increase to over $10,000 in the near future, though, I'd probably just leave the money in the fund. As Logan T pointed out, your wife would be eligible for Admiral shares at the same expense ratio as the ETF.

Funds have some nice benefits over ETFs, such as automatic contributions, being able to buy them at any time (technically you can buy ETFs at any time, but not a good idea after trading hours), and not having to deal with the bid/ask spread. I use ETFs (and have an allocation to VNQ) but if I had started out with more in my account I probably would have gone the fund route.

Sciray
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Re: ROTH IRA - VGSIX vs VNQ

Post by Sciray » Tue Sep 09, 2014 12:54 pm

Beyond what everyone else said, when you buy shares in an ETF, you can't buy partial shares. It's like a stock, so you'll have to pay in increments of the stock price. Ex: $77, $154. $231, etc. I'd stick with the fund and convert to Admiral shares, but if you want some of the benefits of the ETF, there's no huge reason not to.

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walletless
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Re: ROTH IRA - VGSIX vs VNQ

Post by walletless » Tue Sep 09, 2014 12:55 pm

Great, thanks! I might put more amount to the REIT next year around May, where the balance will likely be above the $10,000 limit required for admiral funds (assuming REITs don't fall too much).. so I will just keep it as is (in VGSIX) for now.

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