Tools

Is it worthwhile to pay the ETF conversion fee?

Based on my previous post on whether to convert my VEIEX (Vanguard Emerging Market Index Fund) holding to VWO (ETF class), I thought it would be a good exercise for me to try to build a simple calculator to compute the breakeven investment amount for investors who need to pay the $50 conversion fee.

The calculator below will find the breakeven point which will make it worthwhile to perform the mutual fund to ETF conversion. The calculator inputs are as follows.

  1. The conversion fee, currently $50. Enter 50.
  2. The ETF expense ratio saving. For example, VEIEX ER=0.37% and VWO ER=0.25%. The difference is 0.12%, enter as 12.
  3. The investment horizon in years.
  4. The expected annual return. If the expected annual return is 8%, enter 8.

When the investment amount to be converted is higher than that calculated, a conversion would be worthwhile (assuming the assumptions are true). Note that as mentioned in the previous post, taxes are not considered in the computations.

ETF Conversion Decision Calculator

Conversion fee (in $)
Expense ratio saving (in bps; 100 bps = 1%)
Investment horizon (in years)
Expected return a year (in %)
 
Investment should be at least (in $)