Vanguard : Investing in market index funds vs ETFs
As the title reads everyone here suggests vanguard ETFs like VTI vs market index funds such as VTSAX/VTIAX. I have read that you can't buy partial shares in ETFs and the spread is higher too. Any reason why ETFs are preferred over index funds? TIA!
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ETFs can have tax advantages in that they don’t throw off as many capital gains. This only matters in a taxable account of course. Also if you don’t have a Vanguard account then you can get the lower expense ratio with VTI as with the admiral shares that would require a 10k min investment and Vanguard account.
What tax advantages are you talking abt? Can you please explain?
ETFs are constructed in such a way that they don’t pay you capital gains in some situations where a mutual fund would. In the mutual fund case you’ll pay some capital gains taxes for the year if you are holding the fund in a taxable account. The ETF will work with the underlying securities in such a way that they don’t pass on capital gains to you as the fund operates, but rather you deal with capital gains only if/when you sell. At least that’s my understanding.
Don't fret this, no differences worth mulling over. ETF share price is low so who cares if you can't get partial funds. It's not like Bershire.A price.
I prefer mutual funds since I can set up monthly automatic payments from my bank account and forget about it.
You can trade ETFs at any time during the day when the market is open. Mutual funds are traded on the next market close. If you're investing long term, this flexibility shouldn't matter.