VTI vs. FSKAX for Taxable Account

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Bassman
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VTI vs. FSKAX for Taxable Account

Post by Bassman » Fri Aug 09, 2019 7:59 am

Part of my retirement investing will be in a taxable account with Fidelity. In my IRA I have FSKAX, Fidelity total stock market. In my other tax deferred accounts, HSA and SEP-IRA with other brokers, I have VTI. So I have some money to invest fro retirement that would be in a taxable account in my main broken, Fidelity. What are the advantages and disadvantages in this case of VTI vs. FSKAX? One thing with FSKAX is that there is no fee to buy. But my limited understanding is that ETFs are better for taxable accounts.

Gadget
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Re: VTI vs. FSKAX for Taxable Account

Post by Gadget » Fri Aug 09, 2019 8:09 am

You want ITOT at Fidelity in taxable. Not FSKAX.

Only Vanguard mutual funds can be held in taxable accounts with the tax efficiency of an ETF. I hold some FSKAX, but only in a 401k.

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jhfenton
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Re: VTI vs. FSKAX for Taxable Account

Post by jhfenton » Fri Aug 09, 2019 8:28 am

Gadget wrote:
Fri Aug 09, 2019 8:09 am
You want ITOT at Fidelity in taxable. Not FSKAX.

Only Vanguard mutual funds can be held in taxable accounts with the tax efficiency of an ETF. I hold some FSKAX, but only in a 401k.
+1 This is entirely correct. ITOT is the iShares twin to VTI and is commission-free at Fidelity. It's the clear choice for a total market fund in a taxable account at Fidelity.

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vineviz
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Re: VTI vs. FSKAX for Taxable Account

Post by vineviz » Fri Aug 09, 2019 8:48 am

jhfenton wrote:
Fri Aug 09, 2019 8:28 am
Gadget wrote:
Fri Aug 09, 2019 8:09 am
You want ITOT at Fidelity in taxable. Not FSKAX.

Only Vanguard mutual funds can be held in taxable accounts with the tax efficiency of an ETF. I hold some FSKAX, but only in a 401k.
+1 This is entirely correct. ITOT is the iShares twin to VTI and is commission-free at Fidelity. It's the clear choice for a total market fund in a taxable account at Fidelity.
+2

ITOT would be my choice for taxable accounts at Fidelity.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Topic Author
Bassman
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Re: VTI vs. FSKAX for Taxable Account

Post by Bassman » Fri Aug 09, 2019 9:29 am

Thank you all and I'm glad I asked before buying!

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ruralavalon
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Re: VTI vs. FSKAX for Taxable Account

Post by ruralavalon » Fri Aug 09, 2019 11:39 am

Bassman wrote:
Fri Aug 09, 2019 7:59 am
Part of my retirement investing will be in a taxable account with Fidelity. In my IRA I have FSKAX, Fidelity total stock market. In my other tax deferred accounts, HSA and SEP-IRA with other brokers, I have VTI. So I have some money to invest fro retirement that would be in a taxable account in my main broken, Fidelity. What are the advantages and disadvantages in this case of VTI vs. FSKAX? One thing with FSKAX is that there is no fee to buy. But my limited understanding is that ETFs are better for taxable accounts.
In a taxable account at Fidelity I suggest using iShares Core S&P Total US Stock Mkt ETF (ITOT).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

NativeTxn
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Re: VTI vs. FSKAX for Taxable Account

Post by NativeTxn » Fri Aug 09, 2019 3:22 pm

If you are going to be investing a set dollar amount per period (basically dollar cost averaging) into the taxable account, then FSKAX might be better since it would get every penny invested.

If you are investing a lump sum or don't mind having money sit in cash until you get enough to buy full shares, then ITOT could be the way to go.

ITOT will be more tax-efficient than FSKAX, but ETFs aren't necessarily the best investment vehicle in all cases. Just because it's in a taxable account doesn't mean that you should automatically choose tax efficiency as the only, or main, driver.

If you are putting in a set amount each month and using ITOT, you will inevitably have cash sitting idle since you can only buy whole shares; whereas, with FSKAX, you can put every penny to work at all times. The potential gains from being fully invested at all times could more than outweigh the tax efficiency of ITOT versus FSKAX (and they might not). It would boil down to analyzing tax-drag (using FSKAX over the more tax efficient ITOT) vs the cash drag on your returns of using ITOT and always having some money in cash.

IMO, it's not as simple as: you're investing in a taxable account so you should/must use ITOT because it's more tax efficient than FSKAX.

It depends on how you're depositing money and other factors play into it as well.

Ultimately, you will likely be fine either way.
Last edited by NativeTxn on Fri Aug 09, 2019 4:54 pm, edited 1 time in total.

DoctorPhysics
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Re: VTI vs. FSKAX for Taxable Account

Post by DoctorPhysics » Fri Aug 09, 2019 3:40 pm

I use FSKAX in taxable, and a dab of ITOT also.

FSKAX has ER 0.015 while ITOT has 0.03.

I guess one could also consider both for tax loss harvesting pairs.

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jhfenton
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Re: VTI vs. FSKAX for Taxable Account

Post by jhfenton » Mon Aug 12, 2019 8:46 am

DoctorPhysics wrote:
Fri Aug 09, 2019 3:40 pm
I use FSKAX in taxable, and a dab of ITOT also.

FSKAX has ER 0.015 while ITOT has 0.03.

I guess one could also consider both for tax loss harvesting pairs.
I suspect you'll pay more than the 0.015 ER difference in taxes on an annual basis.

ETFs are better in taxable accounts (or Vanguard mutual funds with an ETF share class).

rkhusky
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Re: VTI vs. FSKAX for Taxable Account

Post by rkhusky » Mon Aug 12, 2019 9:13 am

Another advantage of ITOT vs VTI and FSKAX, which you also hold in tax-advantaged accounts, is less risk of a wash sale when selling for a loss in taxable. Although, depending on how conservative you are on the "substantially identical" question, there may still be some risk since they are all total market funds, even though they appear to all follow different indexes. Something you may want to settle in your mind before you need to sell for a loss.

nix4me
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Re: VTI vs. FSKAX for Taxable Account

Post by nix4me » Mon Aug 12, 2019 10:51 am

ITOT for the win

Or FZROX if you must use mutual fund.

RCL
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Re: VTI vs. FSKAX for Taxable Account

Post by RCL » Tue Aug 13, 2019 12:05 am

jhfenton wrote:
Mon Aug 12, 2019 8:46 am
DoctorPhysics wrote:
Fri Aug 09, 2019 3:40 pm
I use FSKAX in taxable, and a dab of ITOT also.

FSKAX has ER 0.015 while ITOT has 0.03.

I guess one could also consider both for tax loss harvesting pairs.
I suspect you'll pay more than the 0.015 ER difference in taxes on an annual basis.

ETFs are better in taxable accounts (or Vanguard mutual funds with an ETF share class).
I agree with the bolded part above...FSKAX has been throwing off Capital gains, both long and short term.
ITOT for the win!!
It Is Best To Consult Others Before Taking Unusual Actions

ladycat
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Re: VTI vs. FSKAX for Taxable Account

Post by ladycat » Tue Aug 13, 2019 12:35 am

Looking at https://www.ishares.com/us/products/239 ... market-etf doesn't this show for 2019 ITOT had a distribution of $0.357 (not yet classified as dividend or cap. gain)?
FSKAX had slightly higher distributions of $0.244 (dividend) and $0.127 (cap gain) for a total of $0.371.

Without knowing how the ITOT distribution is classified, and what the year-end distributions will be for both holdings, how does one determine that ITOT is the clear winner?

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ruralavalon
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Re: VTI vs. FSKAX for Taxable Account

Post by ruralavalon » Tue Aug 13, 2019 9:16 am

ladycat wrote:
Tue Aug 13, 2019 12:35 am
Looking at https://www.ishares.com/us/products/239 ... market-etf doesn't this show for 2019 ITOT had a distribution of $0.357 (not yet classified as dividend or cap. gain)?
FSKAX had slightly higher distributions of $0.244 (dividend) and $0.127 (cap gain) for a total of $0.371.

Without knowing how the ITOT distribution is classified, and what the year-end distributions will be for both holdings, how does one determine that ITOT is the clear winner?
You will not know to an absolute certainty for this year until after the end of the year.

You can look at prior years to know with reasonable certainty, because the structure as traditional fund or ETF remains the same for each.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

ladycat
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Re: VTI vs. FSKAX for Taxable Account

Post by ladycat » Tue Aug 13, 2019 10:29 am

ruralavalon wrote:
Tue Aug 13, 2019 9:16 am
ladycat wrote:
Tue Aug 13, 2019 12:35 am
Looking at https://www.ishares.com/us/products/239 ... market-etf doesn't this show for 2019 ITOT had a distribution of $0.357 (not yet classified as dividend or cap. gain)?
FSKAX had slightly higher distributions of $0.244 (dividend) and $0.127 (cap gain) for a total of $0.371.

Without knowing how the ITOT distribution is classified, and what the year-end distributions will be for both holdings, how does one determine that ITOT is the clear winner?
You will not know to an absolute certainty for this year until after the end of the year.

You can look at prior years to know with reasonable certainty, because the structure as traditional fund or ETF remains the same for each.
Thanks.

I hold FSKAX in taxable, and periodically add to it. My other concern with ITOT is that it is currently fee-free at Fidelity, but it's unclear how long that will be true. The fine print at Fido says "For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive, long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs...."

If you're holding forever, new fees won't be a problem, but selling for cash flow in retirement could come with niggling fees. Maybe that's not enough to be concerned about.

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