Vanguard phasing out regular mutual fund shares?

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Re: Vanguard phasing out regular mutual fund shares?

Post by abuss368 » Thu Jan 02, 2020 9:15 pm

fortyofforty wrote:
Thu Jan 02, 2020 9:14 pm
No reason for me to play games with duplicate ETFs and mutual funds. Mutual funds do everything mentioned, and I see no need to return to complexity or go backwards in terms of flexibility.
Agree. Each time I look, I struggle to find a good reason to consider transitioning.

Hopefully Vanguard can not force us to change!
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Re: Vanguard phasing out regular mutual fund shares?

Post by S_Track » Thu Jan 02, 2020 9:55 pm

ftobin wrote:
Thu Jan 02, 2020 4:05 am
S_Track wrote:
Wed Jan 01, 2020 1:29 am
I do not have any experience with ETF's but curious if we have the same problem with mutual funds? When I place an order for a mutual fund in the morning I have no idea what the closing price will be when its executed. Is this similar? Thanks
With ETFs you are never guaranteed such a NAV execution (though some venues have considered having a closing-NAV based execution; I don't think they gained traction). For index funds you've effectively you've done the equivalent of participating in the closing cross for all the fund's holdings, allowing that it's not always actually executed that way underneath.
Would you be able to give me an example in simple terms of what you mean by not guaranteeing a NAV execution. Say I place a order for ETF Fund X...? Won't I be close even if I uses a Market order or what am I missing? Thanks

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Re: Vanguard phasing out regular mutual fund shares?

Post by Northern Flicker » Fri Jan 03, 2020 12:08 am

I doubt you will ever be required to move to ETFs, but it now seems pretty clear that you will get a slightly lower ER with ETFs at Vanguard. A tax-qualified account could be held at Fidelity to get a lower ER for index mutual funds they offer (no short-term TIPS index that I’m aware of for instance).
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Re: Vanguard phasing out regular mutual fund shares?

Post by sgm7091 » Fri Jan 03, 2020 12:52 am

cherijoh wrote:
Sun Dec 29, 2019 10:51 am
There are some circumstances where mutual funds are superior for an investor's needs. The one that springs to mind is anyone who is dollar cost averaging a fixed dollar amount either out of every paycheck (eg., into a tax-advantaged workplace plan) or semi-monthly or monthly from their checking account (into a taxable investment account).
A Vanguard advisor recently told me, the feature of DCA is coming to ETFs, perhaps in 12-18 months.

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Re: Vanguard phasing out regular mutual fund shares?

Post by fortyofforty » Fri Jan 03, 2020 7:04 am

The slightly higher cash drag in my account, combined with the incalculable values of convenience and simplicity, makes mutual funds the way to go for me.
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Re: Vanguard phasing out regular mutual fund shares?

Post by nisiprius » Fri Jan 03, 2020 7:44 am

Fractional shares, fractional shares! What's the world coming to, I ask you? O tempora, O mores.*

Why, sonny, I remember when newspapers printed stock prices as mixed numbers in increments of 1/8th of a dollar, using honest fraction symbols, 25, 25⅛, 25¼, 25⅜, 25½, 25⅝, 25¾, 25⅞, 26. So when they said we could trade in sixteenths of a dollar, we were in heaven. That oughta be good enough for anyone. And we had wonderful music, Lawrence Welk, Guy Lombardo, and the way they dress nowadays, I tell you. And a pool table in the billiards hall!

Well, I hope they are coding it in COBOL, because there, by golly, is a language that respects money. No way will I ever trust a dollar of my money to a Microsoft math library, no sirree.

*Latin for "breaded shrimp with gourmet mushrooms."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Vanguard phasing out regular mutual fund shares?

Post by jhfenton » Fri Jan 03, 2020 9:08 am

fortyofforty wrote:
Thu Jan 02, 2020 9:14 pm
No reason for me to play games with duplicate ETFs and mutual funds. Mutual funds do everything mentioned, and I see no need to return to complexity or go backwards in terms of flexibility.
Usually, I would agree that it's not worth the trouble. But when I kept both VSS and VFSVX, I was adding to the fund every month; and there was a 14 bp expense gap between the ETF and the Investor shares. (There were no Admiral shares yet.) That was reason enough to own both funds.

My employer since added VTMGX/Vanguard FTSE Developed Markets to my 401(k), so I'm not adding to VSS (our largest holding) on a regular basis. So I consolidated everything into VSS. (There's still a 5 bp gap between VSS and the Admiral shares. That's a three-figure annual expense gap on our position.)

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Re: Vanguard phasing out regular mutual fund shares?

Post by fortyofforty » Fri Jan 03, 2020 1:30 pm

Look at me! Look at me! I can trade all day! Buy. Sell. Buy. Sell. I can trade indexes just like stocks. It's the best of both worlds. This is great! I can use an index to satisfy my need, need I tells ya, to trade tings. In and out. Out and in. It's an index that eats like a stock. It's perfectly millennial, with a gnat's attention span. Why didn't they come up with this sooner? I don't want to wait until the end of the day to find out how much I bought. I needs ta know right NOW! Mutual funds is soooo 2010, or 1910 even. Git wid da new program!
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Re: Vanguard phasing out regular mutual fund shares?

Post by jhfenton » Fri Jan 03, 2020 1:46 pm

fortyofforty wrote:
Fri Jan 03, 2020 1:30 pm
Look at me! Look at me! I can trade all day! Buy. Sell. Buy. Sell. I can trade indexes just like stocks. It's the best of both worlds. This is great! I can use an index to satisfy my need, need I tells ya, to trade tings. In and out. Out and in. It's an index that eats like a stock. It's perfectly millennial, with a gnat's attention span. Why didn't they come up with this sooner? I don't want to wait until the end of the day to find out how much I bought. I needs ta know right NOW! Mutual funds is soooo 2010, or 1910 even. Git wid da new program!
Sarcasm attacking a straw man. Do you have a point?

There are advantages to both mutual funds and ETFs in different circumstances and different accounts. We own both. Any person making an unbiased assessment is likely to own both. Neither fund structure is being phased out any time soon.

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Re: Vanguard phasing out regular mutual fund shares?

Post by nisiprius » Fri Jan 03, 2020 2:35 pm

I note that the Vanguard website lists mutual funds ahead of ETFs here:

Image

...but ETFs get top billing here:

Image

Clearly, Vanguard needs to do what Hollywood does and introduce "diagonal billing:"

Image
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Re: Vanguard phasing out regular mutual fund shares?

Post by changingtimes » Fri Jan 03, 2020 2:47 pm

mmcmonster wrote:
Sun Dec 29, 2019 7:07 am
What you can't do is buy fractional shares of ETFs with new money. If I could (hopefully possible some time in the near future), I would convert all my mutual funds to ETFs.
This is why I have been slowly driven insane over the past year thanks to a $0.03 balance in the settlement fund of my Roth. I will probably return to VTSAX from VTI just to quiet my OCD. :-)
Last edited by changingtimes on Fri Jan 03, 2020 4:02 pm, edited 1 time in total.

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Re: Vanguard phasing out regular mutual fund shares?

Post by fortyofforty » Fri Jan 03, 2020 3:53 pm

nisiprius wrote:
Fri Jan 03, 2020 7:44 am
Fractional shares, fractional shares! What's the world coming to, I ask you? O tempora, O mores.*

Why, sonny, I remember when newspapers printed stock prices as mixed numbers in increments of 1/8th of a dollar, using honest fraction symbols, 25, 25⅛, 25¼, 25⅜, 25½, 25⅝, 25¾, 25⅞, 26. So when they said we could trade in sixteenths of a dollar, we were in heaven. That oughta be good enough for anyone. And we had wonderful music, Lawrence Welk, Guy Lombardo, and the way they dress nowadays, I tell you. And a pool table in the billiards hall!

Well, I hope they are coding it in COBOL, because there, by golly, is a language that respects money. No way will I ever trust a dollar of my money to a Microsoft math library, no sirree.

*Latin for "breaded shrimp with gourmet mushrooms."
jhfenton wrote:
Fri Jan 03, 2020 1:46 pm
Sarcasm attacking a straw man. Do you have a point?

There are advantages to both mutual funds and ETFs in different circumstances and different accounts. We own both. Any person making an unbiased assessment is likely to own both. Neither fund structure is being phased out any time soon.
Of course there are. And I see no need to attack traditional mutual fund investors as troglodytes for not jumping on the ETF bandwagon, or not bowing to the supposed indisputable superiority of ETFs, especially when both have positives and negatives.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Re: Vanguard phasing out regular mutual fund shares?

Post by fortyofforty » Fri Jan 03, 2020 3:55 pm

nisiprius wrote:
Fri Jan 03, 2020 2:35 pm
I note that the Vanguard website lists mutual funds ahead of ETFs here:

Image

...but ETFs get top billing here:

Image

Clearly, Vanguard needs to do what Hollywood does and introduce "diagonal billing:"

Image
No, it's clear that Vanguard has gone all-in for ETFs, and clearly sees money to be made here. I don't see any form of shared billing in the near future.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Re: Vanguard phasing out regular mutual fund shares?

Post by csmath » Fri Jan 03, 2020 10:39 pm

My DW and I opened new TIRA Mutual Fund accounts yesterday over the phone without any hesitation what-so-ever from the Vanguard Rep. FWIW I don't see any indication that the mutual fund shares are going to be phased out in a forceful manner.

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Re: Vanguard phasing out regular mutual fund shares?

Post by ftobin » Sat Jan 04, 2020 4:38 am

S_Track wrote:
Thu Jan 02, 2020 9:55 pm
Would you be able to give me an example in simple terms of what you mean by not guaranteeing a NAV execution. Say I place a order for ETF Fund X...? Won't I be close even if I uses a Market order or what am I missing? Thanks
"guaranteeing a NAV execution" has a fairly precise meaning. "close" is certainly not "guaranteeing".

I'll just link something Rick Ferri's wrote a while ago: Solving The Bond ETF Discount Problem .

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Re: Vanguard phasing out regular mutual fund shares?

Post by sgm7091 » Sat Jan 04, 2020 8:45 am

This topic/thread seemed to have touched a few nerves on both sides - MF vs ETFs. I cannot fathom the major differences. Each has some advantages and disadvantages. Millennials seem to like ETFs and so VG and others are catering to them and future needs.

IMO, both will be offered for many years to come by all companies including VG.

Anyone has comprehensive list of pros and cons between them?

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Re: Vanguard phasing out regular mutual fund shares?

Post by S_Track » Sat Jan 04, 2020 9:32 am

ftobin wrote:
Sat Jan 04, 2020 4:38 am
S_Track wrote:
Thu Jan 02, 2020 9:55 pm
Would you be able to give me an example in simple terms of what you mean by not guaranteeing a NAV execution. Say I place a order for ETF Fund X...? Won't I be close even if I uses a Market order or what am I missing? Thanks
"guaranteeing a NAV execution" has a fairly precise meaning. "close" is certainly not "guaranteeing".

I'll just link something Rick Ferri's wrote a while ago: Solving The Bond ETF Discount Problem .
Thanks for the link, good explanation.

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Re: Vanguard phasing out regular mutual fund shares?

Post by Silence Dogood » Sat Jan 04, 2020 9:45 am

Silence Dogood wrote:
Sat Dec 28, 2019 11:41 pm
MnD wrote:
Sat Dec 28, 2019 7:04 pm
I did not click on every ETF on this list but looked at a bunch and all I checked that started before before 2017 have both ETF and mutual fund class shares and none after.
Vanguard got a new CEO in 2018.

Coincidence?
Well, I just checked - it was November 2018 when Vanguard lowered the admiral shares minimum for non-sector index funds from $10K to $3K.

Why would Vanguard do this if they wanted to discourage people from buying traditional mutual funds?

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Re: Vanguard phasing out regular mutual fund shares?

Post by jeffyscott » Sat Jan 04, 2020 10:52 am

Silence Dogood wrote:
Sat Jan 04, 2020 9:45 am
Silence Dogood wrote:
Sat Dec 28, 2019 11:41 pm
MnD wrote:
Sat Dec 28, 2019 7:04 pm
I did not click on every ETF on this list but looked at a bunch and all I checked that started before before 2017 have both ETF and mutual fund class shares and none after.
Vanguard got a new CEO in 2018.

Coincidence?
Well, I just checked - it was November 2018 when Vanguard lowered the admiral shares minimum for non-sector index funds from $10K to $3K.

Why would Vanguard do this if they wanted to discourage people from buying traditional mutual funds?
Well, if the result of doing this is that there is a bigger gap between the ER of the Admiral shares and the ETFs, then it would encourage people to go to the ETF.

As a mutual fund shareholder, I find it a bit annoying that Vanguard thinks it is okay for me to subsidize small accounts and even to subsidize shenanigans to game the system, such as that described above:
jhfenton wrote:
Thu Jan 02, 2020 5:55 pm
I used to keep dual positions in VSS/Vanguard FTSE All-world ex-US Small Cap and VFSVX, the Investor shares. VSS often traded at a premium in 2016-2018, so I would usually buy VFSVX throughout the year and periodically call to convert everything over ~$1,000 to VSS. There is really no minimum balance required to keep a fund position open. (If there are active Investor shares, and you dip below the Admiral minimum, they can downgrade your shares. But the Investor shares for the index Admiral shares with a $3,000 minimum are now basically defunct.)
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: Vanguard phasing out regular mutual fund shares?

Post by Silence Dogood » Sat Jan 04, 2020 11:37 am

jeffyscott wrote:
Sat Jan 04, 2020 10:52 am
Well, if the result of doing this is that there is a bigger gap between the ER of the Admiral shares and the ETFs, then it would encourage people to go to the ETF.
VTSAX - expense ratio: 0.04%

VTI - expense ratio: 0.03%

Isn't a 1 basis point difference inconsequential?

Doesn't that amount to $100 per $1,000,000 invested?

Do we even know that it's a full basis point and that these numbers aren't rounded?

Couldn't even the smallest behavioral error overwhelm this difference?

In my opinion, the difference between a $10K minimum versus a $3K minimum is far more consequential than a cost difference of 1 basis point.

Think about it...

A little over a year ago, a novice investor (with Vanguard) had to choose between:

VTSMX, with a 0.14% expense ratio and a $3K minimum or
VTI, with a 0.04% expense ratio and a ~ $140 minimum

A 10 basis point difference and a $2,860 minimum difference.

Today, a novice investor has to choose between:

VTSAX, with a 0.04% expense ratio and a $3K minimum or
VTI, with a 0.03% expense ratio and a ~ $164 minimum

A 1 basis point difference and a $2,836 minimum difference.

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Re: Vanguard phasing out regular mutual fund shares?

Post by talzara » Sat Jan 04, 2020 4:36 pm

jeffyscott wrote:
Sat Jan 04, 2020 10:52 am
As a mutual fund shareholder, I find it a bit annoying that Vanguard thinks it is okay for me to subsidize small accounts and even to subsidize shenanigans to game the system, such as that described above:
jhfenton wrote:
Thu Jan 02, 2020 5:55 pm
I used to keep dual positions in VSS/Vanguard FTSE All-world ex-US Small Cap and VFSVX, the Investor shares. VSS often traded at a premium in 2016-2018, so I would usually buy VFSVX throughout the year and periodically call to convert everything over ~$1,000 to VSS. There is really no minimum balance required to keep a fund position open. (If there are active Investor shares, and you dip below the Admiral minimum, they can downgrade your shares. But the Investor shares for the index Admiral shares with a $3,000 minimum are now basically defunct.)
ETF conversion is not gaming the system. The Authorized Participants are also doing arbitrage at a much larger scale. Every share that an investor converts is a share that the APs don't have to create. The investor gets to keep the arbitrage profits instead of giving them to Wall Street. It's only a few basis points, but Vanguard became successful by saving basis points.

Vanguard is already making a huge number of stock trades, so the costs of creating a few more mutual fund shares are minimal. However, we are subsidizing the phone calls. It would have been better if the conversion could've been done on the website.

I think Vanguard should make it easier for us to arbitrage the shares. It should allow you to redeem mutual fund shares by converting them to ETFs first. Whenever the ETF is trading at a premium, the Vanguard website should offer to do an automatic conversion to an ETF.

This was actually the original idea for Vanguard's ETF shares. They wanted to let people sell their mutual fund shares without forcing the fund to realize capital gains. (I guess they didn't think about heartbeat trades in 2001.) Gus Sauter mentioned this in the Bogleheads podcast episode 5: https://bogleheads.podbean.com/e/episod ... ick-ferri/

However, Vanguard's IT is not very good. If they can't even do ETF conversions on the website, how can they do something advanced like this?

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Re: Vanguard phasing out regular mutual fund shares?

Post by jhfenton » Sat Jan 04, 2020 4:45 pm

jeffyscott wrote:
Sat Jan 04, 2020 10:52 am
As a mutual fund shareholder, I find it a bit annoying that Vanguard thinks it is okay for me to subsidize small accounts and even to subsidize shenanigans to game the system, such as that described above:
jhfenton wrote:
Thu Jan 02, 2020 5:55 pm
I used to keep dual positions in VSS/Vanguard FTSE All-world ex-US Small Cap and VFSVX, the Investor shares. VSS often traded at a premium in 2016-2018, so I would usually buy VFSVX throughout the year and periodically call to convert everything over ~$1,000 to VSS. There is really no minimum balance required to keep a fund position open. (If there are active Investor shares, and you dip below the Admiral minimum, they can downgrade your shares. But the Investor shares for the index Admiral shares with a $3,000 minimum are now basically defunct.)
They're in the process of recreating the incentives that used to exist with VSS and VFSVX.

With most funds (e.g. emerging markets VWO and VEMAX), there used to be no difference in expense ratio between ETFs and Admiral shares. VSS was the rare ETF that had no Admiral shares, only Investor shares, so at one point there was a 12 bp to 26 bp expense disparity. Of course people who want to use the mutual fund are going to engage in shenanigans. At 14 bp, I had a few hundred reasons per year to do so.

They eventually added Admiral Shares to ex-US Small Cap last year, but still with a 4 bp gap with the ETF (now 5 bp). And now they've opened up a 4 bp gap between VWO and VEMAX. It's probably not enough to be worth the "shenanigans" yet, but as this thread indicates, people are going to start thinking about it.

Solving the ETF dollar purchase puzzle is the obvious solution.

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Re: Vanguard phasing out regular mutual fund shares?

Post by lostdog » Sat Jan 04, 2020 4:58 pm

changingtimes wrote:
Fri Jan 03, 2020 2:47 pm
mmcmonster wrote:
Sun Dec 29, 2019 7:07 am
What you can't do is buy fractional shares of ETFs with new money. If I could (hopefully possible some time in the near future), I would convert all my mutual funds to ETFs.
This is why I have been slowly driven insane over the past year thanks to a $0.03 balance in the settlement fund of my Roth. I will probably return to VTSAX from VTI just to quiet my OCD. :-)
+1

Me too!!
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Re: Vanguard phasing out regular mutual fund shares?

Post by jeffyscott » Sat Jan 04, 2020 5:03 pm

talzara wrote:
Sat Jan 04, 2020 4:36 pm
jeffyscott wrote:
Sat Jan 04, 2020 10:52 am
As a mutual fund shareholder, I find it a bit annoying that Vanguard thinks it is okay for me to subsidize small accounts and even to subsidize shenanigans to game the system, such as that described above:
jhfenton wrote:
Thu Jan 02, 2020 5:55 pm
I used to keep dual positions in VSS/Vanguard FTSE All-world ex-US Small Cap and VFSVX, the Investor shares. VSS often traded at a premium in 2016-2018, so I would usually buy VFSVX throughout the year and periodically call to convert everything over ~$1,000 to VSS. There is really no minimum balance required to keep a fund position open. (If there are active Investor shares, and you dip below the Admiral minimum, they can downgrade your shares. But the Investor shares for the index Admiral shares with a $3,000 minimum are now basically defunct.)
ETF conversion is not gaming the system. The Authorized Participants are also doing arbitrage at a much larger scale. Every share that an investor converts is a share that the APs don't have to create. The investor gets to keep the arbitrage profits instead of giving them to Wall Street. It's only a few basis points, but Vanguard became successful by saving basis points.

Vanguard is already making a huge number of stock trades, so the costs of creating a few more mutual fund shares are minimal.
Maybe I am mistaken in assuming that buying $3000 of VFSVX, then converting $2000 of it to VSS, then buy another $2000 VFSVX, convert that, etc., etc., etc. would add costs to the mutual fund.
However, we are subsidizing the phone calls. It would have been better if the conversion could've been done on the website.
I did not know it required a phone call, that'd be enough to keep me out :) .
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: Vanguard phasing out regular mutual fund shares?

Post by JustinR » Sat Jan 04, 2020 5:05 pm

Here's the full list sorted by basis points saved. For every $10,000 invested, you save this number in dollars per year:

$5 per $10,000 invested
  • FTSE All-World ex-US Small-Cap - VSS 0.11% / VFSAX 0.16%

$4 per $10,000 invested
  • Emerging Markets - VWO 0.10% / VEMAX 0.14%

$3 per $10,000 invested
  • Tax-Exempt Bond - VTEB 0.06% / VTEAX 0.09%
  • Total International Stock - VXUS 0.08% / VTIAX 0.11%
  • FTSE All-World ex-US - VEU 0.08% / VFWAX 0.11%
  • Total International Bond - BNDX 0.08% / VTABX 0.11%

$2 per $10,000 invested
  • Developed Markets - VEA 0.05% / VTMGX 0.07%
  • Dividend Appreciation - VIG 0.06% / VDADX 0.08%
  • High Dividend Yield - VYM 0.06% / VHYAX 0.08%
  • Total World Stock - VT 0.08% / VTWAX 0.10%
  • European / Europe - VGK 0.08% / VEUSX 0.10%
  • Pacific - VPL 0.08% / VPADX 0.10%
  • Short-Term Treasury - VGSH 0.05% / VSBSX 0.07%
  • Intermediate-Term Treasury - VGIT 0.05% / VSIGX 0.07%
  • Long-Term Treasury - VGLT 0.05% / VLGSX 0.07%
  • Short-Term Corporate Bond - VCSH 0.05% / VSCSX 0.07%
  • Intermediate-Term Corporate Bond - VCIT 0.05% / VICSX 0.07%
  • Long-Term Corporate Bond - VCLT 0.05% / VLTCX 0.07%
  • Mortgage-Backed Securities - VMBS 0.05% / VMBSX 0.07%

$1.50 per $10,000 invested
  • Total Bond Market - BND 0.035% / VBTLX 0.05%

$1 per $10,000 invested
  • Total Stock Market - VTI 0.03% / VTSAX 0.04%
  • S&P 500 - VOO 0.03% / VFIAX 0.04%
  • Growth - VUG 0.04% / VIGAX 0.05%
  • Large-Cap - VV 0.04% / VLCAX 0.05%
  • Value - VTV 0.04% / VVIAX 0.05%
  • Mid-Cap - VO 0.04% / VIMAX 0.05%


Nicer table:
Angst wrote:
Tue Jul 16, 2019 8:21 am

Code: Select all

FTSE World exUS SmCap(31% $5) - VSS  0.11% / VFSAX 0.16%
Emerging Markets     (29% 4) - VWO  0.10% / VEMAX 0.14%
Tax-Exempt Bond      (33% 3) - VTEB 0.06% / VTEAX 0.09%
Total Int'l Stock    (27% 3) - VXUS 0.08% / VTIAX 0.11%
FTSE All-World ex-US (27% 3) - VEU  0.08% / VFWAX 0.11%
Total Int'l Bond     (27% 3) - BNDX 0.08% / VTABX 0.11%
Developed Markets    (29% 2) - VEA  0.05% / VTMGX 0.07%
Short-Term Treasury		(29% 2) - VGSH 0.05% / VSBSX 0.07%
Intermediate-Term Treasury	(29% 2) - VGIT 0.05% / VSIGX 0.07%
Long-Term Treasury		(29% 2) - VGLT 0.05% / VLGSX 0.07%
Short-Term Corporate Bond	(29% 2) - VCSH 0.05% / VSCSX 0.07%
Intermediate-Term Corporate Bond(29% 2) - VCIT 0.05% / VICSX 0.07%
Long-Term Corporate Bond	(29% 2) - VCLT 0.05% / VLTCX 0.07%
Mortgage-Backed Securities	(29% 2) - VMBS 0.05% / VMBSX 0.07%
Dividend Appreciation(25% 2) - VIG  0.06% / VDADX 0.08%
High Dividend Yield  (25% 2) - VYM  0.06% / VHYAX 0.08%
Total World Stock    (20% 2) - VT   0.08% / VTWAX 0.10%
European / Europe    (20% 2) - VGK  0.08% / VEUSX 0.10%
Pacific              (20% 2) - VPL  0.08% / VPADX 0.10%
Total Bond Market    (30% 1.5) BND  0.035%/ VBTLX 0.05%
Total Stock Market   (25% 1) - VTI  0.03% / VTSAX 0.04%
S&P 500              (25% 1) - VOO  0.03% / VFIAX 0.04%
Growth               (20% 1) - VUG  0.04% / VIGAX 0.05%
Large-Cap            (20% 1) - VV   0.04% / VLCAX 0.05%
Value                (20% 1) - VTV  0.04% / VVIAX 0.05%
Mid-Cap              (20% 1) - VO   0.04% / VIMAX 0.05%

alex_686
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Re: Vanguard phasing out regular mutual fund shares?

Post by alex_686 » Sat Jan 04, 2020 5:35 pm

Silence Dogood wrote:
Sat Jan 04, 2020 11:37 am
VTSAX - expense ratio: 0.04%

VTI - expense ratio: 0.03%

Isn't a 1 basis point difference inconsequential?
No, A 25% reduction in expenses is very consequential.

It may not mean much to you, but it is a massive difference on Vanguard’s side. Index funds are a low cost commodity where funds can only really distinguish themselves on cost.

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jeffyscott
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Re: Vanguard phasing out regular mutual fund shares?

Post by jeffyscott » Sat Jan 04, 2020 5:50 pm

jhfenton wrote:
Sat Jan 04, 2020 4:45 pm
jeffyscott wrote:
Sat Jan 04, 2020 10:52 am
As a mutual fund shareholder, I find it a bit annoying that Vanguard thinks it is okay for me to subsidize small accounts and even to subsidize shenanigans to game the system, such as that described above:
jhfenton wrote:
Thu Jan 02, 2020 5:55 pm
I used to keep dual positions in VSS/Vanguard FTSE All-world ex-US Small Cap and VFSVX, the Investor shares. VSS often traded at a premium in 2016-2018, so I would usually buy VFSVX throughout the year and periodically call to convert everything over ~$1,000 to VSS. There is really no minimum balance required to keep a fund position open. (If there are active Investor shares, and you dip below the Admiral minimum, they can downgrade your shares. But the Investor shares for the index Admiral shares with a $3,000 minimum are now basically defunct.)
They're in the process of recreating the incentives that used to exist with VSS and VFSVX.

With most funds (e.g. emerging markets VWO and VEMAX), there used to be no difference in expense ratio between ETFs and Admiral shares. VSS was the rare ETF that had no Admiral shares, only Investor shares, so at one point there was a 12 bp to 26 bp expense disparity. Of course people who want to use the mutual fund are going to engage in shenanigans. At 14 bp, I had a few hundred reasons per year to do so.

They eventually added Admiral Shares to ex-US Small Cap last year, but still with a 4 bp gap with the ETF (now 5 bp). And now they've opened up a 4 bp gap between VWO and VEMAX. It's probably not enough to be worth the "shenanigans" yet, but as this thread indicates, people are going to start thinking about it.

Solving the ETF dollar purchase puzzle is the obvious solution.
Yeah, it makes sense to do it at some point, I don't blame those who do use the conversion process in order to get their ETFs at NAV. I am just too lazy to deal with ETFs at all...and now I learned there is the added burden of phone calls.

I get even by making them mail paper statements :twisted: , except while writing that I realized we'd not gotten one in a while and checking, I found they had somehow magically switched us to all paperless.
Time is your friend; impulse is your enemy. - John C. Bogle

JustinR
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Re: Vanguard phasing out regular mutual fund shares?

Post by JustinR » Sat Jan 04, 2020 7:02 pm

jeffyscott wrote:
Sat Jan 04, 2020 5:50 pm
Yeah, it makes sense to do it at some point, I don't blame those who do use the conversion process in order to get their ETFs at NAV. I am just too lazy to deal with ETFs at all...and now I learned there is the added burden of phone calls.

I get even by making them mail paper statements :twisted: , except while writing that I realized we'd not gotten one in a while and checking, I found they had somehow magically switched us to all paperless.
I think the main reason for doing conversions is that you get the best of both worlds:
  • investing new money at whatever amount you want which is only possible with Mutual Funds
  • convert and get the lower expense ratios and portability of ETFs
When I want to invest $5,000, I want to invest $5,000...not $4723.74 or whatever.

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Re: Vanguard phasing out regular mutual fund shares?

Post by talzara » Sat Jan 04, 2020 8:12 pm

jeffyscott wrote:
Sat Jan 04, 2020 5:03 pm
Maybe I am mistaken in assuming that buying $3000 of VFSVX, then converting $2000 of it to VSS, then buy another $2000 VFSVX, convert that, etc., etc., etc. would add costs to the mutual fund.
The costs are minimal.

The mutual fund would incur the same trading costs if the investor had purchased shares and never converted them. It actually saves money if the investor sells, since they're now ETF shares.

The ETF conversion is just a bookkeeping entry. It's practically free.

The arbitrage profits are taken from the Authorized Participant who would otherwise have created the ETF shares. The mutual fund doesn't lose any money.

The problem is the phone call. It's expensive to keep a customer service representative on the phone to do the conversion. Vanguard used to charge for ETF conversions, but it doesn't charge anymore.
jeffyscott wrote:
Sat Jan 04, 2020 5:03 pm
I did not know it required a phone call, that'd be enough to keep me out :) .
This is not the worst example of Vanguard's IT failures. We have a whole thread on the topic. :-)

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Re: Vanguard phasing out regular mutual fund shares?

Post by Silence Dogood » Sat Jan 04, 2020 11:36 pm

alex_686 wrote:
Sat Jan 04, 2020 5:35 pm
Silence Dogood wrote:
Sat Jan 04, 2020 11:37 am
VTSAX - expense ratio: 0.04%

VTI - expense ratio: 0.03%

Isn't a 1 basis point difference inconsequential?
No, A 25% reduction in expenses is very consequential.

It may not mean much to you, but it is a massive difference on Vanguard’s side. Index funds are a low cost commodity where funds can only really distinguish themselves on cost.
Don't you think that using percentages is misleading?

Imagine if a few years from now, VTSAX has a 0.02% expense ratio and VTI has a 0.01% expense ratio... that would be a 50% reduction in price!

alex_686
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Re: Vanguard phasing out regular mutual fund shares?

Post by alex_686 » Sun Jan 05, 2020 11:51 am

Silence Dogood wrote:
Sat Jan 04, 2020 11:36 pm
alex_686 wrote:
Sat Jan 04, 2020 5:35 pm
Silence Dogood wrote:
Sat Jan 04, 2020 11:37 am
VTSAX - expense ratio: 0.04%

VTI - expense ratio: 0.03%

Isn't a 1 basis point difference inconsequential?
No, A 25% reduction in expenses is very consequential.

It may not mean much to you, but it is a massive difference on Vanguard’s side. Index funds are a low cost commodity where funds can only really distinguish themselves on cost.
Don't you think that using percentages is misleading?

Imagine if a few years from now, VTSAX has a 0.02% expense ratio and VTI has a 0.01% expense ratio... that would be a 50% reduction in price!
No I don’t. For prospective I used to work in mutual fund accounting and more used to looking at this from the fund’s perspective than from a small retail account prospective. You may not care about 1 bps, but The major fund do.

I mean, it is kind of like telling Walmart or Home Depot that they only need a lowish price, not the lowest price.

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Re: Vanguard phasing out regular mutual fund shares?

Post by jeffyscott » Sun Jan 05, 2020 12:27 pm

alex_686 wrote:
Sun Jan 05, 2020 11:51 am
Silence Dogood wrote:
Sat Jan 04, 2020 11:36 pm
alex_686 wrote:
Sat Jan 04, 2020 5:35 pm
Silence Dogood wrote:
Sat Jan 04, 2020 11:37 am
VTSAX - expense ratio: 0.04%

VTI - expense ratio: 0.03%

Isn't a 1 basis point difference inconsequential?
No, A 25% reduction in expenses is very consequential.

It may not mean much to you, but it is a massive difference on Vanguard’s side. Index funds are a low cost commodity where funds can only really distinguish themselves on cost.
Don't you think that using percentages is misleading?

Imagine if a few years from now, VTSAX has a 0.02% expense ratio and VTI has a 0.01% expense ratio... that would be a 50% reduction in price!
No I don’t. For prospective I used to work in mutual fund accounting and more used to looking at this from the fund’s perspective than from a small retail account prospective. You may not care about 1 bps, but The major fund do.

I mean, it is kind of like telling Walmart or Home Depot that they only need a lowish price, not the lowest price.
I guess I should care more about a bp or 2 difference in ER than I do about whether I buy milk for $1.59 per gallon at Meijer or $2.19 per gallon at Costco but I, illogically, do the opposite.
Time is your friend; impulse is your enemy. - John C. Bogle

TheDDC
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Re: Vanguard phasing out regular mutual fund shares?

Post by TheDDC » Sun Jan 05, 2020 12:38 pm

Remind me to care about this when Wellington and Wellesley have ETF shares available. Clearly Vanguard doesn’t care to force anyone over since those are some of their most prized possessions.

Oh yes. Can anyone tell me how to buy ETFs straight from my bank account... in 2020?

*silence*

No one? Kthanksbye.

-TheDDC
Refreshingly, a double barrel shotgun blast of truth... | Rules to wealth building: 100% VTSAX piled high and deep, 0% given away to banks, minimize amount given to health care industrial complex

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Re: Vanguard phasing out regular mutual fund shares?

Post by UpperNwGuy » Sun Jan 05, 2020 12:48 pm

TheDDC wrote:
Sun Jan 05, 2020 12:38 pm
Remind me to care about this when Wellington and Wellesley have ETF shares available. Clearly Vanguard doesn’t care to force anyone over since those are some of their most prized possessions.

Oh yes. Can anyone tell me how to buy ETFs straight from my bank account... in 2020?

*silence*

No one? Kthanksbye.

-TheDDC
It's not just Wellington and Wellesley. Vanguard's entire family of municipal bond funds, both national and state-specific, are mutual funds only without corresponding ETFs. VTEB is their only municipal bond offering in the ETF space.

alex_686
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Re: Vanguard phasing out regular mutual fund shares?

Post by alex_686 » Sun Jan 05, 2020 1:36 pm

jeffyscott wrote:
Sun Jan 05, 2020 12:27 pm
I guess I should care more about a bp or 2 difference in ER than I do about whether I buy milk for $1.59 per gallon at Meijer or $2.19 per gallon at Costco but I, illogically, do the opposite.
It is not that, but....

I personally feel very strongly that manually transmissions are much more cost efficient than automatic transmissions. However, I also know why manually transmissions are disappearing - it is not cost effective for manufacturers to offer them.

Same situation here. You are standing in the same line to buy a gallon of milk as the institutional buyer who are buying it by the tanker. The product managers at Costco are going to structure the product accordingly.

ETFs are structurally cheaper than mutual funds, index funds are commodity products that are sold on cost. Like manual transmissions, mutual funds are disappearing no matter how much we love them.

Silence Dogood
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Re: Vanguard phasing out regular mutual fund shares?

Post by Silence Dogood » Sun Jan 05, 2020 10:19 pm

alex_686 wrote:
Sun Jan 05, 2020 1:36 pm
jeffyscott wrote:
Sun Jan 05, 2020 12:27 pm
I guess I should care more about a bp or 2 difference in ER than I do about whether I buy milk for $1.59 per gallon at Meijer or $2.19 per gallon at Costco but I, illogically, do the opposite.
It is not that, but....

I personally feel very strongly that manually transmissions are much more cost efficient than automatic transmissions. However, I also know why manually transmissions are disappearing - it is not cost effective for manufacturers to offer them.

Same situation here. You are standing in the same line to buy a gallon of milk as the institutional buyer who are buying it by the tanker. The product managers at Costco are going to structure the product accordingly.

ETFs are structurally cheaper than mutual funds, index funds are commodity products that are sold on cost. Like manual transmissions, mutual funds are disappearing no matter how much we love them.
You've brought up this analogy before...

Manual transmissions are disappearing because they are less convenient to consumers, despite being cheaper...

Silence Dogood
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Re: Vanguard phasing out regular mutual fund shares?

Post by Silence Dogood » Sun Jan 05, 2020 10:31 pm

alex_686 wrote:
Sun Jan 05, 2020 11:51 am
....For prospective I used to work in mutual fund accounting and more used to looking at this from the fund’s perspective than from a small retail account prospective. You may not care about 1 bps, but The major fund do....
Perhaps you are missing the perspective of the average mutual fund investor?

It is pretty easy for most people to buy a mutual fund.

Buying an ETF may be easy for most people on this forum, but for people who are not interested in finances (which is most people), the process of buying an ETF is more intimidating.

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Re: Vanguard phasing out regular mutual fund shares?

Post by jeffyscott » Sun Jan 05, 2020 10:42 pm

Silence Dogood wrote:
Sun Jan 05, 2020 10:19 pm
alex_686 wrote:
Sun Jan 05, 2020 1:36 pm
jeffyscott wrote:
Sun Jan 05, 2020 12:27 pm
I guess I should care more about a bp or 2 difference in ER than I do about whether I buy milk for $1.59 per gallon at Meijer or $2.19 per gallon at Costco but I, illogically, do the opposite.
It is not that, but....

I personally feel very strongly that manually transmissions are much more cost efficient than automatic transmissions. However, I also know why manually transmissions are disappearing - it is not cost effective for manufacturers to offer them.

Same situation here. You are standing in the same line to buy a gallon of milk as the institutional buyer who are buying it by the tanker. The product managers at Costco are going to structure the product accordingly.

ETFs are structurally cheaper than mutual funds, index funds are commodity products that are sold on cost. Like manual transmissions, mutual funds are disappearing no matter how much we love them.
You've brought up this analogy before...

Manual transmissions are disappearing because they are less convenient to consumers, despite being cheaper...
And most feel that mutual funds are more convenient than ETFs.

I'm also not sure that manuals are more cost efficient than automatics, in the long run, in these days of 8 or more speed automatics and CVTs. I drove manuals until they started offering worse mpg and fewer speeds than automatics. And no one wants to drive an 8 or 9 speed manual.
Time is your friend; impulse is your enemy. - John C. Bogle

Northern Flicker
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Re: Vanguard phasing out regular mutual fund shares?

Post by Northern Flicker » Sun Jan 05, 2020 11:43 pm


Maybe I am mistaken in assuming that buying $3000 of VFSVX, then converting $2000 of it to VSS, then buy another $2000 VFSVX, convert that, etc., etc., etc. would add costs to the mutual fund.
It won’t incur any more cost than just making the deposits to the mutual fund share class. The spinning off of ETF shares benefits the mutual fund share class because the lowest cost basis shares can be incorporated into the ETF, which helps manage capital gains, so mutual fund share class investors benefit from robust uptake of ETF shares.

As far as subsidy is concerned, with it being cheaper to administer the ETF shares, when the ERs were the same, ETF investors were actually subsidizing the mutual fund share class holders. That is now ending. You can pay for whichever you prefer, hopefully at costs commensurate with actual administrative costs.
Index fund investor since 1987.

Northern Flicker
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Re: Vanguard phasing out regular mutual fund shares?

Post by Northern Flicker » Tue Jan 07, 2020 9:29 pm

If I understood correctly what a Vanguard rep was telling me, it turns out that converting from mutual fund shares to ETF shares limits the ability to change the cost basis method after the conversion. Uncovered mutual funds shares may have to convert to ETF that will always use average cost basis, and covered shares will always have the cost basis method that was in force with the mutual fund shares when the ETF conversion took place.
Index fund investor since 1987.

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Re: Vanguard phasing out regular mutual fund shares?

Post by CoastalWinds » Tue Jan 07, 2020 10:13 pm

Mutual funds aren’t going anywhere.

How many ETFs can you buy in your 401k?

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Re: Vanguard phasing out regular mutual fund shares?

Post by jeffyscott » Mon Jan 13, 2020 2:10 pm

jeffyscott wrote:
Sat Jan 04, 2020 5:50 pm
I get even by making them mail paper statements :twisted: , except while writing that I realized we'd not gotten one in a while and checking, I found they had somehow magically switched us to all paperless.
I figured out how they tricked us, when entering a trade the system asks how you want the confirmation and it defaults to a choice that reads: Send this confirmation and all account documents by e-delivery. I have to manually select the second choice, which is our actual current selection of statements by mail other stuff electronic.

Just another unnecessary minor annoyance from Vanguard, preceded by already having been nagged once about going all paperless when logging on then nagged as always by the claim that the account needs to be transitioned.
Time is your friend; impulse is your enemy. - John C. Bogle

UpperNwGuy
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Re: Vanguard phasing out regular mutual fund shares?

Post by UpperNwGuy » Mon Jan 13, 2020 2:27 pm

jeffyscott wrote:
Mon Jan 13, 2020 2:10 pm
jeffyscott wrote:
Sat Jan 04, 2020 5:50 pm
I get even by making them mail paper statements :twisted: , except while writing that I realized we'd not gotten one in a while and checking, I found they had somehow magically switched us to all paperless.
I figured out how they tricked us, when entering a trade the system asks how you want the confirmation and it defaults to a choice that reads: Send this confirmation and all account documents by e-delivery. I have to manually select the second choice, which is our actual current selection of statements by mail other stuff electronic.

Just another unnecessary minor annoyance from Vanguard, preceded by already having been nagged once about going all paperless when logging on then nagged as always by the claim that the account needs to be transitioned.
I made a trade this morning on my brokerage account, and the system did not ask me how I wanted to receive the confirmation. Perhaps that's because I opted to receive everything electronically several years ago. If I need a paper copy for some reason, I simply print it out.

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jeffyscott
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Re: Vanguard phasing out regular mutual fund shares?

Post by jeffyscott » Mon Jan 13, 2020 2:34 pm

UpperNwGuy wrote:
Mon Jan 13, 2020 2:27 pm
jeffyscott wrote:
Mon Jan 13, 2020 2:10 pm
jeffyscott wrote:
Sat Jan 04, 2020 5:50 pm
I get even by making them mail paper statements :twisted: , except while writing that I realized we'd not gotten one in a while and checking, I found they had somehow magically switched us to all paperless.
I figured out how they tricked us, when entering a trade the system asks how you want the confirmation and it defaults to a choice that reads: Send this confirmation and all account documents by e-delivery. I have to manually select the second choice, which is our actual current selection of statements by mail other stuff electronic.

Just another unnecessary minor annoyance from Vanguard, preceded by already having been nagged once about going all paperless when logging on then nagged as always by the claim that the account needs to be transitioned.
I made a trade this morning on my brokerage account, and the system did not ask me how I wanted to receive the confirmation. Perhaps that's because I opted to receive everything electronically several years ago. If I need a paper copy for some reason, I simply print it out.
Yes, I assume that is how it works, that they don't ask if you are already doing what they want. In fact, it notes that you may be asked again by the other selections.
Time is your friend; impulse is your enemy. - John C. Bogle

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