Mutual fund shares or ETF of same fund

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tominsc
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Mutual fund shares or ETF of same fund

Post by tominsc »

I'm a fairly experienced personal investor with years of generally good results using Vang index funds and making most of my own decisions, after reading a lot of advice, etc., and other due diligence. We're in our 70s and our portfolio is sufficient for our needs. Our SS and my pensions cover our routine living expenses. I've always used index fund shares themselves, and always Vang Admiral shares whenever my purchase sizes permit that.

I know what ETFs are, in principle. I know that many of the funds I have money in now and could exchange into when I rebalance, etc., can also be acquired as ETFs. But I don't really know what the big picture pros and cons are of doing it either way.

I'd like some basic info about why I should either choose or shun either way of putting my money to work at Vang.

Thx.
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arcticpineapplecorp.
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Re: Mutual fund shares or ETF of same fund

Post by arcticpineapplecorp. »

you can read more here:

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

since it doesn't sound like you do much with your assets since you're living on SS and pension I don't see why you'd need to change what you're doing.

I have only owned mutual funds (not ETFs). They weren't around when I started investing. I never saw the need to change.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
alex_686
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Re: Mutual fund shares or ETF of same fund

Post by alex_686 »

Mutual funds and ETFs are basically the same thing. Basic same product, different wrapper. The big difference is how you buy/purchase and sell/redeem them.

There are frequent arguments here at Bogleheads over the differences. Making mountains out of mole hills.

I think ETFs are better, they have a slight edge over mutual funds, and I think everybody will be converting over in the next 30 years. I don't think you need to do anything right now.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
sport
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Re: Mutual fund shares or ETF of same fund

Post by sport »

arcticpineapplecorp. wrote: Tue Jan 12, 2021 1:29 pm ...I have only owned mutual funds (not ETFs). They weren't around when I started investing. I never saw the need to change.
+1. With ETFs, you get involved with market orders, limit orders, spreads, etc. With funds, you place your order (buy or sell) for a dollar amount and that is what happens at the end of the business day. Very simple and straightforward. The only advantage I can see for ETFs is easy portability to other brokerages.
alex_686
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Re: Mutual fund shares or ETF of same fund

Post by alex_686 »

sport wrote: Tue Jan 12, 2021 2:19 pm The only advantage I can see for ETFs is easy portability to other brokerages.
Lower operational costs, both explicate and implicit (trading costs). You can look at this as either a few .01%s from the expense ratio or 30% reduction in operational costs. Lower tax drag from capital gains.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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arcticpineapplecorp.
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Re: Mutual fund shares or ETF of same fund

Post by arcticpineapplecorp. »

sport wrote: Tue Jan 12, 2021 2:19 pm
arcticpineapplecorp. wrote: Tue Jan 12, 2021 1:29 pm ...I have only owned mutual funds (not ETFs). They weren't around when I started investing. I never saw the need to change.
+1. With ETFs, you get involved with market orders, limit orders, spreads, etc. With funds, you place your order (buy or sell) for a dollar amount and that is what happens at the end of the business day. Very simple and straightforward. The only advantage I can see for ETFs is easy portability to other brokerages.
i saw a webcast from Vanguard yesterday with Rebecca Katz (Principal, Senior communications advisor), Tim Buckley (CEO) and Greg Davis (chief investment officer) and at the end they were talking about the differences between ETFs and MFs and Greg explained a little about orders, recommending limit rather than market orders.

Finally, Tim said if you plan to do tax loss harvesting he favored using ETFs due to frequent trading limitations of mutual funds. (confirmed:
If you sell or exchange shares of a Vanguard fund, you will not be permitted to buy or exchange back into the same fund, in the same account, within 30 calendar days. However, this rule does not apply to:
https://personal.vanguard.com/us/whatwe ... angepolicy)
I wasn't sure exactly what he meant by that since you have to wait 30 days in either event to avoid a wash sale.

anyone know what Tim was talking about here? Why are ETFs preferable to MFs when tax loss harvesting?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
tominsc
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Re: Mutual fund shares or ETF of same fund

Post by tominsc »

Good replies, everyone. The article helped a lot. Overall, it sounds as if, compared with my lifelong familiarity and comfort level with funds, it's another example of "if it ain't broke...."
alex_686
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Re: Mutual fund shares or ETF of same fund

Post by alex_686 »

arcticpineapplecorp. wrote: Tue Jan 12, 2021 3:17 pm I wasn't sure exactly what he meant by that since you have to wait 30 days in either event to avoid a wash sale.
The sale trade of a ETF takes a second to execute. Then you know the exact amount of your sale. You can then execute another buy for that same exact amount to a good TLH pair - a ETF that has similar - but not exactly the same - characteristics.

With a mutual fund you will not know your total proceeds until the end of the day. So you can't put in a new buy order until the next, meaning that you lose a day. It is possible to do a exchange within a fund family, but that assumes that there is a good TLH pair within the same family. Which may or may not be the case.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
sport
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Re: Mutual fund shares or ETF of same fund

Post by sport »

arcticpineapplecorp. wrote: Tue Jan 12, 2021 3:17 pm
sport wrote: Tue Jan 12, 2021 2:19 pm
arcticpineapplecorp. wrote: Tue Jan 12, 2021 1:29 pm ...I have only owned mutual funds (not ETFs). They weren't around when I started investing. I never saw the need to change.
+1. With ETFs, you get involved with market orders, limit orders, spreads, etc. With funds, you place your order (buy or sell) for a dollar amount and that is what happens at the end of the business day. Very simple and straightforward. The only advantage I can see for ETFs is easy portability to other brokerages.
i saw a webcast from Vanguard yesterday with Rebecca Katz (Principal, Senior communications advisor), Tim Buckley (CEO) and Greg Davis (chief investment officer) and at the end they were talking about the differences between ETFs and MFs and Greg explained a little about orders, recommending limit rather than market orders.

Finally, Tim said if you plan to do tax loss harvesting he favored using ETFs due to frequent trading limitations of mutual funds. (confirmed:
If you sell or exchange shares of a Vanguard fund, you will not be permitted to buy or exchange back into the same fund, in the same account, within 30 calendar days. However, this rule does not apply to:
https://personal.vanguard.com/us/whatwe ... angepolicy)
I wasn't sure exactly what he meant by that since you have to wait 30 days in either event to avoid a wash sale.

anyone know what Tim was talking about here? Why are ETFs preferable to MFs when tax loss harvesting?
I am not sure, but here is a possibility. Let's say you TLH from the S&P500 to Total Stock. You wait 31 days and then move the money back to S&P. Now let's say the market takes a big drop right after you do that. You would be prohibited from TLH into Total Stock again because it is less than 30 days since you sold it.
krafty81
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Re: Mutual fund shares or ETF of same fund

Post by krafty81 »

I will never buy a MF again.
sport
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Re: Mutual fund shares or ETF of same fund

Post by sport »

alex_686 wrote: Tue Jan 12, 2021 3:29 pm It is possible to do a exchange within a fund family, but that assumes that there is a good TLH pair within the same family. Which may or may not be the case.
Vanguard has so many funds, I never have any problem finding one that I want. I am more likely to have to make a choice among several good options.
alex_686
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Re: Mutual fund shares or ETF of same fund

Post by alex_686 »

sport wrote: Tue Jan 12, 2021 3:31 pm Vanguard has so many funds, I never have any problem finding one that I want. I am more likely to have to make a choice among several good options.
For some strategies, but not all. Besides, what you are saying is not true. Or you more likely to find a good THL partner within Vanguard or within Vanguard and all other fund families?

Which is not to say you can't stick with Vanguard. I strongly believe that ETFs are marginally better.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
sport
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Re: Mutual fund shares or ETF of same fund

Post by sport »

alex_686 wrote: Tue Jan 12, 2021 3:39 pm
sport wrote: Tue Jan 12, 2021 3:31 pm Vanguard has so many funds, I never have any problem finding one that I want. I am more likely to have to make a choice among several good options.
For some strategies, but not all. Besides, what you are saying is not true. Or you more likely to find a good THL partner within Vanguard or within Vanguard and all other fund families?

Which is not to say you can't stick with Vanguard. I strongly believe that ETFs are marginally better.
I just said that Vanguard has all the funds *I* need. So, that is true. Perhaps your experience is different.
placeholder
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Re: Mutual fund shares or ETF of same fund

Post by placeholder »

I prefer etfs because I like to keep my assets where I want and move them around for transfer bonuses especially now that most custodians have no transaction fees for etfs.
exodusNH
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Re: Mutual fund shares or ETF of same fund

Post by exodusNH »

arcticpineapplecorp. wrote: Tue Jan 12, 2021 3:17 pm I wasn't sure exactly what he meant by that since you have to wait 30 days in either event to avoid a wash sale.

anyone know what Tim was talking about here? Why are ETFs preferable to MFs when tax loss harvesting?
Vanguard doesn't want you jumping in and out of the mutual funds since it creates a lot of churn for them and goes against their "buy & hold" philosophy. With ETFs, you buy the ETF from someone who wants to sell it. It may not impact Vanguard at all.

So, if you try to harvest fund X and have an automatic buy* hitting in the next 30 days, you may not be able to complete that buy.

*Actually, it looks like they won't block automatic investments. I think the spirit of what I was trying to say still gets across, though.
MoneyAndTime
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Re: Mutual fund shares or ETF of same fund

Post by MoneyAndTime »

If you sell or exchange shares of a Vanguard fund, you will not be permitted to buy or exchange back into the same fund, in the same account, within 30 calendar days. However, this rule does not apply to:
https://personal.vanguard.com/us/whatwe ... angepolicy)

I wasn't sure exactly what he meant by that since you have to wait 30 days in either event to avoid a wash sale.

anyone know what Tim was talking about here? Why are ETFs preferable to MFs when tax loss harvesting?

I wonder if he meant Tax Gain Harvesting, then it makes a lot more sense. Because in the case of TGH, you need to sell and immediately buy it again to adjust your basis. Then again, TGH is kinda rare.
Last edited by MoneyAndTime on Tue Jan 12, 2021 6:38 pm, edited 1 time in total.
arf30
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Re: Mutual fund shares or ETF of same fund

Post by arf30 »

ETFs are generally more efficient (tax and ER) and portable to other brokerages.

Mutual funds are more user friendly (auto buy $X directly from my bank account, or auto sell $X and transfer to my bank account). No fiddling with market or limit orders during business hours.
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arcticpineapplecorp.
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Re: Mutual fund shares or ETF of same fund

Post by arcticpineapplecorp. »

MoneyAndTime wrote: Tue Jan 12, 2021 6:04 pm
If you sell or exchange shares of a Vanguard fund, you will not be permitted to buy or exchange back into the same fund, in the same account, within 30 calendar days. However, this rule does not apply to:
https://personal.vanguard.com/us/whatwe ... angepolicy)

I wasn't sure exactly what he meant by that since you have to wait 30 days in either event to avoid a wash sale.

anyone know what Tim was talking about here? Why are ETFs preferable to MFs when tax loss harvesting?

I wonder if he meant Tax Gain Harvesting, then it makes a lot more sense. Because in the case of TGH, you need to sell and immediately buy it again to adjust your basis. Then again, TGH is kinda rare.
no, Tim specifically said tax LOSS harvesting. Not tax GAIN harvesting.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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