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Rollover Advice?
Old 07-13-2009, 01:02 PM   #1
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Rollover Advice?

My wife recently left her job and has a 401K and a lump sum pension that we will need to roll over to an IRA in the next few months. I had planned to roll them to IRAs with T. Rowe Price -- using their mutual funds -- since we already have some there. But lately I've been looking at the Vanguard ETF funds and especially their low expense ratios. I see that I could open a Rollover IRA in a Vanguard brokerage account, using ETFs.

Is this something that others have done? What are the pros and cons versus using mutual funds? Any advice appreciated.

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Old 07-13-2009, 03:53 PM   #2
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Yes, many here have rolled to Vanguard, Fidelity or Schwab. The 2 biggies that come to mind are cost vs loads and the ability to get the sector you believe in. I would run from any Mutual Fund with expense ratios that exceed the costs of indexes so that is basically all of them! Some day when I am older I might use a balanced bond fund.

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Old 07-13-2009, 04:45 PM   #3
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I'd suggest that you search ETF's on this site, as they have been discussed a number of times. Then I'd send you over to the Boglehead's forum to lurk, learn, then ask for suggestions.

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Old 07-13-2009, 04:55 PM   #4
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From Vanguard:

Also to directly compare the Vanguard ETF vs the equivalent MF:

In general if you are lump summing or buying large amounts infrequently the ETF is cheaper. If you buy small amounts frequently the MF is cheaper as there is no commission.

Vanguard ETF's also have some advantages if in a taxable account.

It is hard to beat Vanguard and Fidelity Spartan funds for expenses so I would stick with them.

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Old 07-13-2009, 05:21 PM   #5
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Vanguard funds will have lower expense ratios than TRowePrice, however their brokerage service VBS leaves quite a lot to be desire.

On regular mutual funds vs ETFs:

No-load funds have no commissions to buy/sell and you get the end-of-day NAV whenever you trade. No agonizing worries about limit orders, best prices, whatever. Some Vanguard funds have a small purchase fee of 0.25%.

ETFs trade like stocks, so you can have the following extra expenses:
1. Commissions (can be avoided by using a broker with free trades like WellsFargo).

2. Bid/ask spread: One does not buy at the NAV, nor sell at the NAV. There is a small spread that the market maker pockets. This can be 1 or 2 cents on a $30 stock or an extra 0.03% or more.

3. Premium/discount to NAV: Sometimes the bid/ask quote is a bit aways from the intraday NAV.

4. Any dividends automatically reinvested are usually a day or two later and the broker decides how much you pay for the reinvested shares. This is somewhat different from the standard mutual fund where shares are bought at the NAV on the same day as the distribution.

I like to use ETFs for my equities and use regular funds for my fixed income assets. I like to pick the price I am willing to pay, track tax lots, and do tax-loss-harvesting. I find all this easier with ETFs.

For more help with using Vanguard from folks who use Vanguard, check out:
Bogleheads :: View Forum - Investing - Help with Personal Investments
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