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Email from Vanguard

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  • Avatar Dollingerj 
    Participant
    Status: Other Professional
    Posts: 29
    Joined: 05/03/2019

    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

    #229527 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3945
    Joined: 01/08/2016

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

    main issue is you can only buy integer number.

    dividends give you fractional shares.

     

     

    #229532 Reply
    Avatar Hober Mallow 
    Participant
    Status: Other Professional, Spouse
    Posts: 35
    Joined: 01/01/2018

    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_use_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    Note that the second link is slightly out of date.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.

    #229534 Reply
    Avatar Dollingerj 
    Participant
    Status: Other Professional
    Posts: 29
    Joined: 05/03/2019
    medical school scholarship sponsor

    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

    #229540 Reply
    Liked by Vagabond MD, Tim
    Vagabond MD Vagabond MD 
    Participant
    Status: Physician
    Posts: 3338
    Joined: 01/21/2016

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

    "Wealth is the slave of the wise man and the master of the fool.” -Seneca the Younger

    #229621 Reply
    Liked by Peds
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2477
    Joined: 01/03/2017

    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.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #229624 Reply
    Avatar HumbleInvestor 
    Participant
    Status: Physician, Small Business Owner
    Posts: 147
    Joined: 12/28/2016
    Earnest refinancing bonus

    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?

    #229636 Reply

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