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Vanguard ETFs or Stocks?
Old 07-09-2013, 03:29 PM   #1
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Vanguard ETFs or Stocks?

DH and I (25 and 29 y/o) have new Roth IRAs with $5,000 each currently sitting in Money Market funds because we haven't yet decided where to invest the money. In looking at Vanguard's fee schedule today, I saw that it is free to buy Vanguard ETFs, but there is a $7 transaction fee for Vanguard stocks. I had planned to invest in VTSMX (Total Stock Market Index Fund) and VGTSX (Total International Stock Index Fund). (We have bonds in other investment vehicles.) Looking at the ETFs, I could instead invest in VTI (Total Stock Market ETF) and VXUS (Total International Stock ETF) and avoid the transaction fees. I'm not familiar with ETFs, and when I tried searching for information about them online, I just got confused, so now I have a new study topic for when I have time again.

Question: Is it worth it to invest in the ETFs instead of the index funds to avoid $14 in fees on $10,000?

Thank you for any advice or insight you might have!
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Old 07-09-2013, 03:40 PM   #2
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You might want to call them and ask because usually Vanguard funds are free I think.

Anyway, the ETFs are just the same as the funds but with lower expenses (assuming you are looking at the Investor share versions) so I would go with the ETFs because the ERs are lower.
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Old 07-09-2013, 04:22 PM   #3
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You would not buy a Vanguard index fund through the Vanguard Brokerage. You would set up a different account with Vanguard to buy a mutual fund, and it should be free to buy. There might be a maintenance fee involved if you have a low balance--under $10,000, I believe. Not sure if there is a similar fee for the Brokerage service and whether the fee is for each account under $10K. Under the "What we offer" tab, look at Mutual funds rather than Stocks, bonds, & CDs.

I think pb4uski is right that an ETF has lower expenses than an investor share mutual fund, so an ETF is probably the slightly better way to go. The difference is very small and the bid/ask spread may offset it, though I think I've only bought and sold one ETF. Otherwise, the underlying holdings of the ETF vs the index fund are the same. What I would look to avoid is the low balance maintenance fee which may mean consolidating your holdings in one account or the other.
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Old 07-09-2013, 04:34 PM   #4
Confused about dryer sheets
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Quote:
Originally Posted by RunningBum View Post
You would not buy a Vanguard index fund through the Vanguard Brokerage. You would set up a different account with Vanguard to buy a mutual fund, and it should be free to buy. There might be a maintenance fee involved if you have a low balance--under $10,000, I believe. Not sure if there is a similar fee for the Brokerage service and whether the fee is for each account under $10K. Under the "What we offer" tab, look at Mutual funds rather than Stocks, bonds, & CDs.
RunningBum, thank you for this! You're right that I was looking for mutual funds; now I feel really foolish. I signed us both up for paperless statements, so Vanguard waives the $20 annual fee for accounts under $10,000, so we're good there. Thanks again!
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Our background: DH and I are 25 and 29. He is active duty military and I am a veteran and a goverment GS civilian. We are debt-free as of last year and are now starting to invest with the intent to FIRE in about 14 years (when DH completes his 20 years in). We are DINKs and currently live in free on-base housing in a high COL area.
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Old 07-09-2013, 06:38 PM   #5
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Glad to help, Jexy, and good luck!
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