Comments on: Is it worthwhile to pay the ETF conversion fee? http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/ Personal finance and investing in mutual funds and ETFs Thu, 08 Jan 2009 12:07:24 +0000 http://wordpress.org/?v=2.5 By: indexfundfan http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23121 indexfundfan Wed, 28 May 2008 04:20:24 +0000 http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23121 Ted, As far as I know, you can only convert VTSMX (to VTI). VGTSX, which is the Vanguard Total International Stock index fund cannot be directly converted to VEU. But if you want, you can sell VGTSX and buy VEU in two separate transactions. If you hold for the long haul, and assuming that brokerage fees continues to drop to an insignificant amount in the future, the above calculator helps you to calculate if the lower ER of the ETF is worthwhile to pay the $50 conversion fee. Basically the choice is between paying $50 and get the lower ER OR not paying $50 but continue with the higher ER. Keep in mind that the $50 itself will also compound into a significant amount in future. The bid/ask spread comes in only if you need to purchase or sell ETF shares in the open market. It does not apply to mutual fund to ETF conversions, like from VTSMX to VTI. Ted,

As far as I know, you can only convert VTSMX (to VTI). VGTSX, which is the Vanguard Total International Stock index fund cannot be directly converted to VEU. But if you want, you can sell VGTSX and buy VEU in two separate transactions.

If you hold for the long haul, and assuming that brokerage fees continues to drop to an insignificant amount in the future, the above calculator helps you to calculate if the lower ER of the ETF is worthwhile to pay the $50 conversion fee. Basically the choice is between paying $50 and get the lower ER OR not paying $50 but continue with the higher ER. Keep in mind that the $50 itself will also compound into a significant amount in future.

The bid/ask spread comes in only if you need to purchase or sell ETF shares in the open market. It does not apply to mutual fund to ETF conversions, like from VTSMX to VTI.

]]> By: Ted http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23117 Ted Tue, 27 May 2008 21:18:31 +0000 http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23117 ? ?

]]> By: Ted http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23116 Ted Tue, 27 May 2008 21:04:46 +0000 http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23116 So if I have $20k each in VTSMX and VGTSX that I plan to hold for the long haul in an IRA would you recommend I convert this to VTI and VEU? How do I maximize the bid/ask spread or whatever? So if I have $20k each in VTSMX and VGTSX that I plan to hold for the long haul in an IRA would you recommend I convert this to VTI and VEU?

How do I maximize the bid/ask spread or whatever?

]]> By: indexfundfan @ indextown » Blog Archive » Review of VEIEX to VWO ETF conversion at VBS http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23038 indexfundfan @ indextown » Blog Archive » Review of VEIEX to VWO ETF conversion at VBS Fri, 18 Apr 2008 14:42:34 +0000 http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23038 [...] various reasons already discussed (Should I convert…? and Is it worthwhile to pay the ETF conversion fee?), I recently converted my Vanguard Emerging Markets Index mutual fund holding (VEIEX) to the ETF [...] […] various reasons already discussed (Should I convert…? and Is it worthwhile to pay the ETF conversion fee?), I recently converted my Vanguard Emerging Markets Index mutual fund holding (VEIEX) to the ETF […]

]]> By: indexfundfan http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23034 indexfundfan Thu, 17 Apr 2008 16:19:01 +0000 http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23034 Zany, that's true. For the VEIEX to VWO conversion, the redemption fee alone is probably enough to make the change. But the calculator is meant to be more generic. An investor thinking of converting is essentially faced with the decision : convert to get the lower ER but have $50 less to compound over the years OR stick to the mutual fund and has $50 more to compound, but at a higher ER. The calculator tries to figure that out. However, it does not take into account the expenses on the redemption part (which could include redemption fees, brokerage commission, trading spread costs, etc). Zany, that’s true. For the VEIEX to VWO conversion, the redemption fee alone is probably enough to make the change.

But the calculator is meant to be more generic. An investor thinking of converting is essentially faced with the decision : convert to get the lower ER but have $50 less to compound over the years OR stick to the mutual fund and has $50 more to compound, but at a higher ER.

The calculator tries to figure that out. However, it does not take into account the expenses on the redemption part (which could include redemption fees, brokerage commission, trading spread costs, etc).

]]> By: zany http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23032 zany Thu, 17 Apr 2008 05:47:49 +0000 http://www.indextown.com/archives/2008/04/12/is-it-worthwhile-to-pay-the-etf-conversion-fee/#comment-23032 One important point you missed out is the 0.5% load that you get when you sell the mutual fund that you will save with the ETF. Essentially, that would be reason enough to go with the change. One important point you missed out is the 0.5% load that you get when you sell the mutual fund that you will save with the ETF. Essentially, that would be reason enough to go with the change.

]]>