Announcement

Collapse
No announcement yet.

Question about first Vanguard investment

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

    Question about first Vanguard investment

    I'm trying to expand my investment efforts, currently I'm only invested in a 401K, IRA's, and 529. Through various articles and podcasts, the Vanguard low cost index funds continually came up as a reputable choice so I decided to take the plunge. I think I may have invested in the "wrong" account. I invested in "Vanguard Total Stock Market Index Fund Admiral Shares", as the "Total Stock Market Index Fund" was what I wrote down in my notes after listening to various podcasts & such. But after I invested, I was reading another article that spoke of the differences between Admiral Shares & other shares. It seems I chose a higher cost investment? It seems the EFT was the lower cost? I can't figure out the difference. I'm definitely an investment newbie, could someone shed some light on the choice I made vs. the EFT? Perhaps a silly question, but I want to set up auto investments every month into the Vanguard account, if I did indeed choose wrong, can I keep that money in there and set up auto investments for the EFT account? Thank you.

    #2
    Generally speaking, ETFs (exchange traded funds) have lower costs than mutual funds. However, that's not the case in this situation. Both the Vanguard Total Stock Market index fund and the Total Stock Market ETF both have an expense ratio of 0.04%. If this is an investment you plan to hold long term, there's really very little difference. The "advantage" of an ETF is that it trades like a stock so you can sell it at any time during the trading day whereas a mutual fund only trades at the end of the day.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    Comment


      #3
      Thanks, Steve!

      I do plan on just buying consistently and holding and don't really see myself timing the market to sell in that capacity. Thanks for the reassurance that it wasn't a total fail!

      Comment


        #4
        I also focus on VTSAX as the majority of my US stocks exposure. Otherwise the admiral share used to require minimum of 10K (recently lowered to minimum 3K), with expense ratio .04%, while the ETF VTI has the same expense ratio, but no minimum. Prior to the Admiral share, they had Investor share for 3k,but higher expense, but this share has been dropped. Fees are not a concern for those two since they're the same. Otherwise I prefer MFs for automatic scheduling to purchse, and buying fractional shares, so no small amounts left.

        I'm still fairly new to the investing side, and I'm sure more experienced users will chime in for more details, but these links should help steer you in the right direction.

        This is a good break down between the Total Stock Market Index Fund Admiral Shares (VTSAX) vs Investor Shares (VTSMX ) and ETF VTI.
        https://www.hisandherfi.com/vanguard-vtsax-vtsmx-vti/

        Pros/cons of MFs vs ETFs:
        https://www.bogleheads.org/forum/vie...=767441#767441

        "I'd buy that for a dollar!"

        Comment


          #5
          DS beat me to it
          "I'd buy that for a dollar!"

          Comment


            #6
            I didn't read the boglehead link but ETFs tend to be more tax efficient, so if this is a taxable account that could be a factor. But index funds, by nature, are pretty tax efficient anyway. They don't do a lot of trading. Still, they do pay out capital gains every year which are taxable while with an ETF, the gains aren't taxed until you sell.
            Steve

            * Despite the high cost of living, it remains very popular.
            * Why should I pay for my daughter's education when she already knows everything?
            * There are no shortcuts to anywhere worth going.

            Comment


              #7
              vanguard total market is a good start. id choose the eft as well, but maybe depends on your brokerage account. efts are treated as stocks which has lower trading commissions than mutual funds generally.

              Comment


                #8
                Originally posted by ~bs View Post
                efts are treated as stocks which has lower trading commissions than mutual funds generally.
                OP, did you buy the fund direct from Vanguard or through a broker?
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                  #9
                  ^ good question.

                  Comment


                    #10
                    Adding one note to emphasize one of OP's questions ... One downside of ETFs is that you cannot set ETFs to auto-purchase. Only mutual funds provide that option (at least with Vanguard--another broker might allow it).

                    Really, there is virtually no difference between VTSAX & VTI. I choose to use the mutual fund for the ease of use, but the ETF is just as good. The auto-purchase vs. trading as a stock is basically the only differentiator between them.
                    "Praestantia per minutus" ... "Acta non verba"

                    Comment


                      #11
                      Originally posted by disneysteve View Post

                      OP, did you buy the fund direct from Vanguard or through a broker?
                      Directly through Vanguard.

                      Thanks for all the advice and info! I hadnít intended to start with the 3K minimum, though I hadnít really considered what the minimum would be. I really do want to just automate it, so it sounds like the mutual fund works out best for me since EFT doesnít offer that option. Thanks!

                      Comment


                        #12
                        if you go through a brokerage, there generally is no minimum if you're buying the eft. and you only need to pay the $10 trading fee or whatever. I think direct mutual fund investment with vanguard has no purchase fee, but you have the higher minimum.

                        Comment


                          #13
                          Originally posted by tink View Post

                          Directly through Vanguard.

                          Thanks for all the advice and info! I hadnít intended to start with the 3K minimum, though I hadnít really considered what the minimum would be. I really do want to just automate it, so it sounds like the mutual fund works out best for me since EFT doesnít offer that option. Thanks!
                          It sounds like the choice you made is just fine.

                          I actually started investing in my first Vanguard ETF just last year. The process is definitely a bit different. I put in $1,000/month but you can only fund the purchase from your settlement fund, so first I have to put the money in the settlement fund. Then I can enter the buy order for the ETF shares. You can only buy whole shares, so they have a calculator built into the transaction page. I enter $1,000 and it tells me how many shares I can get. It's always a little less than $1,000 worth, so the extra stays in the settlement fund until I use it. So one month, my $1,000 bought 11 shares. The next month, between the new $1,000 and what remained in the settlement fund, I was able to get 12 shares. At the moment, I've got $21 sitting in the settlement fund from last month's investment so it's not like a lot of money is sitting uninvested.

                          I didn't care about auto investing for this account so that wasn't a deciding factor. I'm fine doing it manually each month.
                          Steve

                          * Despite the high cost of living, it remains very popular.
                          * Why should I pay for my daughter's education when she already knows everything?
                          * There are no shortcuts to anywhere worth going.

                          Comment

                          Working...
                          X