Converting Vanguard accounts to brokerage, funds to ETFs

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Da5id
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Converting Vanguard accounts to brokerage, funds to ETFs

Post by Da5id »

Before I go ahead and convert my 3 non-brokerage accounts at Vanguard to brokerage accounts, any comments on why I shouldn't do it? I have 4 other brokerage accounts there, seems OK so far. I intend to do this so as to convert 3 of my mutual funds to the paired ETFs:

VBTLX->BND (ER 0.05%->0.035%)
VTSAX->VTI (ER 0.04%->0.03%)
VTIAX->VXUS (ER 0.11%->0.08%)

Anything to look out for? I'll carefully store and compare my cost basis for the taxable funds. I assume I don't care about the basis in my various IRAs and inherited IRAs? I assume this just takes a phone call (or a direct message?) to get them to do the Mutual Fund->ETF migration?

The immediate motivation is to drop the ERs (saving a few $100 per year). It is also to simplify in advance moving elsewhere should I decide to do so. I'm not losing my messages, and in any case I haven't decided to move elsewhere. But certainly the possibility is feeling pretty open at this point, despite being at Vanguard for over 30 years.

That will leave me with a few mutual funds at Vanguard (money market, VAIPX, and VBIRX) that don't have analogous ETFs, but that is fine.
increment
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by increment »

Da5id wrote: Tue Aug 03, 2021 1:04 pm VBTLX->BND (ER 0.05%->0.035%)
Vanguard says, "Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—don't allow for conversions.)"
Topic Author
Da5id
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by Da5id »

increment wrote: Tue Aug 03, 2021 1:15 pm
Da5id wrote: Tue Aug 03, 2021 1:04 pm VBTLX->BND (ER 0.05%->0.035%)
Vanguard says, "Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—don't allow for conversions.)"
Ah thanks. Well since all of my VBTLX is in some sort of IRA that isn't an issue, I'll just sell and buy. Which I can of course do for all funds in those accounts.
nalor511
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by nalor511 »

Da5id wrote: Tue Aug 03, 2021 1:19 pm
increment wrote: Tue Aug 03, 2021 1:15 pm
Da5id wrote: Tue Aug 03, 2021 1:04 pm VBTLX->BND (ER 0.05%->0.035%)
Vanguard says, "Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—don't allow for conversions.)"
Ah thanks. Well since all of my VBTLX is in some sort of IRA that isn't an issue, I'll just sell and buy. Which I can of course do for all funds in those accounts.
You'll come out exactly even, without any premium/discount or bid/ask nonsense, if you have VG do the conversion (where possible)
UpperNwGuy
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by UpperNwGuy »

I think you're making a good move. I still hold mutual funds but in a brokerage account. All of mutual funds are convertible to ETFs. I haven't pulled the trigger yet because I still like being able to invest 100% of each month's contributions without leaving any residual cash on the table after buying whole ETF shares.
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Da5id
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by Da5id »

nalor511 wrote: Tue Aug 03, 2021 1:24 pm
Da5id wrote: Tue Aug 03, 2021 1:19 pm
increment wrote: Tue Aug 03, 2021 1:15 pm
Da5id wrote: Tue Aug 03, 2021 1:04 pm VBTLX->BND (ER 0.05%->0.035%)
Vanguard says, "Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—don't allow for conversions.)"
Ah thanks. Well since all of my VBTLX is in some sort of IRA that isn't an issue, I'll just sell and buy. Which I can of course do for all funds in those accounts.
You'll come out exactly even, without any premium/discount or bid/ask nonsense, if you have VG do the conversion (where possible)
That makes sense. Can't do that for VBTLX, but might as well for the others. Probably comes out in the wash, but why not.
UpperNwGuy
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by UpperNwGuy »

Why not keep VBTLX as a mutual fund? You can hold it in your brokerage account. You could stop contributing to it and put all new contributions to BND.
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Da5id
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by Da5id »

UpperNwGuy wrote: Tue Aug 03, 2021 2:10 pm Why not keep VBTLX as a mutual fund? You can hold it in your brokerage account. You could stop contributing to it and put all new contributions to BND.
That 's a thought. I figured I'd make a clean sweep and get it done now. Other than fractional share purchase (BND is $86, not a big cash drag) doesn't matter right? Given the amount of BND I have it is well over $100 difference in expenses, which seems more important than the interest on a fractional share.
Topic Author
Da5id
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by Da5id »

I do wonder why BND and VBTLX were so different, particularly in the early years.

https://www.portfoliovisualizer.com/bac ... ion2_2=100
AQ
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by AQ »

I still haven't done the conversion to the brokerage account yet. The main concern is that should something come up during the transition (say, mess up the cost basis), it's a big hassle to deal with given frequent complaints about the customer services or lack of... Though not sure how long Vanguard will keep the mutual fund platform open..
sycamore
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by sycamore »

Da5id wrote: Tue Aug 03, 2021 1:04 pm ...Anything to look out for? I'll carefully store and compare my cost basis for the taxable funds.
Things to do on your new brokerage account:
- confirm / set your cost basis method (probably want SpecID)
- confirm / set up dividend and capital gain distribution election (reinvest vs settlement fund, etc.)
- confirm / set up beneficiary and/or Transfer On Death designations
- confirm / set up linked bank accounts
Da5id wrote: Tue Aug 03, 2021 1:04 pm I assume I don't care about the basis in my various IRAs and inherited IRAs?
Correct. (well, if you made non-deductible contributions to an IRA, you should be keeping track of that yourself)
Da5id wrote: Tue Aug 03, 2021 1:04 pm I assume this just takes a phone call (or a direct message?) to get them to do the Mutual Fund->ETF migration?
Phone call.
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Vegomatic
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Re: Converting Vanguard accounts to brokerage, funds to ETFs

Post by Vegomatic »

One thing that you can do on the mutual fund platform, which you can NOT do on the brokerage platform, is to use what Vanguard use to call "Directed Dividends".

When you have mutual funds in a mutual fund (as opposed to brokerage) account, you can tell VG that the dividends from one fund can be 'directed' into another fund.

Why is this useful? Well, for example, if you are taking RMDs, you can direct the dividends from many/all/some funds to be invested into a fund from which you will take your regular RMD.

So, for example, if you are taking your RMDs from your Wellesley (or Wellington, fund) for example, you can have all of the other funds direct their dividends to your Wellesley (or Wellington) fund, and then take your RMDs automatically from the Wellesley (or Wellington) fund.

You can't do this on a brokerage account - it's as if you have hired an accountant / bookkeeper for nothing.

While it may sound like a small / silly thing, it tremendously simplifies RMD 'management'. And you can't do it with a brokerage account.

For what it's worth, I have both types of accounts - mutual fund and brokerage. There are advantages and disadvantages for each. You don't need to go all-or-none, you can mix-and-match.
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