Talk:Investing FAQ for the Bogleheads® forum

Should this be FAQs from the Bogleheads Forum? Also, I think we should split the answer to each question into its own article. Some questions may require a long answer.


 * A hearty welcome aboard, tfb. This post originated over at the test wiki, as primary author grabiner used the medium to present a working draft model for a FAQ post to be stickied on the forum. This accounts for the title. The best option for handling answers that require elaboration beyond a summary answer is to create a page for the article and link it into the summary. This is likely to prove the near optimal solution since it retains easy readability and easier navigation. Blbarnitz 13:36, 28 May 2008 (EDT)


 * Barry's idea corresponds to my own vision of the page as well. Questions in this FAQ should have a reasonable answer in about two paragraphs, so that the FAQ itself can be available where posters will see it, and doesn't get too long.  (In particular, general questions about asset allocation cannot be answered in two paragraphs, so they do not appear in the FAQ.)  Many of the FAQ questions already have links to full pages with more detailed answers, and some have been split to put their longer answers on separate pages already; I did this with Paying down loans versus investing and may do it with the decision of whether to keep a taxable fund.  Grabiner 21:19, 28 May 2008 (EDT)


 * Got it. I like the "short answer plus long answer when necessary" approach. Thanks. Tfb 22:15, 28 May 2008 (EDT)

I would like to add a new section on ETFs. My suggested questions: Grabiner 04:07, 14 June 2010 (UTC)
 * Should I use ETFs or mutual funds? (can't answer easily, but can discuss considerations)
 * Do ETFs have a tax advantage?
 * How should I place orders to buy and sell ETFs? (link to Orders)
 * Any other suggestions?

ETFs vs. Mutual Funds potential answers: --LadyGeek 01:22, 15 June 2010 (UTC)
 * ETFs approach the cost of Vanguard's Admiral funds. If your mutual fund is near that limit, there's no advantage to convert.
 * ETFs have no impact on investing philosophy. The advantage is their lower operating costs, not that trading occurs during the day (mutual funds trade at the end of the day). Additional trading will quickly negate any advantage of an ETF (it's also market timing).

--LadyGeek 22:38, 15 June 2010 (UTC)
 * Why don't you use ETFs?, which contains links to 2 other threads
 * Sidenote: Employer plans can't use ETFs
 * Employer plans can provide access to ETFs if:


 * 1) They have a brokerage platform inside the plan;
 * 2) They use a fiduciary that provides ETFS.--Blbarnitz 23:30, 15 June 2010 (UTC)

Some statements are unclear to me. I may have some incorrect questions because I had difficulty understanding the FAQ (as written).

What is an ETF?
...Vanguard's ETFs are a share class of the index funds.
 * Do you mean that Vanguard ETFs have the same share class as the equivalent mutual fund (not necessarily an index fund)?
 * Why is this important - is it for tax considerations, as stated below?
 * Are there any difference between Vanguard ETFs and non-Vanguard ETF offerings?

...Vanguard also allows you to convert the mutual fund shares to ETF shares.
 * Rather than allowing a conversion, suggest that conversion is the recommended method to avoid tax implications.

The ETFs are a share class of the mutual funds, so they hold exactly the same securities.

I will clarify the conversion issue, as the tax issue is important Grabiner 01:19, 18 June 2010 (UTC)

Do ETFs have a tax advantage?
All ETFs have a potential tax advantage, but Vanguard's ETFs are share classes of its index funds, and thus the Vanguard mutual funds with ETF classes have the same advantage.
 * Above statement is confusing, but I think you are referring to Vanguard's VIPER patent for high tax efficiency(?). Discussed here: Gus Sauter comments on Vanguard ETF structure

...Thus ETFs can often reduce the capital gains they must distribute; most of the Vanguard stock ETFs (and the corresponding mutual funds once the ETF opened) have never distributed a gain. --LadyGeek 02:23, 17 June 2010 (UTC)
 * "Most" stock ETFs is vague and needs supporting data. It should also be compared to non-Vanguard stock ETFs. Is this restricted to stock ETFs?

Here, the point is that all ETFs tend to be tax efficient. Since Vanguard's ETFs are a share class of the mutual fund, the fund has the same tax efficiency.

The reason for mentioning stock ETFs is that Extended Duration Treasury had a huge capital gain last year. I will list the only two Vanguard stock ETFs to distribute a gain. Most non-Vanguard ETFs have also avoided gains, but a lot of small-cap ETFs have distributed gains in their early years (and VSS did the same).