Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-31-2009, 06:37 AM   #21
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Last week I completed my conversion from mutual funds to ETFs in my IRA account. That account has most of my assets. The two Roths and DW's IRA are all in VTSMX. My taxable account has all VTI and 300 pathetic shares of BAC.

Here's what the conversion did as far as fees go.

DODFX (0.65%) became VEA (0.12%)
VEIEX (0.37%) became VWO (0.25%)
VTSMX (0.15%) became VTI (0.07%)
VSMAX (0.13%) became VB (0.10%)

It went very smoothly. With a CD recently matured, I had some free cash in my account. I bought about 2 to 2:30 every day and sold the nominal equivalent amount of mutual funds at the close. The next day ETrade had the cash available for investment so I did it again and again until I was done.

I paid $80 in commissions. I pay $5 for "market" and $10 for "limit." Most but not all of my ETF buys were limit orders. I break even in less than a month.

I also rebalanced my equities to the nearest 100 shares. All of my rebalancing is done in this account and I've moved the rebalancing date to early January since all the funds except VTI pays dividends on Dec 31. VTI does it quarterly.

My IRA also has all my CDs which is most of my fixed income/cash stuff. Getting the dividends in cash makes it easier to rebalance. My other tax deferred accounts all reinvest their dividends.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-31-2009, 07:06 AM   #22
Dryer sheet aficionado
 
Join Date: May 2008
Posts: 32
Quote:
Originally Posted by lsbcal View Post
Here is a source for premium/discount history: ETFConnect - Fund Quick Facts - Vanguard FTSE All-World ex-US ETF - VEU

I'm still trying to understand the gotchas on ETF's. Would appreciate insights particularily on premium/discounts. From the history for a fund like VBR (Vanguard Small Cap Value) you could easily loose or gain on the premium/discount front by maybe 0.4%. On 100k that's $400.

Also from Rick Ferri's The ETF Book:
One gotcha that has kept me away from ETFs,at least in my taxable acct, is that you pay a commission on each transaction. If you dollar cost average, as I do, those commissions add up and detract from your returns, esp. over time.
__________________

__________________
Marcretire is offline   Reply With Quote
Old 01-31-2009, 09:54 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Quote:
Originally Posted by 2B View Post
DODFX (0.65%) became VEA (0.12%)
VEIEX (0.37%) became VWO (0.25%)
VTSMX (0.15%) became VTI (0.07%)
VSMAX (0.13%) became VB (0.10%)
...
I paid $80 in commissions. I pay $5 for "market" and $10 for "limit." Most but not all of my ETF buys were limit orders. I break even in less than a month.
2B, you have done what you've done, so this note is mostly for others watching this.

(1) A better match for DODFX is VEU since both contain emerging markets equities in about the same proportion.

(2) Your Vanguard switches are merely a different share class of the same fund. Vanguard would've let you change share class at the NAV for $50 per switch. I think you sold the fund at NAV then purchased the ETF shares the next day, so that means there was some friction there. If the fund dropped in value over that day, you made money. If it gained in value, then you lost money. It's not clear where you held your Vanguard funds and thus the costs to do these exchanges.

You stated this was in your IRA, so no tax-loss harvesting, but for others these transactions of converting from the investor share class to the ETF share class could be so-called wash sales if the shares were sold for a loss.
__________________
LOL! is offline   Reply With Quote
Old 01-31-2009, 10:46 AM   #24
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by LOL! View Post
2B, you have done what you've done, so this note is mostly for others watching this.

(1) A better match for DODFX is VEU since both contain emerging markets equities in about the same proportion.

(2) Your Vanguard switches are merely a different share class of the same fund. Vanguard would've let you change share class at the NAV for $50 per switch. I think you sold the fund at NAV then purchased the ETF shares the next day, so that means there was some friction there. If the fund dropped in value over that day, you made money. If it gained in value, then you lost money. It's not clear where you held your Vanguard funds and thus the costs to do these exchanges.
I intended to get VEA because my emerging markets are "pure" in VWO. Because of the CD cash, I bought the ETF shortly before the close and sold the mutual fund on the close. The time difference was within an hour. Being anal, I kept a rough track of how things worked out between where the market closed and what I bought the ETF for. I was slightly ahead but not too much overall.

The IRA was at Etrade so I got off much cheaper than if I paid Vanguard $50 for each swap.

I have VTI in my taxable account but don't reinvest dividends. I'm more than keeping my AA in equities by my 401k and SERP contributions.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 01-31-2009, 10:47 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,675
Quote:
Originally Posted by LOL! View Post
...
(2) Your Vanguard switches are merely a different share class of the same fund. Vanguard would've let you change share class at the NAV for $50 per switch. I think you sold the fund at NAV then purchased the ETF shares the next day, so that means there was some friction there....
LOL, are you saying here that VG will let you switch from ETF's to funds and vice-versa at the closing day price of the fund (the NAV) for $50? So especially if the ETF is selling at a premium you will perhaps get a better deal depending on the trade amount. An observation, Rick Ferri has suggested buying/selling ETF's one-half hour before close (or after the open) so I guess this would be counter to his suggestion.
__________________
Lsbcal is offline   Reply With Quote
Old 01-31-2009, 08:23 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Quote:
Originally Posted by lsbcal View Post
LOL, are you saying here that VG will let you switch from ETF's to funds and vice-versa at the closing day price of the fund (the NAV) for $50? So especially if the ETF is selling at a premium you will perhaps get a better deal depending on the trade amount. An observation, Rick Ferri has suggested buying/selling ETF's one-half hour before close (or after the open) so I guess this would be counter to his suggestion.
No, you added more to what I said than what I said. Consult with Vanguard for details and not with me.

Rick Ferri is a great guy who seems to understand the lay investor who needs help. I don't buy into his rules-of-thumb myself, but they are good if you are clueless.
__________________
LOL! is offline   Reply With Quote
Old 02-01-2009, 06:53 AM   #27
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by lsbcal View Post
An observation, Rick Ferri has suggested buying/selling ETF's one-half hour before close (or after the open) so I guess this would be counter to his suggestion.
I held SPY and IWD in my taxable account until December when I sold to book the tax loss. I bought VTI.

I've seen some irrational moves by SPY right at the open and right at the close. The moves can be almost 1% up or down from the actual index. The only logic is that traders are anticipating index moves that may or may not happen. Most of the time SPY moved with the index during the day. The wild opens or closes were infrequent but not alway predictable.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 02-02-2009, 12:04 AM   #28
Thinks s/he gets paid by the post
DblDoc's Avatar
 
Join Date: Aug 2007
Posts: 1,224
Quote:
Originally Posted by Marcretire View Post
One gotcha that has kept me away from ETFs,at least in my taxable acct, is that you pay a commission on each transaction. If you dollar cost average, as I do, those commissions add up and detract from your returns, esp. over time.
It depends on how much you purchase at a time and how long you hold them. Vanguard has a calculator to help determine which is better for a given situation.

https://personal.vanguard.com/us/fac...nt.jsp?etfId=0

DD
__________________
DblDoc is offline   Reply With Quote
Old 02-06-2009, 03:24 PM   #29
Recycles dryer sheets
bamsphd's Avatar
 
Join Date: Nov 2005
Posts: 337
Quote:
Originally Posted by lsbcal View Post
LOL, are you saying here that VG will let you switch from ETF's to funds and vice-versa at the closing day price of the fund (the NAV) for $50?
From the brokerage fees and commissions page at: https://personal.vanguard.com/us/acc...lueContent.jsp under "Other Fees."

Vanguard ETFs $50 per conversion of conventional Vanguard index fund shares to shares of Vanguard ETFs. Flagship: no charge. (Fees may vary at other brokerage firms.)

As I understand it, this allows you to convert from an open ended Vanguard index fund into the equivalent ETF without triggering a taxable event. [Warning, I'm just a layman, I'm NOT a CPA, lawyer, etc.]

I have never encountered anything saying Vanguard will let you go the other direction. From an ETF to an open ended fund. However, I would suggest asking Vanguard if you have a desire to do that. Worst case, they say no.
__________________
bamsphd is offline   Reply With Quote
Old 02-06-2009, 04:10 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,675
I did ask VG and they confirmed that one could convert funds -> ETF's but not vice-versa. I was just wondering if this allowed one to get the ETF's without having to worry about discounts/premiums but that is really not the case. You will just get the closing ETF price which may be distorted by funny things that happen toward the close. Oh well.
__________________
Lsbcal is offline   Reply With Quote
Old 02-06-2009, 04:57 PM   #31
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 1,318
Lsbcal,
Did Vanguard say whether the exchange would be treated as a taxable event? If not it is significant.

The way things work with the IRS, the wash sale rule only works against you if you're trying to claim a loss. A sale and re-buy is counted as no sale at all (ie. no loss claimable) if you have a loss. But If you have a gain and sell from one fund and within 30 days buy into another 'effectively identical' fund, you've got yourself a capital gains tax liability. (Heads I win, Tails you lose... Funny how that works!)

Having Vanguard exchange these into ETFs without triggering the gain, sort of like switching from Investor-level fund to Admiral-level fund, is a big boon.

Anybody else have the scoop on this?
__________________
ER for 10 years; living off 4.3% of savings (and a few book royalties ;-)
ESRBob is offline   Reply With Quote
Old 02-06-2009, 05:17 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,675
I did not make this clear but all my trading is in tax deferred accounts. So taxes are not an issue for me.
__________________

__________________
Lsbcal is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Thoughts on improving a lazy ETF portfolio FinanceGeek FIRE and Money 12 08-14-2007 04:20 PM
New ETF: Sudan-Free social ETF Olav23 FIRE and Money 2 06-28-2007 10:03 AM
High Dividend Portfolio vs Portfolio Diversified Across Asset Classes ScaredtoQuit FIRE and Money 36 01-12-2007 01:24 PM
ETF only portfolio webbach FIRE and Money 19 12-15-2006 11:37 AM
The FIRE dividend ETF portfolio preben FIRE and Money 6 05-15-2006 02:16 PM

 

 
All times are GMT -6. The time now is 04:25 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.