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Vanguard lower ETF fees (ER) and 'creative' ways to lower taxes w/o dist

Home General Investing Vanguard lower ETF fees (ER) and 'creative' ways to lower taxes w/o dist

  • Avatar Marko-ER 
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    One more of an FYI, the other open to comments / questions:

    Vanguard recently lowered their ER on additional 21 common ETFs:

    https://investornews.vanguard/lower-expense-ratios-on-21-vanguard-etfs-means-more-savings-for-you/

    No huge surprise and the changes are rather small (a few dollars a year, for an average portfolio), but heck Vanguard again reclaims low-cost leadership from iShares/blackrock/Schwab.  Few exceptions are REITs (VNQ > FREL > SCHH; differences are minimal) and in my opinion somewhat gimmicky zero-cost “loss leader” funds from Fidelity.  Full disclosure, I do own FZROX and FZILX, but only enough to be able to get Fidelity HSA.

    What I found more interesting & wanted to get some insight from the knowledgable community here, is Vanguard rapid “heartbeat” trading practice.

    https://www.bloomberg.com/graphics/2019-vanguard-mutual-fund-tax-dodge/

    To be frank I do not fully understand the article and I do not care to spend the time to fully understand… Does this suggest there is a tax advantage to investing with Vanguard than other funds at least in taxable brokerage accounts?  Does it mean there is an advantage to invest in taxable using Vanguard Mutual funds versus corresponding Vanguard ETFs — what I think I know is you can exchange vanguard mutual fund shares into vanguard ETFs, but not vice versa.

    #211559 Reply
    Avatar Peds 
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    No. It just means MF are as tax efficient as ETFs at Vanguard. That isn’t the case anywhere else.
    The patient expires in 2023. I’m sure we’ll see everyone else start doing it then

    #211561 Reply
    Liked by jz
    Avatar Phantasos 
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    The patient expires in 2023.

    Click to expand…

    Ok.  Time of death is 2023.

    "The problem with internet quotes is that you can't always depend on their accuracy" - Abraham Lincoln, 1864

    #211626 Reply
    Avatar Peds 
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    Bwuahaha

    #211627 Reply
    Avatar HumbleInvestor 
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    I did not understand the concept either except that the taxes are not due till the fund is sold as the gains were transferred to the ETF effectively making sure the fund has zero gains. Now the ETF has built in tax efficiency to make it work. I am interested in an explanation as well to understand the process and the built in tax efficiency of the ETFs.

    #211640 Reply
    Avatar ZZZ 
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    “To be frank I do not fully understand the article and I do not care to spend the time to fully understand”

    What about it do you not understand? It’s amazingly simple and well explained in the article…there are even pictures.

    “Does this suggest there is a tax advantage to investing with Vanguard than other funds at least in taxable brokerage accounts? ”
    It doesn’t suggest it, it plainly states the fact. If you like mutual funds, Vanguard has a patented tax advantage strategy. Or you can just buy ETFs from anyone, which all take advantage of the in-kind redemption loophole for RICs.

    Tax policy is always full of holes. Enjoy taking advantage of this one!

    #211661 Reply
    Avatar Marko-ER 
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    In the broad overview, hand-waving fashion I understand, but there are plenty of nuances. And just because vanguard uses this method and even has it patented (how?  as a process?  the patent system in the US is truly broken), does it mean their mutual funds are always the best/most tax efficient?  Not necessarily, it even suggests so in the article.  And what are the implications of other mutual funds jumping on board in 2023 when this patent expires? (to clarify for others, the patent expires but the tax “loophole” if you want to call it that does not).   Those, among other points I wanted to see if anyone in the community wanted to discuss.    ZZZ your post comes across as overly dismissive.

    #211735 Reply
    Avatar Eye-guy 
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    Has anyone who holds vanguard admiral shares and received capital gain taxes considered converting to ETF version of their security to not have to pay capital gain taxes.  The ETFS do not have capital gains until the security is sold.   To me over a period of some time that would seem to add up.

    thanks

    #213801 Reply
    CordMcNally CordMcNally 
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    Has anyone who holds vanguard admiral shares and received capital gain taxes considered converting to ETF version of their security to not have to pay capital gain taxes. The ETFS do not have capital gains until the security is sold. To me over a period of some time that would seem to add up. thanks

    Click to expand…

    Did you not get the answer you wanted in the other thread?

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

    #213805 Reply

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