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Converting VTSAX to VTI in brokerage account? Is it taxable?

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  • Converting VTSAX to VTI in brokerage account? Is it taxable?

    In general I prefer index mutual funds over ETF's but then I came across this article.
    MY FINANCIAL ADVISOR has been on a mission to reduce my investment costs. He’s been replacing my low-cost, broad-based index mutual funds with the exchange-traded fund (ETF) version. He believes this will improve my investment returns over the long run. For instance, if you own Vanguard Total International Stock Index Fund—a mutual fund—you’re currently paying 0.11% in annual expenses. But Vanguard’s ETF alternative charges just 0.08%, equal to a savings of three cents a year for every $100 invested.

    Although the ER difference is minimal compared to an active/passive mutual fund, it still can add up. I was wondering if I switch VTSAX--> VTI in a brokerage account at Vanguard, will I have to pay capital gains tax? Same with all the other vanguard mutual funds--> ETFs.


  • #2
    An ETF is a collection of hundreds or thousands of stocks or bonds, managed by experts, in a single fund that trades on major stock exchanges.


    • #3
      I've been considering the same thing, but mostly to make future tax loss harvesting easier


      • #4
        The numbers have to be fairly larger before an ER makes a meaningful difference between the Admiral shares and the similar ETF (think 200K+) IMO.


        • #5
          From the article referenced by the OP, starting with $350K after 25 yrs VTI would have $6.9K advantage over VTSAX. The annualized return is ~7% over the lifetime which is ~$1.9M. Rounding error.