ETFs in Vanguard Roth IRA

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etm
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ETFs in Vanguard Roth IRA

Post by etm » Mon Jun 07, 2010 9:10 pm

Quick question for everyone. Can you add ETFs in your Vanguard Roth IRA? Vanguard's website advertises their IRAs as having broad access to Vanguard's Mutual Funds, ETFs and stocks. I've had a Roth for about 8 years. But I don't see how I can add ETFs. I can only add Vanguard Mutual Funds when I try to add a new fund.

rai
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Post by rai » Mon Jun 07, 2010 9:15 pm

did you try going to the ETF page, and check the ETF you want and click buy?


That's the way I can do it, but mayb you have to set up a brokerage fund first.
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jcompton
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Post by jcompton » Mon Jun 07, 2010 9:15 pm

You'll need to open a Vanguard Brokerage Services (VBS) account attached to your Roth IRA. It will link to your mutual fund account through a Prime MM sweep account, and then you can buy ETFs.

GammaPoint
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Post by GammaPoint » Mon Jun 07, 2010 9:23 pm

^^ As he said.

no_name
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Post by no_name » Thu Jun 10, 2010 8:31 pm

1) is it even a good idea to have ETF in a roth ira?

2) Can you have a TR fund along with ETFs?

3) If so, would that mean they are separate things in your Roth IRA?

4) What do most people think of VG brokerage accounts that charge 20$? Does this seem fair?

5) What do you guys think?

Thanks!

GammaPoint
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Post by GammaPoint » Thu Jun 10, 2010 9:04 pm

mo0ink wrote:1) is it even a good idea to have ETF in a roth ira?
Why wouldn't it be?
2) Can you have a TR fund along with ETFs?
VG's TR funds don't have ETF equivalents. But there are some out there that are (e.g., TZV).
3) If so, would that mean they are separate things in your Roth IRA?
It's just how Vanguard divides up your assets. You keep mutual funds in a mutual fund portion and ETFs in the brokerage portion. It's just how they do it. Nothing special about it.
4) What do most people think of VG brokerage accounts that charge 20$? Does this seem fair?
Small accounts cost more to Vanguard to maintain than large accounts. The fee is waived if you have over $50k (and the fee is less than the ER benefit if you use ETFs at an even lower amount).

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Post by no_name » Thu Jun 10, 2010 9:12 pm

GammaPoint wrote:
mo0ink wrote:1) is it even a good idea to have ETF in a roth ira?
Why wouldn't it be?
2) Can you have a TR fund along with ETFs?
VG's TR funds don't have ETF equivalents. But there are some out there that are (e.g., TZV).
3) If so, would that mean they are separate things in your Roth IRA?
It's just how Vanguard divides up your assets. You keep mutual funds in a mutual fund portion and ETFs in the brokerage portion. It's just how they do it. Nothing special about it.
4) What do most people think of VG brokerage accounts that charge 20$? Does this seem fair?
Small accounts cost more to Vanguard to maintain than large accounts. The fee is waived if you have over $50k (and the fee is less than the ER benefit if you use ETFs at an even lower amount).
I see, what if I buy an ETF, and decide to buy more of shares of it, is there a transaction fee?

If not, this goes only if you want to buy and sell an ETF? So, the buyer, and seller both lose money due to transaction fee?

Please reassure me again, there is no taxes on this if this is in your brokerage account in your ROTH? correct?

oh, yea, how much money does one need to start up a brokerage account?

btw I am not planning on opening it up right away but, instead, learning about it.

Thanks, yes, I am a complete newbie.
Last edited by no_name on Thu Jun 10, 2010 9:21 pm, edited 1 time in total.

GammaPoint
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Post by GammaPoint » Thu Jun 10, 2010 9:20 pm

mo0ink wrote:
I see, what if I buy an ETF, and decide to buy more of shares of it, is there a transaction fee?
Not at Vanguard (assuming you're buying Vanguard ETFs). Otherwise it's whatever a normal stock trade would cost you.

Please reassure me again, there is no taxes on this if this is in your brokerage account in your ROTH? correct?
Correct. It's got the same taxable consequences as mutual funds.

oh, yea, how much money does one need to start up a brokerage account?
Any amount, although it's probably not going to be worth it until you have $30k or something.

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Post by no_name » Thu Jun 10, 2010 9:31 pm

GammaPoint wrote:
mo0ink wrote:
oh, yea, how much money does one need to start up a brokerage account?
Any amount, although it's probably not going to be worth it until you have $30k or something.
why is that? I am curious?

not too much to buy?

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Post by GammaPoint » Thu Jun 10, 2010 9:33 pm

mo0ink wrote:
GammaPoint wrote:
mo0ink wrote:
oh, yea, how much money does one need to start up a brokerage account?
Any amount, although it's probably not going to be worth it until you have $30k or something.
why is that? I am curious?

not too much to buy?
Well if you have to pay $20 for the brokerage account but you don't have a lot of money the ER savings on the ETFs isn't going to make up for that. But if you don't care about that and want to hold ETFs for other reasons (convenience, cheaper access to international small cap, etc.) then it might be a good idea.

no_name
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Post by no_name » Thu Jun 10, 2010 9:42 pm

Actually, I was reading this article,

http://www.usnews.com/money/blogs/Fund- ... stors.html

I know that there is a $3k for opening one up and it gets charged $20 annually, ETF on the other hand, price varies and so does the shares in ETF.

ETF would be very efficent for individuals that do little or no trading each year and those that buy and hold?

like I said, i am learning about this, and would like any info.

thanks

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elgob.bogle
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Post by elgob.bogle » Thu Jun 10, 2010 9:52 pm

if you have questions - call Vanguard ETF desk at 866-499-8473

Both my wife & I opened Brokerage accounts in our ROTH IRAs yesterday & today. They will handle conversion of existing funds next day for those with a corresponding etf.

elgob.bogle

no_name
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Post by no_name » Thu Jun 10, 2010 9:54 pm

elgob.bogle wrote:if you have questions - call Vanguard ETF desk at 866-499-8473

Both my wife & I opened Brokerage accounts in our ROTH IRAs yesterday & today. They will handle conversion of existing funds next day for those with a corresponding etf.

elgob.bogle
how did that go?

you just registered on brokerage put down $3000 and just brought ETFs?

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elgob.bogle
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Post by elgob.bogle » Thu Jun 10, 2010 10:15 pm

I actually had a nice chat session with the Vanguard rep who was very helpful in explaining the procedures, limit orders, market orders, etc.

best regards

elgob

no_name
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Post by no_name » Thu Jun 10, 2010 10:23 pm

These are all ETF's.

Vanguard Total Stock Market Index Fund (VTSMX) 40%
Vanguard Total International Stock Index Fund (VGTSX) 5%
Vanguard Emerging Markets Stock Index Fund (VEIEX) 15%
Vanguard REIT Index Fund (VGSIX) 20%
Vanguard Treasury Funds (VFISX, VFITX, VUSTX) 15% (5% ea)
Vanguard Inflation-Protected Securities Fund (VIPSX) 5%


I think I can afford some risks without sacrificing some safety.
It's probably unlikely for all of them to go sour at the same time.

My plan will one day, open a brokerage account pay the $3000, place it in a MMA, and buy all these ETFs and follow my AA.

However, a question remains, how will I do it?

Again, I have not begun investing in ETFs quiet yet, I am learning and continue to learn. What do you guys think of this>?


once again, when I do (one day) open the account, how do I go about following my AA?

I know, that I buy these ETF's, however, how do you do percentages in your ETF's? They are just shares that you buy in each of them.

Please help this nublet understand.

Thoughts? prayers? criticism is welcomed. :D

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Post by no_name » Fri Jun 11, 2010 4:16 pm

elgob.bogle wrote:I actually had a nice chat session with the Vanguard rep who was very helpful in explaining the procedures, limit orders, market orders, etc.

best regards

elgob
I can't open a brokerage account for ETF b/c it's in my ROTH IRA until next year, where the contribution limit I have exceeded $3000...

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Post by no_name » Sat Jun 12, 2010 1:27 pm

mo0ink wrote:
elgob.bogle wrote:I actually had a nice chat session with the Vanguard rep who was very helpful in explaining the procedures, limit orders, market orders, etc.

best regards

elgob
I can't open a brokerage account for ETF b/c it's in my ROTH IRA until next year, where the contribution limit I have exceeded $3000...
This year I maxed $5000 on my TR fund, that means I can't open a ETF brokerage account this year?

:idea:

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Kevin M
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Post by Kevin M » Sat Jun 12, 2010 4:09 pm

We opened a brokerage account in my daughter's Roth IRA at Vanguard so she could get into additional asset classes without the $3,000 minimum of the index funds. Since she already had a Roth IRA mutual fund account, it only took a few minutes online to open the brokerage account. She had an existing money market account, which serves as the sweep fund for the brokerage account, so no need to fund the account to open it. She falls under my flagship status, so no $20 annual fee ;-)

Since there are no commissions on Vanguard ETFs, she can buy 1 share at a time, and ease her way into the new ETFs (she is investing in 5 of them, complementing her existing holdings in total stock and total international). After buying a few shares initially, she's been setting limit orders 2-3% below current price, and thanks to the recent correction, has quickly gotten about half way to her target allocations for the new asset classes (value, small value, small blend, small international, REIT).

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Post by no_name » Sat Jun 12, 2010 5:27 pm

Kevin M wrote:We opened a brokerage account in my daughter's Roth IRA at Vanguard so she could get into additional asset classes without the $3,000 minimum of the index funds. Since she already had a Roth IRA mutual fund account, it only took a few minutes online to open the brokerage account. She had an existing money market account, which serves as the sweep fund for the brokerage account, so no need to fund the account to open it. She falls under my flagship status, so no $20 annual fee ;-)

Since there are no commissions on Vanguard ETFs, she can buy 1 share at a time, and ease her way into the new ETFs (she is investing in 5 of them, complementing her existing holdings in total stock and total international). After buying a few shares initially, she's been setting limit orders 2-3% below current price, and thanks to the recent correction, has quickly gotten about half way to her target allocations for the new asset classes (value, small value, small blend, small international, REIT).
That's pretty savvy, I am only 18, and what you said, really makes sense. No $3000 requirement. However, I fall below flagship membership, and considering that $20 is charge once a year makes a whole lot of sense.

Maybe I can open a brokerage account w/ no $3000? If it is true, then, I am gonna have to open it after June. :D

If she falls under your flagship status, how can that be? :?:
Last edited by no_name on Sat Jun 12, 2010 6:00 pm, edited 1 time in total.

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Post by no_name » Sat Jun 12, 2010 5:39 pm

Kevin M wrote:We opened a brokerage account in my daughter's Roth IRA at Vanguard so she could get into additional asset classes without the $3,000 minimum of the index funds. Since she already had a Roth IRA mutual fund account, it only took a few minutes online to open the brokerage account. She had an existing money market account, which serves as the sweep fund for the brokerage account, so no need to fund the account to open it. She falls under my flagship status, so no $20 annual fee ;-)

Since there are no commissions on Vanguard ETFs, she can buy 1 share at a time, and ease her way into the new ETFs (she is investing in 5 of them, complementing her existing holdings in total stock and total international). After buying a few shares initially, she's been setting limit orders 2-3% below current price, and thanks to the recent correction, has quickly gotten about half way to her target allocations for the new asset classes (value, small value, small blend, small international, REIT).
The question I was asking, does the brokerage account require a minimum of $3000 to open if this was in my ROTH?

If so, would this consider to be a contribution to my ROTH IRA?

I ask b/c I open my ROTH IRA @ VG this year and sense I maxed it out this year, I am done with my contributions.

I am confused. :?:

Thanks!

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Kevin M
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Post by Kevin M » Sat Jun 12, 2010 9:06 pm

mo0ink,

In your Roth IRA at Vanguard, do you have anything in the Prime money market fund? If so, then you don't need to contribute any more to open a brokerage account. You simply open the account, and indicate in your application that your existing money market fund is to be used as your "sweep" account.

If not, another option would be to transfer $3,000 from another fund to the Prime Money Market fund, but you'd have to consider the issue of being out of the other fund for a bit. Once the brokerage account was opened, you could purchase an ETF similar to the fund you transferred out of, if there is one.

I think I saw a post indicating that you didn't need to meet the $3,000 minimum for the money market fund in opening a brokerage account, but that's not my understanding.

Having said all of this, I wouldn't necessarily encourage you to even open a brokerage account at this point. There are additional complexities and expenses to ETFs that you don't need to worry about with mutual funds (bid/ask spreads, discount/premiums, market orders or limit orders). I enjoy it, and can help my daughter with it, but I wouldn't recommend it for most investors.

Kevin

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Post by no_name » Sat Jun 12, 2010 9:20 pm

Kevin M wrote:mo0ink,

In your Roth IRA at Vanguard, do you have anything in the Prime money market fund? If so, then you don't need to contribute any more to open a brokerage account. You simply open the account, and indicate in your application that your existing money market fund is to be used as your "sweep" account.

If not, another option would be to transfer $3,000 from another fund to the Prime Money Market fund, but you'd have to consider the issue of being out of the other fund for a bit. Once the brokerage account was opened, you could purchase an ETF similar to the fund you transferred out of, if there is one.

I think I saw a post indicating that you didn't need to meet the $3,000 minimum for the money market fund in opening a brokerage account, but that's not my understanding.

Having said all of this, I wouldn't necessarily encourage you to even open a brokerage account at this point. There are additional complexities and expenses to ETFs that you don't need to worry about with mutual funds (bid/ask spreads, discount/premiums, market orders or limit orders). I enjoy it, and can help my daughter with it, but I wouldn't recommend it for most investors.

Kevin
I do have a Prime MMA however it's balance is $0 and my TR fund is $3300. I think, I understand ETF quite a bit because I actually have a plan follow up on the page for my AA.

ETF work for those who do less frequent trading. I consider myself a buy and hold investor and again, I do less trades. I don't attempt to beat the market but, instead, do passive investing and I believe that my AA will allow me to have the most risk along with safety.

$20 annual sounds like a bargin, considering that the ETFs are commission-free.

To my understanding, when you open a brokerage acc, you get to have a Prime MMA along with your actual brokerage (where you do your trades)?

Any earnings, earned from your brokerage acc can:
A: go into Prime MMA
B: reinvested

You didn't mention what would happen if I had $0 in my Prime MMA?
but $3300 in my TR fund. I plan to max out my contributions this year...

Can I still open one up considering my situation?

btw, if I am eligible I could open one up next month to avoid $20 annual this year.

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Post by Kevin M » Sat Jun 12, 2010 10:38 pm

I don't know if VG will let you open a brokerage account with $0 in your MM account; you can just try to do the application online and see. If not, as I said, you could exchange $3,000 from your TR fund to Prime MM, open the account, then buy your ETFs. It took 1 day for my daughter's account to be approved, so you would be out of the market for a couple of days. As a long term investor, that shouldn't make much difference to you.
mo0ink wrote:These are all ETF's.

Vanguard Total Stock Market Index Fund (VTSMX) 40%
Vanguard Total International Stock Index Fund (VGTSX) 5%
Vanguard Emerging Markets Stock Index Fund (VEIEX) 15%
Vanguard REIT Index Fund (VGSIX) 20%
Vanguard Treasury Funds (VFISX, VFITX, VUSTX) 15% (5% ea)
Vanguard Inflation-Protected Securities Fund (VIPSX) 5%
...

once again, when I do (one day) open the account, how do I go about following my AA?

I know, that I buy these ETF's, however, how do you do percentages in your ETF's? They are just shares that you buy in each of them.
The funds you list aren't ETFs; they're mutual funds. Some of the ones you list have ETF shares (e.g., VTI for Total Stock Market Index), but not all. For example, there's no ETF share class for Total International, but there's something close (VEU).

To do your AA, you buy enough shares in each ETF to get close. You can't get exact, because you can only buy in 1 share increments. So, if a share costs $50, you can get within $50 of your target.

For each asset class, multiply your target allocation by your total account value, then divide by the current market price of the shares of the ETF for that class. Say you have $5000 in your IRA. Your smallest allocation is 5%, which is $250. With a share price of $47, you buy 5 shares which is $235, so it's close, but not exact.

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Post by no_name » Sat Jun 12, 2010 10:43 pm

Kevin M wrote:I don't know if VG will let you open a brokerage account with $0 in your MM account; you can just try to do the application online and see. If not, as I said, you could exchange $3,000 from your TR fund to Prime MM, open the account, then buy your ETFs. It took 1 day for my daughter's account to be approved, so you would be out of the market for a couple of days. As a long term investor, that shouldn't make much difference to you.
mo0ink wrote:These are all ETF's.

Vanguard Total Stock Market Index Fund (VTSMX) 40%
Vanguard Total International Stock Index Fund (VGTSX) 5%
Vanguard Emerging Markets Stock Index Fund (VEIEX) 15%
Vanguard REIT Index Fund (VGSIX) 20%
Vanguard Treasury Funds (VFISX, VFITX, VUSTX) 15% (5% ea)
Vanguard Inflation-Protected Securities Fund (VIPSX) 5%
...

once again, when I do (one day) open the account, how do I go about following my AA?

I know, that I buy these ETF's, however, how do you do percentages in your ETF's? They are just shares that you buy in each of them.
The funds you list aren't ETFs; they're mutual funds. Some of the ones you list have ETF shares (e.g., VTI for Total Stock Market Index), but not all. For example, there's no ETF share class for Total International, but there's something close (VEU).

To do your AA, you buy enough shares in each ETF to get close. You can't get exact, because you can only buy in 1 share increments. So, if a share costs $50, you can get within $50 of your target.

For each asset class, multiply your target allocation by your total account value, then divide by the current market price of the shares of the ETF for that class. Say you have $5000 in your IRA. Your smallest allocation is 5%, which is $250. With a share price of $47, you buy 5 shares which is $235, so it's close, but not exact.
Thanks! Your info is a big help, and I will shoot them a message if this is all feasible, if not, I have to wait next year!

btw. I prob. won't consider a switch between my TR fund to ETF

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elgob.bogle
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Post by elgob.bogle » Sat Jun 12, 2010 10:49 pm

Think of it this way. The prime money market account is the bridge between you mutual funds and your etfs. i had "0" in two of my MM accounts and I was able to make them my sweep accounts. However, I am Voyager level. You could ask all of your questions at the ETF desk. It may be possible to simulate the TR accounts with ETFs.

good luck

elgob

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Post by no_name » Sat Jun 12, 2010 11:48 pm

Thanks all for the big help. Considering my situation here, I am gonna go open it next year. Thanks all once again! :D :wink:

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Kevin M
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Post by Kevin M » Sun Jun 13, 2010 1:04 am

mo0ink wrote:Thanks! Your info is a big help, and I
btw. I prob. won't consider a switch between my TR fund to ETF
Keep in mind that if you keep your TR fund, you should factor it into your asset allocation. If you want the allocation you indicated, then you have to account for the portion of each asset class already owned by the TR fund; e.g., already high allocation to Total Stock Market, some international, some bond. Much easier to manage your asset allocation to specific targets with one fund/ETF for each asset class.

I would rather decide on my asset allocation and buy funds to implement it, rather than leave it up to the TR fund, or have to figure what % of each is in the TR fund. Given your fairly complex desired AA, I would think you'd want to do the same. TR funds may be good for those who just want to keep it very simple.

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