New VG ETFs

[chinaco]

ETFs that are the same as their mutual funds

New twist in the index fund-vs.-ETF battle - The Boston Globe


* S&P 500 (VOO)
* S&P 500 Value (VOOV)
* S&P 500 Growth (VOOG)
* S&P Mid-Cap 400 (IVOO)
* S&P Mid-Cap 400 Value (IVOV)
* S&P Mid-Cap 400 Growth (IVOG)
* S&P Small-Cap 600 (VIOO)
* S&P Small-Cap 600 Value (VIOV)
* S&P Small-Cap 600 Growth (VIOG)


Eventually there will be 19 new ETFs that have a lower cost than the MF equivalent.


https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/research/article?File=IWE_NewsETFExpand

Video explaining it.

https://www.brainshark.com/brainshark/vu/view.asp?pi=444454577&id=web

And if you have VG Brokerage account... apparently the trades are free.

https://personal.vanguard.com/us/insights/article/commissions-05042010

 

[73ss454]

If money is taken from a MF and put into an ETF in lets say the S&P 500 fund or ETF does that create a taxable event?

 

[chinaco]

If money is taken from a MF and put into an ETF in lets say the S&P 500 fund or ETF does that create a taxable event?

Interesting question. Not sure... but I suspect selling is a taxable event (in a taxable account).


This is probably something that advisers will use to manage portfolios (cheaply) and make more profit by lowering their cost.

 

[Martha]

If money is taken from a MF and put into an ETF in lets say the S&P 500 fund or ETF does that create a taxable event?

It depends:
Converting a Vanguard Index Fund to an ETF without Paying Taxes

 

[Nords]

And if you have VG Brokerage account... apparently the trades are free.

So... how's Vanguard's brokerage? And do they trade options?

 

[73ss454]

Thanks Martha, I can't seem to open your link up. Can you help?

 

[Martha]

Thanks Martha, I can't seem to open your link up. Can you help?

It opens for me so I don't know what is wrong. Anyway, the article quotes this from Vanguard (which you should of course check):

Shareholders of Vanguard stock index funds that offer Vanguard ETFs may convert their conventional shares to Vanguard ETFs of the same fund. This conversion is generally tax-free, although some brokerage firms may be unable to convert fractional shares, which could result in a modest taxable gain. (Bond ETFs do not allow the conversion of bond index fund shares to bond ETF shares of the same fund.)
Vanguard will charge $50 for each conversion. (This fee is waived for Flagship clients.) Your brokerage provider may charge an additional fee for this service. For more information, contact your brokerage firm, or call 866-499-8473.
Once you convert to Vanguard ETFs, you cannot convert back to conventional shares. Also, conventional shares held through a 401(k) account cannot be converted to Vanguard ETFs.



EDIT: I couldn't find this info on the vanguard site but I didn't look too hard. I did find this: " For more information about Vanguard ETF Shares, including information on converting conventional shares to Vanguard ETF Shares, call 866-499-8473."​

 

[chinaco]

So... how's Vanguard's brokerage? And do they trade options?

It has been awhile since I used VG as a broker... I stopped when I sold all of our individual stocks. Right now I only use mutual funds and work directly with the fund companies. Back when I used them to buy/sell stock, they used a 3rd party for that service. At the time I think they used Pershing to clear trades. As far as I know you can trade most securities.

https://personal.vanguard.com/us/whatweoffer/stocksbondscds/brokerage-services-account

I was not a frequent trader... but I did not have any problems with the it.

 

[73ss454]

Thanks Martha!

 

[Htown Harry]

And if you have VG Brokerage account... apparently the trades are free.

Confirmed with a purchase just now commission =$0.

The VOO expense ratio is listed at 0.06% - wow. Thanks for the tip, Chinaco.

I'm not sure if was necessary, but I was careful to use a limit order - the OTC bid /ask spread for after-hours trading is huge.

So... how's Vanguard's brokerage? And do they trade options?

Yes, they do trade options.

 

[Nords]

I was not a frequent trader... but I did not have any problems with the it.

The VOO expense ratio is listed at 0.06% - wow. Thanks for the tip, Chinaco.
Yes, they do trade options.

Thanks. Vanguard has always annoyed me with its rock-bottom customer service and anti-trader attitude, but this may be different. And I like selling covered calls on shares I wouldn't mind rebalancing anyway.

I'm going to have to see how Vanguard does on matching three ETFs I'm holding with Fidelity now-- a Dow Dividend (DVY), a MSCI index (EFV), and a small-cap value (IJS). I can leave the Berkshire shares at Fidelity.

 

[Lsbcal]

So... how's Vanguard's brokerage? And do they trade options?

My guess is for occasional trading it's very good. If your the sort of trader that wants special trading software and maybe fairly sophisticated it may not work out.

I think that VG spreads are very good on a relative basis but not a lot of data there. I've used their brokerage for trading ETF's, almost all VG's ETF's. Nowadays I don't try to outguess the market i.e. I just place limit orders at the bid or ask. Executions are generally quick and painless. Sorry, I don't use options.

 

[chinaco]

I hope they cover the international stock indexes and domestic and international bond markets next.

Rock bottom cost and broad diversification.

The final category would be an ETF of ETFs covering several global risk based allocation strategies.

 

[LOL!]

I hope they cover the international stock indexes and domestic and international bond markets next.

?
Vanguard already has lots of etf's in these areas. They've been covered for a while.

VEU, VSS, VEA, VWO, BND, etc.

Not an int'l bond fund unless it is in the new batch.
Nor an int'l value fund like EFV.
VBR is a replacement for IJS.

But if you want free trades of all ETFs, just switch to WellsFargo and abandon both Vanguard and Fidelity.

 

[chinaco]

?
Vanguard already has lots of etf's in these areas. They've been covered for a while.

VEU, VSS, VEA, VWO, BND, etc.

Not an int'l bond fund unless it is in the new batch.
Nor an int'l value fund like EFV.
VBR is a replacement for IJS.

But if you want free trades of all ETFs, just switch to WellsFargo and abandon both Vanguard and Fidelity.

By jove you're right!

 

[afntrn56]

Interesting that every one of these ETF's are 50 bucks a share!!! How the heck did THAT happen??

 

[Lsbcal]

What I like about the Vanguard MSCI based funds and ETF's (like VTV, VOE, VBR -- large cap value, mid-cap value, small cap value) is the existence of actual index data going back to about 1992. You can get that on the MSCI site.

Is there any good index data for some years back for these new S&P indexes? Or are retail investors just suppose to imagine the new index behavior under various past markets? My first guess is the data exists but maybe is only available to subscribers of S&P services i.e. "professionals". But I'd prefer to be proved wrong on this.

Maybe this is a partial answer to my question. I find the iShares S&P Midcap Value 400 here iShares S&P MidCap 400 Value Index Fund (IJJ): Overview - iShares . When comparing the performance of IJJ (monthly returns Excel sheet) versus the Vanguard Midcap-Value fund (VOE or VMVIX), the total return for Mar-01 to Aug-10 is 177% for IJJ and 358% for VOE. For the last 12 months IJJ is up 9.8% versus 12.2% for VOE. Maybe this MSCI index is more value tilted then S&P? Why would I want S&P?

Another clue is that M* shows IJJ's centroid (in the style box) to be somewhat smaller cap but less valuey then VOE. VOE's centroid is squarely in the middle of their mid-value box.

 

[WanderALot]

It opens for me so I don't know what is wrong. Anyway, the article quotes this from Vanguard (which you should of course check):

...
Vanguard will charge $50 for each conversion. (This fee is waived for Flagship clients.) Your brokerage provider may charge an additional fee for this service. For more information, contact your brokerage firm, or call 866-499-8473.
​

Martha, the article you quoted was from '07, I believe Vanguard doesn't charge the $50 conversion fee for non-Flagship clients anymore. Here is the current link (second question from the end):

https://personal.vanguard.com/us/content/Funds/FundsVIPERWhatAreVIPERSharesJSP.jsp

I'm not too impressed with their brokerage service. No problems with its execution or anything, just the slightly quirky interface. I trade *very* infrequently and the last time I executed a trade was when they were still using Pershing.

 

[FinanceDude]

VOO is going to have a tough time. SPY is the most actively traded ETF in the world, what's going to make VOO better? Seems to me a little late to the party in some aspects............

 

[chinaco]

VOO is going to have a tough time. SPY is the most actively traded ETF in the world, what's going to make VOO better? Seems to me a little late to the party in some aspects............

Good question.

If VOO shares are thinly traded, it could lead to a wider discount against the NAV...

 

[FUEGO]

I checked out a couple new VG etfs today, and the volume was tiny, yet the bid/ask spreads were very small (similar to much more active iShares of the same asset class). Less than 0.1% on those I looked at. Not normal for very thinly traded issues.

 

[FinanceDude]

I guess I can see why they did the other ones, but competing against SPY doesn't have any real advantage.

VG sometimes has an alter ego, like their recent attempts to actively prospect FAs to use their ETFs. Almost seems ironic that the "fire your advisor" company wants advisors to help them.........

I would think they would make a bigger push to get their MF clients to diversify into ETFs.............

 

[FUEGO]

I guess I can see why they did the other ones, but competing against SPY doesn't have any real advantage.

VG sometimes has an alter ego, like their recent attempts to actively prospect FAs to use their ETFs. Almost seems ironic that the "fire your advisor" company wants advisors to help them.........

I'm not sure if you are just trolling ( ), but I assume you know it is all about AUM.

Say VG has $10 billion in an index fund and it costs them x to manage the fund assets. If they can get $20 billion in the fund (by reaching out to FA's), and spend less than 2x to manage the $20 billion, then they are reducing expense ratios. Lowering expense ratios is good for Vanguard investors. Very good.

And the sales job should* be easy for VG, since the expense ratios are often lower on VG's etf's versus the competition. I would guess that these brand new VG etfs will initially suffer from lower liquidity, higher bid-ask spreads, larger discounts/premiums to NAV's, greater potential for market impact costs, etc.

* I say "should" because FA's don't necessarily understand or want to trim a few basis points off of their investment expenses for self-serving reasons (bigger commissions from competing investments)

 

[FinanceDude]

I'm not sure if you are just trolling ( ), but I assume you know it is all about AUM.

I don't troll............if folks want to wear their neat 70's rose colored glasses and think every FA has a 100 foot yacht and drives a Bentley, well, then I can't talk them out of that............

And the sales job should* be easy for VG, since the expense ratios are often lower on VG's etf's versus the competition. I would guess that these brand new VG etfs will initially suffer from lower liquidity, higher bid-ask spreads, larger discounts/premiums to NAV's, greater potential for market impact costs, etc.

SPY's ER is 9 basis points...........that's a VG type ER number and I have been using SPY for 10 years..............

* I say "should" because FA's don't necessarily understand or want to trim a few basis points off of their investment expenses for self-serving reasons (bigger commissions from competing investments)

Until ya walk a mile in my shoes..............

 

[FUEGO]

FD, I'm just busting your chops. I know you are one of the good guy FA's, right? My comments are addressed towards the lumpen slums of FA's that sell load funds inside variable annuities inside IRAs. That is, if they can't get you to buy a whole life policy first.

SPY still has an ER that is 50% higher than VG's VOO. You'll only save $30 a year on a $100,000 position. And right now there is only a penny bid-ask spread (0.02%), and enough bid/ask size to handle at least $80,000 in one trade without moving the market. If I was in the market for some SP500 ETF, I would probably buy VOO. But I wouldn't worry about selling and paying cap gains on SPY to save a few bucks a year in expense ratio.

A big savings will be for those having a brokerage account at VG, they can trade free on the ETFs now. If they are buying multiple ETFs on a periodic basis that is.