Lastly Transformed my Vanguard Mutual Fund Admiral Shares to ETF Equivalents in 2024 — My Cash Weblog

I just lately determined to transform my Vanguard mutual fund shares into every of their respective ETF equivalents. These have been all held inside a brokerage account. I bear in mind first contemplating this mutual fund to ETF possibility means again in 2010 (facets of that article could now be outdated). As an alternative of protecting all the attainable determination components, right here I’ll simply doc my very own private components and my expertise finishing the method.

Why did it take 14 years for me to transform my Vanguard mutual fund shares?

Again in 2010, right here was my rationale for staying put:

  • I had no plans to ever go away Vanguard as my main brokerage custodian. Every little thing labored properly sufficient; I had no complaints. My private monetary scenario was additionally comparatively easy.
  • Vanguard was nonetheless easy. Minimal annoying charges. Issues have been considerably barebones however all the pieces labored for essentially the most half. A human answered the telephone comparatively rapidly. They despatched me paper statements at no cost. My account solely allowed mutual funds, no particular person shares. Vanguard had the vibe that “We’re totally different and that’s fantastic. Folks aligned with our views will discover us.”
  • The expense ratios for ETFs and mutual funds have been both an identical or almost idential and each had the identical tax-efficiency because of their share class building. For a very long time, the Admiral and ETFs remained at just about the identical price. Once you purchase ETFs, there are additionally bid/ask spreads and premiums/reductions to NAV to navigate. Any tiny distinction in efficiency could possibly be worn out by all this “noise”.
  • I most well-liked the simplicity and ease of dollar-based transactions. For instance, again then if I had $1,000 to spend money on VTI, on the present share value of $256, I might solely be capable to buy three VTI shares and the remaining would stay in $232 money.

Quick ahead to 2024, and issues have been slightly totally different:

  • I’m critically contemplating leaving Vanguard as my main brokerage custodian. This got here after a couple of irritating incidents and lengthy maintain occasions, by which I felt that it will be simpler on my partner if our belongings have been positioned at a spot dedicated to prime customer support. Basically, an property planning subject after dealing with my mum or dad’s funds. There are positively good and useful folks at Vanguard, however the stage of service shouldn’t be almost as constant as with Constancy. If I consolidated, then there would even be one much less main account to handle. Many exterior brokerages received’t commerce Vanguard mutual funds (apart from full gross sales), so this was the principle purpose for changing to ETFs.
  • Vanguard is making an attempt to develop belongings as laborious as everybody else. Vanguard nonetheless has a low-cost construction, however now it simply looks as if it desires extra, extra, extra. The CEO is leaving below questionable circumstances with out a substitute prepared from inside, so they’re seemingly hiring an outsider. (Tim Buckley began as Jack Bogle’s analysis assistant 33 years in the past!) The Vanguard now serves me extra browser pop-up home windows (e-statements) and upsell adverts (Advisory companies) than each Constancy and Schwab. For instance, Constancy mails me paper statements free. That is useful for older folks which will lose observe of accounts. Vanguard desires $25 a month except I’ve $5 million. I really feel this reveals that at Vanguard, low prices are extra vital than good customer support. In that case, why not merely personal Vanguard ETFs inside a Constancy brokerage account? If Vanguard hires an outsider CEO from one other brokerage firm, I’m most certainly out.
  • The expense ratio unfold has widened barely to the vary of 0.01% as much as 0.06% (VWO). That is nonetheless not an enormous deal to me, however it’s obvious that Vanguard gave up making an attempt to take care of parity and sooner or later the ETFs will at all times be cheaper. The development is a wider hole over time, not a narrower one. I hardly ever promote (and even purchase) lately, so I’ve minimal transaction prices.
  • Vanguard now helps fractional share possession for ETFs. At the moment, If I had $1,000 to spend money on VTI, on the present share value of $256, I might be capable to make investments each penny and find yourself with 3.906 shares of VTI. Due to this fact, even when I do stick with Vanguard, I can nonetheless carry out dollar-based transactions. The conversion shouldn’t be a taxable occasion, so there is no such thing as a tax influence.

Which Vanguard mutual funds can your convert? Though it hasn’t been up to date since 2019 and thus could also be outdated, this Vanguard PDF itemizing which mutual funds are convertible to ETFs should still be helpful. Listed here are the particular mutual fund and ETF pairings (with expense ratios) that I transformed and their expense ratios as of March 2024:

  • Vanguard Whole Inventory Market Index: VTSAX (0.04%) to VTI (0.03%). Distinction of 0.01%.
  • Vanguard Whole Worldwide Inventory Index: VTIAX (0.12%) to VXUS (0.08%). Distinction of 0.04%.
  • Vanguard Small-Cap Worth Index: VSIAX (0.07%) to VBR (0.08%). No distinction.
  • Vanguard Rising Markets Inventory Index: VTIAX (0.14%) to VWO (0.08%). Distinction of 0.06%.
  • Vanguard Intermediate-Time period Treasury Index VSIGX (0.07%) to VGIT (0.04%). Distinction of 0.03%.

Once more, absolutely the variations in expense ratios aren’t that vital in my view except you might be speaking within the tens of millions. However the course of the development is fairly clear, and I do hope to have tens of millions in every ultimately. 🤑

Fast rundown of precise conversion course of:

  • Obtain all price foundation data. It is best to log into your account and obtain all the price foundation data for all of your mutual fund shares. That is very true for non-covered shares. The associated fee foundation for coated shares ought to carry over, but it surely’s higher to be protected.
  • I needed to name Vanguard on the telephone to provoke the conversion. Use the telephone in your account or strive 866-499-8473. (I couldn’t discover a strategy to do it on-line.) It took a pair jumps to seek out the correct particular person, however after that the method was easy. So long as the request is entered earlier than market shut, it ought to undergo on the finish of that very same day. In any other case, it’ll be the following day. You’ll acknowledge that this can be a one-way, non-reversible conversion. Once more, you aren’t promoting something, so there is no such thing as a taxable occasion.
  • The subsequent day, my shiny new ETF holdings have been accessible in my account. and I used to be additionally in a position to verify that all the tax heaps for price foundation carried via with out a difficulty. The conversion was finished on the internet asset worth (NAV) of the funds at market shut. All of my mutual fund shares have been transformed, and I used to be issued fractional shares of ETFs.

Scroll to Top