ETF vs. Index MF

[disneysteve]

It's been about a year now of me buying ETFs vs. MFs, and I find myself re-evaluating if this is really of benefit to me, and if I should just transition back to the MFs, or at least modify my purchase strategy somehow.

My purchase strategy has basically been to set twice-monthly limit orders on the 5x ETFs I'm buying, using a limit price of roughly the trailing 5-day low mark of the ETF.

Or should I give up entirely on the ETFs and just go back to the easy option of MFs, which I can set up for regular automatic purchases at end-of-day?

So with MFs you weren't doing any sort of market timing. You were just buying on a regular and consistent basis. Why not do the same with the ETFs? It sounds like you've unnecessarily complicated the process.

I make my ETF purchase every month as a market order and I almost always put the order in at a time when the market is closed. So basically exactly the same as I would with a MF purchase. I don't try to time the purchase based on market conditions or the price on any given day.

[jIM_MI]

So I'm planning to use the majority of our taxable investments to buy our next house either in cash, or hopefully set us up to pay it off very quickly. While I'm basically emptying our taxable account anyway, I'm looking at potentially rejiggering how we manage our taxable investments. The bottom line question is basically "ETF vs. Index MF."

I'm trying to decide if I should transition our taxable investments from index mutual funds into comparable ETFs instead. We're in a good place on the retirement side (could stop saving in retirement accounts today and do just fine), but we need to build up some bridge investments over the next 15-20 yrs to enable us to retire early, basically whenever we want.

What I'm considering are already pretty low-cost, fairly tax-efficient options, regardless of ETF vs. Index MF -- VOO/VO/VB/VXUS/VNQ and their associated index MF's (VFIAX/VIMAX/VSMAX/VTIAX/VGSLX)

ETF Pros:
- More tax-efficient (low-to-zero taxable capital gains)
- Slightly lower ER costs (1-4 bp's)
- Trade as stocks (limit orders give slightly more control over buy/sale price & timing...minimal concern for me)

ETF Cons:
- No auto-investment option (more hands-on)
- No round-dollar investing (mostly just bothers the OCD side of my brain)
- No fractional shares, so money can be left sitting around in cash

Not necessarily cons, but the other two things that I'm trying to wrap my head around that make me slightly hesitant to go full-bore into ETFs is that I don't fully understand the impact of the 'bid-ask spread' between seller/buyer, and 'discount/premium' between share price & NAV.

So who does regular investing with ETFs? Is having to go in & manually buy all of your shares every few weeks worth the tax efficiency & slightly lower ER's offered by the ETFs? Or just an unnecessary pain?

My dividends at etrade auto invest back into same ETFs (Vanguard ETFs)