Menu

Should I convert my Vanguard Admiral Shares to ETFs?

Home General Investing Should I convert my Vanguard Admiral Shares to ETFs?

  • Avatar Financial Naive MD 
    Participant
    Status: Physician
    Posts: 29
    Joined: 05/05/2019

    I use mutual funds because I can setup monthly automatic transection from bank accounts to make life simple.  I can’t to do that with ETF.  May be I should convert existing mutual funds to ETF once a year to save a few bucks.

    But who know what does VTSAX .04% vs VTI .03% mean?  It could be .035% vs .034%, lol.

    #213557 Reply
    PhysicianOnFIRE PhysicianOnFIRE 
    Moderator
    Status: Physician
    Posts: 1505
    Joined: 01/08/2016

    Vanguard mutual funds are just as tax-efficient as their ETFs. They have a patented process.

    Vanguard Patented a Way to Avoid Taxes on Mutual Funds

    The same cannot be said of other companies, but that may change when the patent expires in 2023.

    Mutual funds make tax loss harvesting easier in some ways since you’ll have zero time out of the market. The downside is that you can’t sell at intra-day prices, but not having to wait for the money to hit the settlement fund to reinvest in a trading partner more than makes up for it, IMHO.

    Cheers!
    -PoF

    40-something anesthesiologist and personal finance blogger @ https://physicianonfire.com [Part of the WCI Network] Find me on Twitter: @physicianonfire

    FIRE. Financial Independence. Retire Early.

    #213602 Reply
    Liked by hatton1
    hatton1 hatton1 
    Participant
    Status: Physician
    Posts: 2919
    Joined: 01/11/2016

    FWIW I own both vanguard MFs and ETFs.  The difference is not material.

    #213605 Reply
    Liked by Vagabond MD
    Avatar Eye-guy 
    Participant
    Status: Physician
    Posts: 5
    Joined: 05/11/2019

    Thanks in advance for assistance on this, but I want to open a taxable account , however I am confused to go with admiral mutual funds or their ETF counterpart, my concern is the capital gain tax on the mutual funds which makes investing in the ETF a logical choice.  Is there anything I am missing here?  I would think it would be a strong majority to prefer the ETF.

    APPRECIATE ANY INPUT

    #213751 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3614
    Joined: 01/08/2016

    You know the CG is the same right?

    #213763 Reply
    Avatar Eye-guy 
    Participant
    Status: Physician
    Posts: 5
    Joined: 05/11/2019

    Thanks ,

    but there would be times when the mutual fund will distribute capital gains even though one did not sell any securities, vs in the ETF capital gains are not distributed until one sells their security .   This makes the ETF more tax efficient.

    #213764 Reply
    Avatar Eye-guy 
    Participant
    Status: Physician
    Posts: 5
    Joined: 05/11/2019

    Thanks ,

    I didn’t explain my post clearly, there would be times when the mutual fund will distribute capital gains even though one did not sell any securities, vs in the ETF ,capital gains are not distributed until one sells their security .   This makes the ETF more tax efficient.

    #213765 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3614
    Joined: 01/08/2016

    Arnt we talking about Vanguard funds?

    #213769 Reply
    Avatar Financial Naive MD 
    Participant
    Status: Physician
    Posts: 29
    Joined: 05/05/2019

    Thanks ,

    but there would be times when the mutual fund will distribute capital gains even though one did not sell any securities, vs in the ETF capital gains are not distributed until one sells their security .   This makes the ETF more tax efficient.

    Click to expand…

    Mutual funds pay dividends.  Most of them are qualified dividends, and we pay long-term capital gain on these.  This is the same for an ETF meaning that there is no difference regarding tax efficient.

    #213776 Reply
    Avatar Eye-guy 
    Participant
    Status: Physician
    Posts: 5
    Joined: 05/11/2019
    Disability Insurance

    Thanks for everyones input, it seems that folks feel there is not any difference in the tax efficiency between the two, but  I thought that occasional capital gains on the mutual fund would be a nod to use the ETF counterpart as any capital gains are not due until the security is sold.

     

    Has anyone with ETFS of the vanguard total stock or 500 index received a tax liability at the end of a year for capital gains ?

     

    #213828 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2132
    Joined: 01/03/2017
    Is there anything I am missing here?

    Click to expand…

    Everything.

    Thanks for everyones input, it seems that folks feel there is not any difference in the tax efficiency between the two, but I thought that occasional capital gains on the mutual fund would be a nod to use the ETF counterpart as any capital gains are not due until the security is sold. Has anyone with ETFS of the vanguard total stock or 500 index received a tax liability at the end of a year for capital gains ?

    Click to expand…

    Folks feel that there is not any difference in tax efficiency because there is not any difference in tax efficiency between Vanguard mutual funds and Vanguard ETFs. Go look at all the popular Vanguard mutual funds on M* and look at capital gain distributions. There are none. VTSAX last did it in 2002, I think. Again, I’ll reiterate, at Vanguard there is NO difference in tax efficiency between there mutual funds and ETFs.

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

    #213836 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5647
    Joined: 01/12/2016
    Click to expand…

    Folks feel that there is not any difference in tax efficiency because there is not any difference in tax efficiency between Vanguard mutual funds and Vanguard ETFs. Go look at all the popular Vanguard mutual funds on M* and look at capital gain distributions. There are none. VTSAX last did it in 2002, I think. Again, I’ll reiterate, at Vanguard there is NO difference in tax efficiency between there mutual funds and ETFs.

    Click to expand…

    This is true at Vanguard only, just to clarify for people just reading. I strongly prefer ETFs overall, though even Vanguard could have a massive cap gains distribution problem one day given how they defer it, its basically a conspiracy theory at this point but something to keep in mind.

    Many people who held non vanguard MFs were slapped with insult after injury in 2008 when they were taxed on capital gains (from redemptions, etc…) even though the funds were crushed.

    #213840 Reply
    Avatar bullsdoc 
    Participant
    Status: Resident
    Posts: 43
    Joined: 07/06/2018

    What are the practical differences between the two in tax-protected accounts though?  I assume minimal?

    #213854 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2132
    Joined: 01/03/2017

    What are the practical differences between the two in tax-protected accounts though?  I assume minimal?

    Click to expand…

    They have the same differences in all accounts for Vanguard. You can’t buy partial ETFs, you can’t trade a mutual fund throughout the day, etc.

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

    #213884 Reply

Reply To: Should I convert my Vanguard Admiral Shares to ETFs?

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear