diff share prices between investor, admiral, & ETF shares

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semperlux
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diff share prices between investor, admiral, & ETF shares

Post by semperlux » Wed Oct 08, 2014 9:10 am

Why are there major differences between some vanguard fund share prices of investor, admiral, & ETF shares?

I was under the impression they are the same products (ie tracking same index) except with different expense ratios in the case of investor versus admiral shares; and regular mutual fund versus a mutual fund traded in stock form in the case of etf's.

For example, when one looks at the mid cap index for Oct 7, investor shares are going for $31.31, admiral for $142.21, & etf at $114.84? Wouldn't it then be more advantageous in this case to purchase investor shares since they are "cheaper" to own more shares, even if the expense ratio is higher than admiral or etf shares?

But then when one looks at another Vanguard fund, like total stock market, the investor shares are $48.32 & admiral shares are $48.34, which is essentially the same. So what's accounting for the difference in prices of some funds but not others?

Thanks for any replies.

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kenyan
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Re: diff share prices between investor, admiral, & ETF share

Post by kenyan » Wed Oct 08, 2014 9:17 am

semperlux wrote:Why are there major differences between some vanguard fund share prices of investor, admiral, & ETF shares?

I was under the impression they are the same products (ie tracking same index) except with different expense ratios in the case of investor versus admiral shares; and regular mutual fund versus a mutual fund traded in stock form in the case of etf's. Mutual funds always trade at Net Asset Value, which is the underlying value of the holdings.

For example, when one looks at the mid cap index for Oct 7, investor shares are going for $31.31, admiral for $142.21, & etf at $114.84? Wouldn't it then be more advantageous in this case to purchase investor shares since they are "cheaper" to own more shares, even if the expense ratio is higher than admiral or etf shares?

But then when one looks at another Vanguard fund, like total stock market, the investor shares are $48.32 & admiral shares are $48.34, which is essentially the same. So what's accounting for the difference in prices of some funds but not others?

Thanks for any replies.
For mutual funds, share price is completely meaningless. It is merely a number to indicate Net Asset Value relative to what the fund originally started at. You can buy thousandths of a share.

For ETFs, the share price is again only indicative of how the price has changed relative to when the fund was started (I believe that Vanguard may start their ETFs at $50, but I could be mistaken). It's not meaningless when it comes to an ETF, since you have to purchase in full-share units, but its relationship to the mutual fund share price is meaningless. The only thing that has meaning is its premium/discount, which is a measure of whether the ETF shares are trading above or below the value of the underlying holdings.

In other words, don't worry about it.
Retirement investing is a marathon.

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semperlux
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Re: diff share prices between investor, admiral, & ETF share

Post by semperlux » Wed Oct 08, 2014 10:35 am

Thanks for your explanation. Makes sense. =)

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House Blend
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Re: diff share prices between investor, admiral, & ETF share

Post by House Blend » Wed Oct 08, 2014 11:23 am

When a mutual fund starts out, the initial share price is generally set to some nice round number. At Vanguard, I think $10/share and $25/share are the most popular starting prices. The choice is completely arbitrary.

So if a fund rolls out Investor, Admiral, and Institutional classes at different times, you should expect wide variation in the prices per share going forward. It says nothing about which fund is better. (The ER tells you that.)

On the other hand, if they roll out all three share classes at once, they'll probably all have the same initial share price. And they will tend to track together very closely. Why? Because (for stock funds) dividends are reflected in the share price until they are distributed, and expenses are generally taken from distributions. The only way you can see in the short term that Admiral shares are better than Investor shares is because they pay more dividends per dollar invested.

On the third hand, it appears to me that Vanguard sometimes doesn't choose round numbers as the initial share price. That's the only way I can make sense of the fact that Investor, Admiral, and Institutional shares of Total Bond Market always have the same price. Recalling that with (most) bond funds, dividends are hidden and not part of the share price, the fact that all three NAVs move together in lockstep is not surprising.
But it is possible only if they started out that way. The surprise is that these share classes were started on dates that are years apart.

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ogd
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Re: diff share prices between investor, admiral, & ETF share

Post by ogd » Wed Oct 08, 2014 12:53 pm

House Blend wrote: On the third hand, it appears to me that Vanguard sometimes doesn't choose round numbers as the initial share price. That's the only way I can make sense of the fact that Investor, Admiral, and Institutional shares of Total Bond Market always have the same price. Recalling that with (most) bond funds, dividends are hidden and not part of the share price, the fact that all three NAVs move together in lockstep is not surprising.
But it is possible only if they started out that way. The surprise is that these share classes were started on dates that are years apart.
Picking the current price of the older share class as the (arbitrary) starting price strikes me as one of the very reasonable choices, particularly the case of Vanguard where people convert from Investor to Admiral on a regular basis. So I'm not surprised.

semperlux: you should indeed not assign any meaning to the share price. You will not buy any more or less underlying assets for the same $$. There will be more or less assets per share, but not per dollar.

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semperlux
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Re: diff share prices between investor, admiral, & ETF share

Post by semperlux » Thu Oct 09, 2014 7:30 am

Thanks everyone for the replies. Very informative & answered my questions. You guys are awesome :D

Wish Vanguard had a page on their site that explained this for the non finance types, can get quite confusing for a new investor looking at the various categories of same fund with differing prices.

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