VTSMX vs. VTI

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TurksandCaicos01
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VTSMX vs. VTI

Post by TurksandCaicos01 » Thu Oct 12, 2017 5:02 pm

What is the difference between these two?

I understand one is a mutual fund and one is an ETF

VTI has a lower expense ratio thus why wouldn't everyone always go with VTI? Confused and working on holdings for my three (four) fund portfolio :)

My three-fund portfolio will be held at fidelity.


Thank you

MotoTrojan
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Re: VTSMX vs. VTI

Post by MotoTrojan » Thu Oct 12, 2017 5:11 pm

TurksandCaicos01 wrote:
Thu Oct 12, 2017 5:02 pm
What is the difference between these two?

I understand one is a mutual fund and one is an ETF

VTI has a lower expense ratio thus why wouldn't everyone always go with VTI? Confused and working on holdings for my three (four) fund portfolio :)

My three-fund portfolio will be held at fidelity.


Thank you
If the 4th fund you allude to is International Bond, consider skipping out on that.

How much are you investing? There is an admiral fund version, VTSAX, which would fix the ER issue. Other than that, it is personal preference. Mutual funds trade on NAV, ETFs trade during the day (sometimes fluctuating ~1% or more) just like a regular stock. Mutual funds are easier to invest in, especially since you can use automated deposits. In some cases mutual funds are less tax-efficient than ETFs, but Vanguard eliminated that problem.

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Earl Lemongrab
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Re: VTSMX vs. VTI

Post by Earl Lemongrab » Thu Oct 12, 2017 5:22 pm

TurksandCaicos01 wrote:
Thu Oct 12, 2017 5:02 pm
What is the difference between these two?

I understand one is a mutual fund and one is an ETF

VTI has a lower expense ratio thus why wouldn't everyone always go with VTI? Confused and working on holdings for my three (four) fund portfolio :)
In fact I would use VTI. There's also an excluded choice that is the reason many don't use the ETF, and that's the Admiral class VTSAX that has the same ER as VTI. That has a 10k minimum.

Some people don't like the mechanics of purchasing ETFs. Other's are afraid of being tempted "trade" them.

I like ETFs because I can get the best ERs and hold them at the custodian of choice, facilitating my use of transfers to generate bonus money.
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livesoft
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Re: VTSMX vs. VTI

Post by livesoft » Thu Oct 12, 2017 5:50 pm

If your 3-fund portfolio will be held at Fidelity, then there is really no reason to use either VTSMX or VTI because Fidelity has equivalent index funds that will have no commissions to use at Fidelity:

https://www.bogleheads.org/wiki/Fidelity

As for the difference between VTSMX and VTI, the commission to buy each of them will be different (could be $0 or not) and for many people they cannot seem to deal with the anxiety of deciding whether and when to use to a limit order or a market order for ETFs, so they will use mutual funds.
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TurksandCaicos01
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Re: VTSMX vs. VTI

Post by TurksandCaicos01 » Thu Oct 12, 2017 6:52 pm

thank you for your quick responses, most of you have confirmed what I thought. I will likely be buying ETFs.

Is the 10,000 minimum per trade or total investments held in that specific admiral fund?

Livesoft brought up equivalent funds at Fidelity so now I will do my research about Fidelity funds in order to build my portfolio.

As for the international bonds, my asset allocation currently provides for mostly equity anyways. Thank you.

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Earl Lemongrab
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Re: VTSMX vs. VTI

Post by Earl Lemongrab » Thu Oct 12, 2017 7:09 pm

TurksandCaicos01 wrote:
Thu Oct 12, 2017 6:52 pm
thank you for your quick responses, most of you have confirmed what I thought. I will likely be buying ETFs.

Is the 10,000 minimum per trade or total investments held in that specific admiral fund?
It's 10k in the fund in a particular account. You can't combine say IRA and taxable. If I were going to be at Fidelity I'd use free iShares ETFs.
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TurksandCaicos01
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Re: VTSMX vs. VTI

Post by TurksandCaicos01 » Thu Oct 12, 2017 7:23 pm

To clarify:

When investing in a IRA at Fidelity with the goal of diversifying in a total US stock market fund- VTSAX, FSTVX and ITOT are essentially the same in their holdings.

VTSAX (ER 0.04): would charge a initial purchase fee and trade fee because using Fidelity

FSTVX (ER 0.04): However with no fees involved in any trades

ITOT (ER 0.03): With no fees involved in any trades

Thus the only difference between FSTVX and ITOT is the expense ratio? This is the reason you say you would use the free iShares ETF? Correct?

CppCoder
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Re: VTSMX vs. VTI

Post by CppCoder » Thu Oct 12, 2017 8:15 pm

TurksandCaicos01 wrote:
Thu Oct 12, 2017 7:23 pm
To clarify:

When investing in a IRA at Fidelity with the goal of diversifying in a total US stock market fund- VTSAX, FSTVX and ITOT are essentially the same in their holdings.

VTSAX (ER 0.04): would charge a initial purchase fee and trade fee because using Fidelity

FSTVX (ER 0.04): However with no fees involved in any trades

ITOT (ER 0.03): With no fees involved in any trades

Thus the only difference between FSTVX and ITOT is the expense ratio? This is the reason you say you would use the free iShares ETF? Correct?
No, these (FSTVX and ITOT) are different funds that likely track similarly for practical purposes. Aside from the mutual fund/ETF differences discussed above, for example, these funds track slightly different indexes. In an IRA, I would use FSTVX because I prefer mutual funds. In fact, at Fidelity, I even use FSTVX in my taxable knowing it is less tax efficient than ITOT because it's just more convenient for me to use mutual funds.

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oldcomputerguy
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Re: VTSMX vs. VTI

Post by oldcomputerguy » Thu Oct 12, 2017 8:43 pm

MotoTrojan wrote:
Thu Oct 12, 2017 5:11 pm
TurksandCaicos01 wrote:
Thu Oct 12, 2017 5:02 pm
What is the difference between these two?

I understand one is a mutual fund and one is an ETF

VTI has a lower expense ratio thus why wouldn't everyone always go with VTI? Confused and working on holdings for my three (four) fund portfolio :)

My three-fund portfolio will be held at fidelity.


Thank you
If the 4th fund you allude to is International Bond, consider skipping out on that.

How much are you investing? There is an admiral fund version, VTSAX, which would fix the ER issue. Other than that, it is personal preference. Mutual funds trade on NAV, ETFs trade during the day (sometimes fluctuating ~1% or more) just like a regular stock. Mutual funds are easier to invest in, especially since you can use automated deposits. In some cases mutual funds are less tax-efficient than ETFs, but Vanguard eliminated that problem.
The OP mentioned holding the portfolio at Fidelity. I don’t believe you can get VTSAX at Fidelity.
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Earl Lemongrab
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Re: VTSMX vs. VTI

Post by Earl Lemongrab » Thu Oct 12, 2017 11:57 pm

TurksandCaicos01 wrote:
Thu Oct 12, 2017 7:23 pm
Thus the only difference between FSTVX and ITOT is the expense ratio? This is the reason you say you would use the free iShares ETF? Correct?
I only use ETFs, other than my 401(k), period. I want flexibility and ETFs do the best job of that. I don't see any reason to use traditional mutual funds.
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mega317
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Re: VTSMX vs. VTI

Post by mega317 » Fri Oct 13, 2017 12:20 am

I agree that you should not pay any commissions because Fidelity has good options.

You got some good answers about mutual funds vs ETFs. But part of your initial question was about expense ratios.

FSTMX = Fidelity total market index fund, investor class ($2,500 minimum, 0.09% expense ratio)
FSTVX = Fidelity total market index fund, premium class ($10,000 minimum, 0.035% expense ratio)
ITOT = ishares Total market, yes it's not identical but it's close enough, 0.03% expense ratio

If you have $9,999 dollars invested, you are paying an expense ratio 0.06% greater for FSTMX over ITOT, which is 6 dollars a year.
When you get to $10,000 you will pay 0.005% more with FSTVX which is 50 cents per 10K a year. If you have 10 million dollars, the difference is 500 bucks a year.

I think the expense ratio should not factor in to this decision.

TurksandCaicos01
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Re: VTSMX vs. VTI

Post by TurksandCaicos01 » Fri Oct 13, 2017 7:38 am

Earl Lemongrab wrote:
Thu Oct 12, 2017 11:57 pm
TurksandCaicos01 wrote:
Thu Oct 12, 2017 7:23 pm
Thus the only difference between FSTVX and ITOT is the expense ratio? This is the reason you say you would use the free iShares ETF? Correct?
I only use ETFs, other than my 401(k), period. I want flexibility and ETFs do the best job of that. I don't see any reason to use traditional mutual funds.
Why do you not use etfs in your 401k?

TurksandCaicos01
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Re: VTSMX vs. VTI

Post by TurksandCaicos01 » Fri Oct 13, 2017 7:40 am

mega317 wrote:
Fri Oct 13, 2017 12:20 am
I agree that you should not pay any commissions because Fidelity has good options.

You got some good answers about mutual funds vs ETFs. But part of your initial question was about expense ratios.

FSTMX = Fidelity total market index fund, investor class ($2,500 minimum, 0.09% expense ratio)
FSTVX = Fidelity total market index fund, premium class ($10,000 minimum, 0.035% expense ratio)
ITOT = ishares Total market, yes it's not identical but it's close enough, 0.03% expense ratio

If you have $9,999 dollars invested, you are paying an expense ratio 0.06% greater for FSTMX over ITOT, which is 6 dollars a year.
When you get to $10,000 you will pay 0.005% more with FSTVX which is 50 cents per 10K a year. If you have 10 million dollars, the difference is 500 bucks a year.

I think the expense ratio should not factor in to this decision.
If the expense ratio is basically null unless you are investing millions that why do people choose one or the other?

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Re: VTSMX vs. VTI

Post by sport » Fri Oct 13, 2017 7:52 am

Earl Lemongrab wrote:
Thu Oct 12, 2017 11:57 pm
TurksandCaicos01 wrote:
Thu Oct 12, 2017 7:23 pm
Thus the only difference between FSTVX and ITOT is the expense ratio? This is the reason you say you would use the free iShares ETF? Correct?
I only use ETFs, other than my 401(k), period. I want flexibility and ETFs do the best job of that. I don't see any reason to use traditional mutual funds.
I use only mutual funds, period. I don't want to deal with market spreads, volatility, and be limited to whole shares. I don't see any reason to use ETFs.

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ruralavalon
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Re: VTSMX vs. VTI

Post by ruralavalon » Fri Oct 13, 2017 8:43 am

TurksandCaicos01 wrote:
Fri Oct 13, 2017 7:40 am
mega317 wrote:
Fri Oct 13, 2017 12:20 am
I agree that you should not pay any commissions because Fidelity has good options.

You got some good answers about mutual funds vs ETFs. But part of your initial question was about expense ratios.

FSTMX = Fidelity total market index fund, investor class ($2,500 minimum, 0.09% expense ratio)
FSTVX = Fidelity total market index fund, premium class ($10,000 minimum, 0.035% expense ratio)
ITOT = ishares Total market, yes it's not identical but it's close enough, 0.03% expense ratio

If you have $9,999 dollars invested, you are paying an expense ratio 0.06% greater for FSTMX over ITOT, which is 6 dollars a year.
When you get to $10,000 you will pay 0.005% more with FSTVX which is 50 cents per 10K a year. If you have 10 million dollars, the difference is 500 bucks a year.

I think the expense ratio should not factor in to this decision.
If the expense ratio is basically null unless you are investing millions that why do people choose one or the other?
Since your account is with Fidelity, in my opinion you might as well just use the Fidelity mutual funds. There is no reason to bother with the inconvenience and commissions of using funds from any other source, or to trouble with the trading mechanics of ETFs.

Tiny differences in expense ratio just don't make any meaningful difference in the performance of your investments. The Fidelity funds that you are considering are very broadly diversified, and have very low expense ratios. They are very good choices.
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Earl Lemongrab
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Re: VTSMX vs. VTI

Post by Earl Lemongrab » Fri Oct 13, 2017 11:19 am

TurksandCaicos01 wrote:
Fri Oct 13, 2017 7:38 am
Earl Lemongrab wrote:
Thu Oct 12, 2017 11:57 pm
I only use ETFs, other than my 401(k), period. I want flexibility and ETFs do the best job of that. I don't see any reason to use traditional mutual funds.
Why do you not use etfs in your 401k?
Well, the main is that they don't have any. We have CITs with low ERs. But I don't need to move my 401(k) assets around from custodian to custodian.
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Earl Lemongrab
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Re: VTSMX vs. VTI

Post by Earl Lemongrab » Fri Oct 13, 2017 11:21 am

sport wrote:
Fri Oct 13, 2017 7:52 am
I use only mutual funds, period. I don't want to deal with market spreads, volatility, and be limited to whole shares. I don't see any reason to use ETFs.
You can hold the ETFs at any custodian. So you get the one with the customer service or other features you prefer. And move them around as you desire. With Vanguard index funds you're pretty much limited to holding them there. I don't find the bid/ask or volatility to be any big deal. The whole shares is only a problem with IRAs for me.
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