ETF or MF for bond fund in IRA?

[disneysteve]

I was going to invest part of DW's rollover IRA in a Vanguard index fund. But I realized that they also offer the same option as an ETF. The MF has an ER of 0.05%. The ETF has an ER of 0.035%. So yes, the ETF is cheaper, but only by 15 thousandths of a point. It that really enough to make a difference?

It's an IRA so taxation isn't a concern. And it's a rollover account so she won't be adding to it in the future.

Should I go with the ETF for the lower ER? The only very minor downside is we can't do fractional shares so there will be a little money left but that can just go into the other MF she already has in that account.

Any other reason to favor the ETF vs the MF in this setting?

[cypher1]

I just had similar discussion with a buddy. If I or someone else was just starting out, and had very little to start investing with, I'd say go ETFs vs minimum of 3K for Admiral type funds (or go Investor class). But for simplification I already do Indexes in all my accounts, so I'd say stick with Index for consistency. Fractional shares is nice, along with scheduling. I understand with ETFs you can set purchase/sell processes, which a lot of people here don't mind doing. But for others who don't care or want easier setup, index is the way to go. Also, I wouldn't get too hung up on E/Rs as well.

[disneysteve]

I just had similar discussion with a buddy. If I or someone else was just starting out, and had very little to start investing with, I'd say go ETFs vs minimum of 3K for Admiral type funds (or go Investor class). But for simplification I already do Indexes in all my accounts, so I'd say stick with Index for consistency. Fractional shares is nice, along with scheduling. I understand with ETFs you can set purchase/sell processes, which a lot of people here don't mind doing. But for others who don't care or want easier setup, index is the way to go. Also, I wouldn't get too hung up on E/Rs as well.

This will essentially be a one-time purchase as she won't be adding to this account, so the scheduling issue doesn't matter. She's got enough to qualify for the Admiral shares. Other than the 0.015% difference in ER, I really can't think of any advantage one way or the other.

[kork13]

This will essentially be a one-time purchase as she won't be adding to this account, so the scheduling issue doesn't matter. She's got enough to qualify for the Admiral shares. Other than the 0.015% difference in ER, I really can't think of any advantage one way or the other.

Yeah, knowing that you won't be contributing to it at all, you might as well just take the fractionally smaller ER & go with the ETF, then let it sit & ride.

[disneysteve]

Yeah, knowing that you won't be contributing to it at all, you might as well just take the fractionally smaller ER & go with the ETF, then let it sit & ride.

I think that's the way to go. If there is no benefit to the MF, we might as well get the smaller ER. It'll save us $7.50/year on $50,000. It's not much but why pay it if we don't have to.