Recently, I applied for the Wells Fargo Portfolio Management Account (PMA) so that I can take advantage of their 100 free trades offer per year for every linked account. The 100 free trades offer is very attractive as it would allow me to invest into ETFs or no-load funds (which previously have transaction fees) with no fees.
There are certain advantages in using ETFs instead of mutual funds; some of which are better tax efficiency, lower expense ratios and no redemption fee / trading restrictions. Currently, the core of my portfolio is invested in Vanguard mutual funds, but this could change in future as I am thinking of using more ETFs in my portfolio, especially for some of the more relevant asset classes.
I looked around to find the ETF vehicles of the asset classes that I currently hold. The following is the list for my equity asset allocation:
- US Total Market : Mutual Fund = VTSAX (Vanguard Total Stock Market Index Admiral, ER = 0.09%), ETF = VTI (Vanguard Total Stock Market ETF, ER = 0.07%).
- US Small-cap : Mutual Fund = VTMSX (Vanguard Tax-managed Small-cap, ER = 0.14%), ETF = VB (Vanguard Small-cap ETF, ER 0.10%) or IJR (iShares S&P 600 index, ER 0.20%, higher trading volume) in taxable account or VBR (Vanguard Small-cap Value ETF, ER = 0.12%) in tax-advantaged account.
- US Real Estate : Mutual Fund = VGSIX (Vanguard REIT Index, ER = 0.21%), ETF = VNQ (Vanguard REIT ETF, ER = 0.12%) in tax-advantaged account only.
- Int’l Large-cap : Mutual Fund = VTMGX (Vanguard Tax-managed International, ER = 0.20%), ETF = Vanguard’s up-coming international fund that tracks the FTSE All-World ex-USA Index (expected ER = 0.25%). Current substitute is iShare’s EFA (ER = 0.35%).
- Int’l Small-cap : Mutual Fund = VINEX (Vanguard International Explorer, ER = 0.43%), ETF = SSgA’s up-coming SPDR S&P World (ex-US) Small Cap ETF. Current poor substitute is Wisdom Tree’s DLS (ER = 0.58%).
- Int’l Emerging Markets : Already using ETF, which is VWO (Vanguard Emerging Market ETF, ER = 0.30%).
- Precious Metal Equity : Mutual Fund = VGPMX (Vanguard Precious Metals and Mining, ER = 0.40%), Current poor substitue is Market Vectors Gold Miners ETF, GDX (ER = 0.50%).
- Healthcare : Already using ETFs, which are IHF (iShares DJ US Healthcare Providers ETF, ER = 0.48%), PBE (Powershares Biotech and Genome ETF, ER = 0.6%) and XPH (State Street SPDR Pharmaceuticals ETF, ER = 0.36%).