Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
danielc
Posts: 377
Joined: Sun Dec 10, 2017 4:48 am

Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by danielc » Tue Jun 12, 2018 1:05 pm

Hello everyone,

We are starting to invest and we're at Fidelity. I'm trying to figure out the most tax efficient Total Stock Market index for our taxable account. Our most straight forward options are Fidelity's index fund (FSTVX) or iShares' ETF (ITOT). I would also consider Vanguard's ETF (VTI) but it costs me $5/trade. I have read elsewhere in this forum that ITOT and VTI are both good but FSTVX is terribly inefficient... but I can't figure out why.

Let's see:

1) Expense Ratio

FSTVI = 0.035%
VTI = 0.040%
ITOT = 0.030%


2) Dividents

FSTVX = 0.05374 (non-Qualified) + 1.00585 (Qualified) on a NAV of 74.79. That's a 0.95 QDI ratio.
VTI = 2.3671; I can't find the QDI ratio but I once read it was 0.95; NAV is 144.08
ITOT = 1.0579; They report a 0.92 QDI ratio. NAV is 64.14

https://www.fidelity.com/mutual-funds/i ... n/year-end
https://investor.vanguard.com/etf/profi ... utions/vti
https://www.ishares.com/us/products/239 ... market-etf#/

2) Capital Gains

As far as I can tell, VTI and ITOT did not distribute any capital gains. FSTVX distributed $0.02 of short term CP and $0.39 of long term CP.

So I put it all together assuming a federal marginal tax rate of 22%, QDI tax rate of 15%, and state level tax rate of 3% and I added up the taxes and expense ratios and this is what I got:

FSTVX = 0.395% cost per year.
VTI = 0.3411% cost per year.
ITOT = 0.3365% cost per year.

Sure, FSTVX is the worst of the pack, but is it really that different? Or have I missed something?

Thanks for the help.

PFInterest
Posts: 1654
Joined: Sun Jan 08, 2017 12:25 pm

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by PFInterest » Tue Jun 12, 2018 1:11 pm

i think either one will be fine. agree would skip VTI given cost.

User avatar
triceratop
Moderator
Posts: 5469
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by triceratop » Tue Jun 12, 2018 1:11 pm

You're not missing anything. Of course, that tax efficiency is 10x the stated difference in expense ratio. And, FSTVX may be more tax inefficient in the future. I would use ITOT in your situation.

By the way have you seen this? viewtopic.php?t=242137
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

User avatar
danielc
Posts: 377
Joined: Sun Dec 10, 2017 4:48 am

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by danielc » Tue Jun 12, 2018 1:17 pm

triceratop wrote:
Tue Jun 12, 2018 1:11 pm
You're not missing anything. Of course, that tax efficiency is 10x the stated difference in expense ratio. And, FSTVX may be more tax inefficient in the future. I would use ITOT in your situation.

By the way have you seen this? viewtopic.php?t=242137
I had not seen that. Thank you.

Hiwatter
Posts: 67
Joined: Tue Aug 16, 2016 3:43 pm

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by Hiwatter » Tue Jun 12, 2018 1:39 pm

triceratop wrote:
Tue Jun 12, 2018 1:11 pm
You're not missing anything. Of course, that tax efficiency is 10x the stated difference in expense ratio. And, FSTVX may be more tax inefficient in the future. I would use ITOT in your situation.

By the way have you seen this? viewtopic.php?t=242137
This is really helpful, thank you.

So based on this spreadsheet, is it accurate to say that for every $100K in Taxable, FSTVX really costs you $42 per year (currently)?

User avatar
triceratop
Moderator
Posts: 5469
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by triceratop » Tue Jun 12, 2018 1:43 pm

Hiwatter wrote:
Tue Jun 12, 2018 1:39 pm
triceratop wrote:
Tue Jun 12, 2018 1:11 pm
You're not missing anything. Of course, that tax efficiency is 10x the stated difference in expense ratio. And, FSTVX may be more tax inefficient in the future. I would use ITOT in your situation.

By the way have you seen this? viewtopic.php?t=242137
This is really helpful, thank you.

So based on this spreadsheet, is it accurate to say that for every $100K in Taxable, FSTVX really costs you $42 per year (currently)?
No, it's accurate to say that for every $100K in Taxable, FSTVX really costs me $18 (currently).

Of course, the number may be $42 for your tax situation. That's the beauty of it. :)
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Hiwatter
Posts: 67
Joined: Tue Aug 16, 2016 3:43 pm

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by Hiwatter » Tue Jun 12, 2018 1:49 pm

triceratop wrote:
Tue Jun 12, 2018 1:43 pm
Hiwatter wrote:
Tue Jun 12, 2018 1:39 pm
triceratop wrote:
Tue Jun 12, 2018 1:11 pm
You're not missing anything. Of course, that tax efficiency is 10x the stated difference in expense ratio. And, FSTVX may be more tax inefficient in the future. I would use ITOT in your situation.

By the way have you seen this? viewtopic.php?t=242137
This is really helpful, thank you.

So based on this spreadsheet, is it accurate to say that for every $100K in Taxable, FSTVX really costs you $42 per year (currently)?
No, it's accurate to say that for every $100K in Taxable, FSTVX really costs me $18 (currently).

Of course, the number may be $42 for your tax situation. That's the beauty of it. :)
Ah, ok I see your tax input now in the spreadsheet.

Maybe I'm missing something, but I can't seem to edit the spreadsheet with my tax info (even after saving it to my google drive)

User avatar
triceratop
Moderator
Posts: 5469
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by triceratop » Tue Jun 12, 2018 1:49 pm

Hiwatter wrote:
Tue Jun 12, 2018 1:49 pm
triceratop wrote:
Tue Jun 12, 2018 1:43 pm
Hiwatter wrote:
Tue Jun 12, 2018 1:39 pm
triceratop wrote:
Tue Jun 12, 2018 1:11 pm
You're not missing anything. Of course, that tax efficiency is 10x the stated difference in expense ratio. And, FSTVX may be more tax inefficient in the future. I would use ITOT in your situation.

By the way have you seen this? viewtopic.php?t=242137
This is really helpful, thank you.

So based on this spreadsheet, is it accurate to say that for every $100K in Taxable, FSTVX really costs you $42 per year (currently)?
No, it's accurate to say that for every $100K in Taxable, FSTVX really costs me $18 (currently).

Of course, the number may be $42 for your tax situation. That's the beauty of it. :)
Ah, ok I see your tax input now in the spreadsheet.

Maybe I'm missing something, but I can't seem to edit the spreadsheet with my tax info (even after saving it to my google drive)
Make a copy!
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Hiwatter
Posts: 67
Joined: Tue Aug 16, 2016 3:43 pm

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by Hiwatter » Tue Jun 12, 2018 1:53 pm

triceratop wrote:
Tue Jun 12, 2018 1:49 pm
Hiwatter wrote:
Tue Jun 12, 2018 1:49 pm
triceratop wrote:
Tue Jun 12, 2018 1:43 pm
Hiwatter wrote:
Tue Jun 12, 2018 1:39 pm
triceratop wrote:
Tue Jun 12, 2018 1:11 pm
You're not missing anything. Of course, that tax efficiency is 10x the stated difference in expense ratio. And, FSTVX may be more tax inefficient in the future. I would use ITOT in your situation.

By the way have you seen this? viewtopic.php?t=242137
This is really helpful, thank you.

So based on this spreadsheet, is it accurate to say that for every $100K in Taxable, FSTVX really costs you $42 per year (currently)?
No, it's accurate to say that for every $100K in Taxable, FSTVX really costs me $18 (currently).

Of course, the number may be $42 for your tax situation. That's the beauty of it. :)
Ah, ok I see your tax input now in the spreadsheet.

Maybe I'm missing something, but I can't seem to edit the spreadsheet with my tax info (even after saving it to my google drive)
Make a copy!
Thanks! (sorry, I thought I did, but it was just a link) ok, I will not ask anymore dumb questions... ;)

dalmatiandan
Posts: 30
Joined: Wed Dec 21, 2016 3:11 pm

Re: Help with tax efficiency -- Fidelity FSTVX vs iShares ITOT

Post by dalmatiandan » Tue Jun 12, 2018 2:56 pm

I use ITOT in taxable instead of the Fidelity mutual fund, based on tax efficiency recommendations I first read about on this board.

I think I also read that Vanguard’s patent on its unique mutual fund/ETF mirrored class structure has a time-table for expiration, and perhaps in the future we will see the other brokerage houses be able to use the same method? Can anyone confirm this?

Dan

Post Reply