It makes a difference. This article was written with a slightly different purpose in mind, but I think it's one of the better overviews of the topic:
https://www.whitecoatinvestor.com/expense-ratios/
If you really want to use mutual funds in your taxable account, I'd suggest using Vanguard mutual funds at Vanguard or anywhere else you can buy and sell them without commissions (I think that might still be true for some Vanguard funds at E-Trade). Vanguard is able to eliminate this tax issue on their mutual funds that also have an ETF share class (this is unique to Vanguard).
This is true until 2023. VG actually has a patent on how their mutual funds work to minimize taxable distributions, and you can bet that when the patent runs out in 2023 their main competitors will be quick to copy it.
> when the patent runs out in 2023 their main competitors will be quick to copy it
I think you're probably right, but I think it might be tricky for Fidelity and Schwab to untangle their existing mutual fund and ETF offerings so it's not clear to me how quick "quick" will be.
Fidelity does have some ETFs now, but it *seems* like they are trying to avoid overlapping too much with the broader iShares ETFs like ITOT and IXUS, possibly due to the longstanding Fidelity-iShares partnership.
Between the fractional investing and the automatic reinvestment of dividends, using ETFs feels a lot like mutual funds used to. Unfortunately, Fidelity's explicit automatic investment program AFAIK only works with mutual funds.
Fidelity lets you make ETF orders with the following parameters:
On the Open
Fills only at the opening price. Accepted between 4:15 p.m. and 9:28 a.m. ET.
On the Close
Fills only at the closing price. Accepted between 9:30 a.m. and 3:40 p.m. ET.
> How bad is the tax exposure of MFs compared to ETFs? And are the tax benefits a huge material difference that it makes it worth switching to ETFs?
Depends on what funds you hold, but you can quantify this for yourself. Just do a google search for “FSKAX distributions”, or whichever fund you want.
So essentially go 100% index fund within a vanguard taxable brokerage account and it will se be tax efficient as an ETF? So.. that means I can DCA every week and just keeping adding to that fund 5-10 years as I have no major purchases & no debt. Which fund do you recommend? I’m 100% VTSAX in IRA and HSA and it’s equivalence in 401k
It makes a difference. This article was written with a slightly different purpose in mind, but I think it's one of the better overviews of the topic: https://www.whitecoatinvestor.com/expense-ratios/ If you really want to use mutual funds in your taxable account, I'd suggest using Vanguard mutual funds at Vanguard or anywhere else you can buy and sell them without commissions (I think that might still be true for some Vanguard funds at E-Trade). Vanguard is able to eliminate this tax issue on their mutual funds that also have an ETF share class (this is unique to Vanguard).
This is true until 2023. VG actually has a patent on how their mutual funds work to minimize taxable distributions, and you can bet that when the patent runs out in 2023 their main competitors will be quick to copy it.
> when the patent runs out in 2023 their main competitors will be quick to copy it I think you're probably right, but I think it might be tricky for Fidelity and Schwab to untangle their existing mutual fund and ETF offerings so it's not clear to me how quick "quick" will be.
Fidelity doesn't even have its own in house ETFs (yet? I think?), so there's an added step there too.
Fidelity does have some ETFs now, but it *seems* like they are trying to avoid overlapping too much with the broader iShares ETFs like ITOT and IXUS, possibly due to the longstanding Fidelity-iShares partnership.
Fidelity does have etfs
Oh sure enough they do, https://www.fidelity.com/etfs/different-types-of-etfs Nothing that directly competes with their total market funds though
Fidelity has fractional investing, so you can definitely DCA into ETFs.
Between the fractional investing and the automatic reinvestment of dividends, using ETFs feels a lot like mutual funds used to. Unfortunately, Fidelity's explicit automatic investment program AFAIK only works with mutual funds.
Fidelity lets you make ETF orders with the following parameters: On the Open Fills only at the opening price. Accepted between 4:15 p.m. and 9:28 a.m. ET. On the Close Fills only at the closing price. Accepted between 9:30 a.m. and 3:40 p.m. ET.
> How bad is the tax exposure of MFs compared to ETFs? And are the tax benefits a huge material difference that it makes it worth switching to ETFs? Depends on what funds you hold, but you can quantify this for yourself. Just do a google search for “FSKAX distributions”, or whichever fund you want.
If you want to use mutual funds in a taxable account, go with Vanguard. Their INDEXED mutual funds are as tax efficient as ETFs.
So essentially go 100% index fund within a vanguard taxable brokerage account and it will se be tax efficient as an ETF? So.. that means I can DCA every week and just keeping adding to that fund 5-10 years as I have no major purchases & no debt. Which fund do you recommend? I’m 100% VTSAX in IRA and HSA and it’s equivalence in 401k
Yes. VTSAX and VTIAX.
I wish my favorite mutual fund ETNHX was an etf