Change holdings from VTI to VFIAX

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pennylane
Posts: 277
Joined: Thu Apr 12, 2018 10:22 am

Change holdings from VTI to VFIAX

Post by pennylane »

Hi everyone,

I’m interested in converting my VTI shares to VFIAX. Is there anyway to do this without incurring a tax bill?
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galawdawg
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Location: Georgia

Re: Change holdings from VTI to VFIAX

Post by galawdawg »

Only if the shares are held in a tax-advantaged account.

If they are in a taxable account, you'll have to sell your shares of VTI to buy shares of VFIAX, incurring tax liability on any gains.
Northern Flicker
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Re: Change holdings from VTI to VFIAX

Post by Northern Flicker »

If the holdings are in a taxable account, and there is an embedded capital gain, you will realize the gain. How that gain is taxed will depend on whether it is a long-term or short-term gain, your Federal tax bracket, and your state tax bracket if you live in a state that taxes income.

Why do you want to do this?
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Topic Author
pennylane
Posts: 277
Joined: Thu Apr 12, 2018 10:22 am

Re: Change holdings from VTI to VFIAX

Post by pennylane »

Northern Flicker wrote: Wed Jun 09, 2021 11:19 am If the holdings are in a taxable account, and there is an embedded capital gain, you will realize the gain. How that gain is taxed will depend on whether it is a long-term or short-term gain, your Federal tax bracket, and your state tax bracket if you live in a state that taxes income.

Why do you want to do this?
I like the auto dollar amount investing aspect of a mutual fund as opposed to have to manually buy X amount of shares per week. Even though both are the same, I like my holdings to be clean and not have various ones in there
SubPar
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Location: MN

Re: Change holdings from VTI to VFIAX

Post by SubPar »

pennylane wrote: Wed Jun 09, 2021 11:21 am
Northern Flicker wrote: Wed Jun 09, 2021 11:19 am If the holdings are in a taxable account, and there is an embedded capital gain, you will realize the gain. How that gain is taxed will depend on whether it is a long-term or short-term gain, your Federal tax bracket, and your state tax bracket if you live in a state that taxes income.

Why do you want to do this?
I like the auto dollar amount investing aspect of a mutual fund as opposed to have to manually buy X amount of shares per week. Even though both are the same, I like my holdings to be clean and not have various ones in there
The fund equivalent of VTI is VTSAX. VFIAX is the S&P 500 Index fund, not US total stock market.
shess
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Joined: Wed May 17, 2017 12:02 am

Re: Change holdings from VTI to VFIAX

Post by shess »

pennylane wrote: Wed Jun 09, 2021 11:21 am
Northern Flicker wrote: Wed Jun 09, 2021 11:19 am If the holdings are in a taxable account, and there is an embedded capital gain, you will realize the gain. How that gain is taxed will depend on whether it is a long-term or short-term gain, your Federal tax bracket, and your state tax bracket if you live in a state that taxes income.

Why do you want to do this?
I like the auto dollar amount investing aspect of a mutual fund as opposed to have to manually buy X amount of shares per week. Even though both are the same, I like my holdings to be clean and not have various ones in there
VTI and VFIAX are not the same, they are different indices. IMHO they are "close enough" in terms of what they do in a portfolio.

If you like the auto-invest and like VTI, open a VTSAX account to do your auto-invest, and then periodically convert to VTI. Converting FROM mutual fund shares TO ETF shares is tax free, but you can only go in that direction. Or start with VFIAX and convert to VOO, if that floats your boat.

I get you about prefering to have one holding rather than two holdings, but, unfortunately, I can't always replay history to fix it, and I'm not always willing to pay the taxes to fix it, so in the end sometimes I just grin and bear it.
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galawdawg
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Re: Change holdings from VTI to VFIAX

Post by galawdawg »

shess wrote: Wed Jun 09, 2021 11:30 am
pennylane wrote: Wed Jun 09, 2021 11:21 am
Northern Flicker wrote: Wed Jun 09, 2021 11:19 am If the holdings are in a taxable account, and there is an embedded capital gain, you will realize the gain. How that gain is taxed will depend on whether it is a long-term or short-term gain, your Federal tax bracket, and your state tax bracket if you live in a state that taxes income.

Why do you want to do this?
I like the auto dollar amount investing aspect of a mutual fund as opposed to have to manually buy X amount of shares per week. Even though both are the same, I like my holdings to be clean and not have various ones in there
VTI and VFIAX are not the same, they are different indices. IMHO they are "close enough" in terms of what they do in a portfolio.

If you like the auto-invest and like VTI, open a VTSAX account to do your auto-invest, and then periodically convert to VTI. Converting FROM mutual fund shares TO ETF shares is tax free, but you can only go in that direction. Or start with VFIAX and convert to VOO, if that floats your boat.

I get you about prefering to have one holding rather than two holdings, but, unfortunately, I can't always replay history to fix it, and I'm not always willing to pay the taxes to fix it, so in the end sometimes I just grin and bear it.
Just to clarify, you can ONLY convert Vanguard mutual funds to an equivalent Vanguard ETF if you hold those shares at Vanguard. If you are at Fidelity, Schwab or anywhere other than Vanguard, you CANNOT convert. In that case, you would need to sell the mutual fund and then buy the ETF.
exodusNH
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Re: Change holdings from VTI to VFIAX

Post by exodusNH »

pennylane wrote: Wed Jun 09, 2021 11:14 am Hi everyone,

I’m interested in converting my VTI shares to VFIAX. Is there anyway to do this without incurring a tax bill?
As someone else pointed out, the mutual fund equivalent of VTI is VTSAX.

In either case, both of those funds have a minimum of $3,000. You could sell just enough of the ETF to get the $3,000 and then buy the mutual fund with the proceeds. If you sell the most expensive lots, you probably won't have made a ton of money on the $3,000 you need to buy in. No need to convert the whole investment.

Having VTI and VTSAX isn't a problem. Behind the scenes, they're the same fund. You have a slightly lower expense ratio with the ETF. You can also freely sell the ETF whenever you need money without incurring the wrath of Vanguard's "frequent trading" policy that can restrict purchases of their mutual funds if you've recently sold some of the same. (Though I believe they exempt automated transactions from that exclusion.)

This is basically what I do. I have mutual funds for the automated purchases and the ETFs for "well, I have nothing better to do with this cash."
Northern Flicker
Posts: 7726
Joined: Fri Apr 10, 2015 12:29 am

Re: Change holdings from VTI to VFIAX

Post by Northern Flicker »

pennylane wrote: Wed Jun 09, 2021 11:21 am
Northern Flicker wrote: Wed Jun 09, 2021 11:19 am If the holdings are in a taxable account, and there is an embedded capital gain, you will realize the gain. How that gain is taxed will depend on whether it is a long-term or short-term gain, your Federal tax bracket, and your state tax bracket if you live in a state that taxes income.

Why do you want to do this?
I like the auto dollar amount investing aspect of a mutual fund as opposed to have to manually buy X amount of shares per week. Even though both are the same, I like my holdings to be clean and not have various ones in there
If you hold the asset at Vanguard, just auto invest into VTSAX, and periodically have Vanguard do an ETF conversion of the VTSAX shares to VTI. Converting in that direction can be done as a non-taxable event at Vanguard.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Cope
Posts: 7
Joined: Fri Jun 08, 2018 12:16 pm

Re: Change holdings from VTI to VFIAX

Post by Cope »

pennylane wrote: Wed Jun 09, 2021 11:21 am
Northern Flicker wrote: Wed Jun 09, 2021 11:19 am If the holdings are in a taxable account, and there is an embedded capital gain, you will realize the gain. How that gain is taxed will depend on whether it is a long-term or short-term gain, your Federal tax bracket, and your state tax bracket if you live in a state that taxes income.

Why do you want to do this?
I like the auto dollar amount investing aspect of a mutual fund as opposed to have to manually buy X amount of shares per week. Even though both are the same, I like my holdings to be clean and not have various ones in there
I believe there are other places where you can auto dollar amount invest in VTI or other ETFs. M1 is one I’ve looked at, but there could be others I’m unaware of. Doing so does have some potential downsides though. Only once (or twice with their plus product) a day trading time and the inability to transfer partial ETF shares to other brokerages.
Doctor Rhythm
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Re: Change holdings from VTI to VFIAX

Post by Doctor Rhythm »

I’d also keep in mind that you’ll likely find an opportunity to tax loss harvest shares of your new fund at some future date. When this happens, you could end up with an extra fund again unless the price drop is severe enough that you can sell your entire stake at a loss. For instance, I’m the proud yet reluctant owner of both VTSAX and VFIAX since April 2020. Not an elegant situation, but worth it for the tax benefit.
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