VTI or VTSAX which is the better choice long term?

Submitted by ToenailRS t3_zzv1bu in personalfinance

Any Vanguard investors here? Curious if I should sell my VTI shares for the admiral share VTSAX?
For my ROTH IRA I am using vanguard. I invest in VTI and VOO atm. 2022 was the first year I've funded a Roth IRA account let alone did investing on my own. I'm currently only looking to do my investing on Vanguard for now to keep things simple.

Would now be a good time to swap over to VTSAX from VTI? What are the benefits? My unrealized gains are sitting at -$347 so I wouldn't create a taxable event and pay. taxes on it.

You need $3k to buy VTSAX. I currently have little more than that ($4800) in VTI

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DeluxeXL t1_j2dp90x wrote

VTSAX lets you fully automate the buying process, including automatically scheduled contribution and purchase of shares for every year until you stop or change it.

VTI, no. You can still automate the contribution to the cash position in Roth IRA, but you have to buy VTI, even with fractional shares, manually on that day.

> My unrealized gains are sitting at -$347 so I wouldn't create a taxable event and pay. taxes on it.

You wouldn't have any tax event inside a Roth IRA anyway.

Also look into diversifying. VTSAX (VTI) only cover the US. VTIAX (VXUS) covers outside the US.

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ToenailRS OP t1_j2dpnow wrote

Awesome. Basically there isn't much of a downside/if any to not switch.
Currently I have ~$5200 invested into VTI (down $347 to make it ~$4800. I'll try and monitor it the next couple days to see if I can make that loss a little smaller but otherwise Ill sell my VTI and purchase the VTSAX.

I do have 4 Shares of VOO as well but that doesn't really have much of a plan right now. VTI is my primary fund in my ROTH IRA account.

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er824 t1_j2dqlx4 wrote

There is no reason to wait to make the loss smaller. If VTI goes up VTSAX will as well.

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Cruian t1_j2ei7rv wrote

>I do have 4 Shares of VOO as well but that doesn't really have much of a plan right now. VTI is my primary fund in my ROTH IRA account.

VOO is the opposite of diversification if you hold VTI/VTSAX: roughly 80% of the weight of VTI is the entirety of VOO, so it concentrates you.

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ToenailRS OP t1_j2eij27 wrote

Yeah Im still new which is why I haven't done anymore with that VOO. Looking to branch out in 2023! VNQ looks appealing in the real estate side but who knows.

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Cruian t1_j2ej4ru wrote

VNQ is already fully included within VTI: https://www.etfrc.com/funds/overlap.php

As /u/DeluxeXL mentioned, going outside the US is going to be diversification. Anything stock based within the US is already covered by VTI (or far too small and difficult to trade to be worth bothering with).

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ToenailRS OP t1_j2ejoue wrote

>d

That website looks neat. Ill take a look now. I'll need to do more research and get a better understanding of where and how much I'd like to diversify.

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Cruian t1_j2ek9v3 wrote

Ex-US might look unappealing now if you simply look at a back test. However, to some of the more knowledgeable, that bad looking back test can be a very good thing.

For reasons on why diversifying beyond the US can be very important, please see:

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ToenailRS OP t1_j2ekx7h wrote

This is fantastic information. Wow thank you for taking the time to link and write all this out!! Thank you so much. Ill take a look at these shortly.

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Citryphus t1_j2dpdks wrote

Even if you had a gain it doesn't create taxable events in a Roth IRA.

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ToenailRS OP t1_j2dpq8c wrote

You're right, I wasn't thinking straight! Appreciate the reminder.

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Grevious47 t1_j2ff5g9 wrote

They are the exact same holdings, one is juat an ETF and the other is a mutual fund. So do you want an ETF or a mutual fund?

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baby__steps t1_j2ekrue wrote

I do backdoor Roth IRA with vanguard and I am 100% VTI.

I have a Robinhood account and do automated dollar cost averaging on VTI. Yes, I use RH. I don’t use it for stupid day trading stuff. Robinhood supported fractional shares and automation before Vanguard, so I just got accustomed to staying with it, since it’s all automatic.

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lucky_ducker t1_j2ftb2p wrote

They are literally the same fund. Different share classes of the same, underlying Vanguard fund. If you have at least the minimum $3K buy-in for the mutual fund, it is six in one, half dozen in another.

That said, I would suggest the mutual fund as the better choice because: a.) mutual funds are designed for fractional shares, so you never have a few dollars of uninvested money sloshing around like you would if all your investments were full shares of an ETF, and b.) mutual funds only post an updated NAV once a day after the markets are closed. If you are the sort of investor that monitors your investments too closely, seeing the ETF dropping in real time can be disconcerting. You probably should choose the mutual fund.

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BastidChimp t1_j2eiom7 wrote

I favor ETFs like VTI over mutual funds. ETFs allow me to transfer between brokerages seemlessly if I need to without a fee. Don't invest in both VTI and VOO. Choose one or the other. They both have many overlapping companies and virtually have the same return. VTI already covers the SP500 companies in VOO.

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ToenailRS OP t1_j2eiwxn wrote

I'll most likely end up getting rid of my VOO shares due to that information. They were bought very early on in my first year of investing. 2022 was the get in the door year for me. Thank you for opinion and help!

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Upset-North-2211 t1_j2enbey wrote

In a Roth you should be more aggressive. I would recommend buying Vanguard US small cap growth ETF (VBK). VTI is great, but I personally want to maximize growth in a Roth account, so when I take withdrawals it comes tax free!

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Cruian t1_j2faubn wrote

>I would recommend buying Vanguard US small cap growth ETF (VBK)

Small cap growth is often called a "black hole of investing" (https://www.etf.com/sections/index-investor-corner/20092-the-black-hole-of-investing.html as the first link I found)

Small value is the "golden one" for cap weight + growth vs value.

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Upset-North-2211 t1_j2fe0er wrote

The problem with this study is it ended in 2012. If you look at a comparison between VBK and DFFVX (US small cap value) since 2012 until 2022, VBK had gained 309%, versus 85% for DFFVX. The world has changed since 2012, and my investing approach has changed with it. I used to follow the DFA approach religiously, but have changed my opinion since Value has lagged SO far behind growth for a very long time.

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Cruian t1_j2fip6p wrote

Sometimes the short term (which even 10 years is) can show the opposite of long term expectations.

>The world has changed since 2012, and my investing approach has changed with it.

I've seen more than a few times that "the most dangerous words in investing are 'this time is different.'"

>but have changed my opinion since Value has lagged SO far behind growth for a very long time.

See my first sentence.

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Upset-North-2211 t1_j2fo8h9 wrote

You are saying that the Value Premium over growth is still an important aspect of investing. Some recent academic research has cast doubt on the continued existence of this premium. Im not saying totally avoid Value, but am saying Growth should be held in a Roth. VBK would have to decline almost 200% versus DFFVX to make it better to hold value instead of growth in the Roth. Doesn’t seem likely to me that this will occur any time soon.

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techcaleb t1_j2e8r68 wrote

VTI has an expense ratio of 3 bps, while VTSAX has an expense ratio of 4 bps. So you would be paying slightly more for the exact same fund. But the different is negligible, so the bigger question is whether you would prefer to invest in an ETF or a mutual fund.

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Luxtenebris3 t1_j2ei9f7 wrote

The cash drag (assuming no fractional etf shares) will more than make up the ER difference until there is a sizeable sum invested. Tbh this low of a difference doesn't matter and fund availability and behavioral factors almost certainly are more important.

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Cruian t1_j2ejftg wrote

>The cash drag (assuming no fractional etf shares) will more than make up the ER difference until there is a sizeable sum invested

Remembering some quick math I had done months ago, it was hundreds of thousands.

However, I think I have heard of Vanguard doing a rollout of fractional Vanguard only ETFs for at least some users.

Other factors can still be more significant than the 1 basis point difference.

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Cruian t1_j2eibwg wrote

There are other factors that can outweigh 1 basis point of ER difference. A single bad ETF trade can negate years worth of that advantage.

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