Index ETF or Index Mutual fund for brokerage acct

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wbarabas
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Index ETF or Index Mutual fund for brokerage acct

Post by wbarabas »

What is better for a brokerage acct? An index mutual fund or index ETF? Tracks the same index, same expense ratio, same turnover. Is there any advantage to one or the other?
bloom2708
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by bloom2708 »

I like the mutual fund because you can buy in amounts, not shares. When I invest I send $500 or $1,000 to taxable.

Buying the ETF always leaves the remainder un-invested. If you put $500 in and the share price is $220, you can buy 2 shares, leaving $60 in Settlement.

The ETF trades like a stock (price fluctuates through the day) and the mutual fund trades at the end of the day price.

With the ETF you have to initiate the transfer to your settlement and then buy. With the mutual fund I can do the buy and transfer in from checking in the same transaction. At least at Vanguard that is how it works.

These are not big differences and in the end, it may not matter much. The remainder is my primary reason.
Last edited by bloom2708 on Mon Apr 12, 2021 7:52 am, edited 1 time in total.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
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wbarabas
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by wbarabas »

bloom2708 wrote: Mon Apr 12, 2021 7:40 am I like the mutual fund because you can buy in amounts, not shares. When I invest I send $500 or $1,000 to taxable.

Buying the ETF always leaves the remainder un-invested. If you put $500 in and the share price is $220, you can buy 2 shares, leaving $80 in Settlement.

The ETF trades like a stock (price fluctuates through the day) and the mutual fund trades at the end of the day price.

With the ETF you have to initiate the transfer to your settlement and then buy. With the mutual fund I can do the buy and transfer in from checking in the same transaction. At least at Vanguard that is how it works.

These are not big differences and in the end, it may not matter much. The remainder is my primary reason.
Thank you!!!!
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nisiprius
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by nisiprius »

No, there are no important differences.

Claims that either kind of product--ETFs or mutual funds--are much better than the other, is debating about angels dancing on the head of a pin.

If you currently invest in individual stocks, and feel generally comfortable with that process, you should probably consider ETFs first. If you currently are familiar with mutual funds and bank accounts, and think in terms of "deposits" and "withdrawals" rather than "trades," you should probably consider mutual funds first.

Understand the fee structure of whatever you were buying, wherever you are buying it.

For well-known, popular kinds of index and categories--including "total market," "S&P 500," "mid-caps," "small-caps," "small-cap value," "international stocks," "dividend stocks" for stocks; "[Bloomberg-Barclay's] Aggregate Index" for bonds; short-term, intermediate-term, and long-term bonds, you will have many choices of both funds and ETFs from many providers, and, as with "87-octane gasoline" they are virtually clones.

If you have gotten drawn into some slightly-off-center specialty, e.g. "factor investing," then you may find that you can find the exact thing you want in an ETF and not in a mutual fund. Conversely, all-in-one whole-portfolio-in-one-fund packages, such as target-date retirement funds, are easier to find in mutual funds.

The financial structure of the product--mutual fund versus ETF--is a connoisseur's thing. When I bought my last car the salesperson tried to convince me that a certain car was better than another because it had a timing chain instead of a timing belt. Who knows? Maybe so, but it isn't something that even worth putting in the list of things to think about.

Getting the fund that has the stuff you want in it should dominate your choice.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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wbarabas
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by wbarabas »

nisiprius wrote: Mon Apr 12, 2021 7:52 am No, there are no important differences.

Claims that either kind of product--ETFs or mutual funds--are much better than the other, is debating about angels dancing on the head of a pin.

If you currently invest in individual stocks, and feel generally comfortable with that process, you should probably consider ETFs first. If you currently are familiar with mutual funds and bank accounts, and think in terms of "deposits" and "withdrawals" rather than "trades," you should probably consider mutual funds first.

Understand the fee structure of whatever you were buying, wherever you are buying it.

For well-known, popular kinds of index and categories--including "total market," "S&P 500," "mid-caps," "small-caps," "small-cap value," "international stocks," "dividend stocks" for stocks; "[Bloomberg-Barclay's] Aggregate Index" for bonds; short-term, intermediate-term, and long-term bonds, you will have many choices of both funds and ETFs from many providers, and, as with "87-octane gasoline" they are virtually clones.

If you have gotten drawn into some slightly-off-center specialty, e.g. "factor investing," then you may find that you can find the exact thing you want in an ETF and not in a mutual fund. Conversely, all-in-one whole-portfolio-in-one-fund packages, such as target-date retirement funds, are easier to find in mutual funds.

The financial structure of the product--mutual fund versus ETF--is a connoisseur's thing. When I bought my last car the salesperson tried to convince me that a certain car was better than another because it had a timing chain instead of a timing belt. Who knows? Maybe so, but it isn't something that even worth putting in the list of things to think about.

Getting the fund that has the stuff you want in it should dominate your choice.
Excellent! TY very much!
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grabiner
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by grabiner »

wbarabas wrote: Mon Apr 12, 2021 7:31 am What is better for a brokerage acct? An index mutual fund or index ETF? Tracks the same index, same expense ratio, same turnover. Is there any advantage to one or the other?
If it is a taxable account, a stock ETF is better than a non-Vanguard mutual fund tracking the same index. The ETF structure allows them to avoid most capital gains. At Vanguard, the ETF is a share class of the mutual fund, so they share the tax benefit.

Otherwise, it is a matter of which is more convenient for you to use.
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ivgrivchuck
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by ivgrivchuck »

wbarabas wrote: Mon Apr 12, 2021 7:31 am What is better for a brokerage acct? An index mutual fund or index ETF? Tracks the same index, same expense ratio, same turnover. Is there any advantage to one or the other?
The differences are minimal. As long as you stick with sensible ETFs/funds, it doesn't matter too much.

I use primarily ETFs because I don't want to be tied to any broker.

But you choose whatever fits best to you.
37% VTI | 37% VXUS | 13% I-bonds | 13% EE-bonds
steve r
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by steve r »

bloom2708 wrote: Mon Apr 12, 2021 7:40 am I like the mutual fund because you can buy in amounts, not shares. When I invest I send $500 or $1,000 to taxable.

Buying the ETF always leaves the remainder un-invested. If you put $500 in and the share price is $220, you can buy 2 shares, leaving $60 in Settlement.

The ETF trades like a stock (price fluctuates through the day) and the mutual fund trades at the end of the day price.

With the ETF you have to initiate the transfer to your settlement and then buy. With the mutual fund I can do the buy and transfer in from checking in the same transaction. At least at Vanguard that is how it works.

These are not big differences and in the end, it may not matter much. The remainder is my primary reason.
+1
I would add that I find mutual funds reduce my BEHAVIORAL errors over the years which are primarily an occasional belief I can time the market :oops: .

Did anyone catch that Greek debt is paying nearly 100 basis points less than US debt ... uh oh ... my point is that I see these things that do not make sense to me from time to time ... and trying to trade them turns out bad more times than it turns out good. Index mutual funds helps me stay the course.
Maximize Diversification - Minimize Costs - Avoid Lotteries
dukeblue219
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Re: Index ETF or Index Mutual fund for brokerage acct

Post by dukeblue219 »

At most modern brokerages (Fidelity, Schwab, not Vanguard) you can easily buy partial shares of ETFs so the issue of investing a dollar amount is moot. However you may not be able to automatically buy a certain amount each month like with funds.

I like that ETFs are easily ported to another brokerage when you want to move (maybe just to capture a transfer bonus). Funds aren't always carried by every brokerage, or may not be free to transact everywhere.
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