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  • Email from Vanguard

    I received an Email from vanguard stating that my VTIAX can be exchanged/converted to its ETF counterpart(VXUS) and save .02 in expense ratio. I think I understand the difference between ETF and mutual funds... and that they aren't very different pretty much just when they are sold. Is there anything hidden in this conversion I'm not aware of? Would you be comfortable doing this? This is within a Roth account so gaining tax advantage of ETF really doesnt matter.

    Thanks

  • #2
    you can convert MF to ETF, but cant go back.

    main issue is you can only buy integer number.

    dividends give you fractional shares.

     

     

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    • #3
      There are a couple of good Bogleheads Wiki articles on the differences between mutual funds and ETFs:

      https://www.bogleheads.org/wiki/Investing_FAQ_for_the_Bogleheads_Forum#Should_I_us e_mutual_funds_or_ETFs.3F

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

       

      Note that the second link is slightly out of date.  It says the ETF and Admiral share expense ratios are the same.  As you indicated in your question that's no longer true.

      There's nothing hidden.  Just be aware that ETFs are slightly more complicated to buy and sell.  You have to enter orders during market hours and you'll have to buy a specific number of shares rather than a dollar amount.  If you or whoever is managing the account isn't comfortable with that, then just stick with the mutual funds.  The difference in expense ratio is so small it won't make much of a difference either way.

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      • #4
        This past comment is really what I was wondering. I'm rather new to this and want cheap hassle free funds I can continually fund. 2 basis points isnt enough for what I'm looking for.

        I'm continuing to be amazed but the knowledge in this forum and the willingness to help. Have a great day

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        • #5
          I cannot think of a single scenario in life where .02% is going to move the needle for me.

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          • #6




            I cannot think of a single scenario in life where .02% is going to move the needle for me.
            Click to expand...


            Except when you're offered 0.02% of $1 trillion...for free. I haven't run into this scenario myself but it isn't for the lack of trying.

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            • #7
              Cant comment specifically about Vanguard. Other the the points already raised I assume the execution price might suffer a bit to account for the lower fee?

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