Fund Comparison

VPU vs VUIAX

The Vanguard Utilities Index Fund (Admiral Shares) (symbol VUIAX) and the Vanguard Utilities ETF (symbol VPU) are two of the largest and most popular utilities sector index funds. Some compare VUIAX vs VPU not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.

The Short Answer

VUIAX and VPU are different share classes of the same portfolio, which is made possible by Vanguard’s ETF share class structure. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VUIAX and VPU are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VUIAX vs VPU

VPU was launched on January 26, 2004, while VUIAX was launched on April 28, 2004. Since the common inception date (the latter of the two inception dates), performance has been identical: 9.69% vs 9.70% annually. Despite changes in fees and expenses over this time period, there is only about a one percent difference in cumulative performance since inception! Looking at the chart of VUIAX vs VPU below, it is obvious that they are identical.

Differences Between VUIAX and VPU

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Some investors may point out that the expense ratios between Vanguard’s Admiral Shares and Vanguard’s ETFs differ. This is true, but it is also reflected in the net performance chart above. At a certain level, differences in expense ration do not matter. A small absolute difference (in basis points) is essentially meaningless (even if it appears large on a percentage basis) and is often smaller than the bid-ask spread (see transaction costs below). Expenses do matter, but I would not sweat infinitesimally small differences (and they’ll show up in net performance anyways).

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VUIAX or VPU. However, only VPU is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .03% for VPU and individual investor trades will not generally be large enough to “move” the market. In the case of VPU, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VPU is able to extend its tax benefits to VUIAX. A more in-depth explanation of Vanguard mutual fund tax-efficiency can be found here.

VUIAX has never paid a capital gain distribution! I noticed some posts on the internet saying that VPU is more tax-efficient than VUIAX, but this incorrect as neither fund has ever made a capital gains distribution.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VUIAX. If all ETFs, I might lean more towards VPU.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.” Investors may want to look to Fidelity’s ETF FUTY or State Street’s ETF XLU (read my comparison of FUTY vs VPU or XLU vs VPU).

Tradability

VUIAX does have a stated minimum initial purchase of $100,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VPU is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VUIAX vs VPU

VUIAX and VPU are literally the same. However, investors should consider the above factors when deciding which one is best for them.

VTEAX vs VTEB

The Vanguard Tax-Exempt Bond Index Fund (Admiral Shares) (symbol VTEAX) and the Vanguard Tax-Exempt Bond Index ETF (symbol VTEB) are two of the largest and most popular municipal (muni) bond index funds. Some compare VTEAX vs VTEB not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.

The Short Answer

VTEAX and VTEB are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VTEAX and VTEB are not two funds pursuing an identical strategy; they are the same fund! Read more about Vanguard’s share class structure and the potential benefits.

Historical Performance: VTEAX vs VTEB

VTEB was launched on August 21, 2015 and VTEAX was launched a few days later on August 25, 2015. Perhaps not surprisingly, performance has been nearly identical since that time: 1.83% vs 1.89% annually. Despite changes in fees and expenses over that time period, the cumulative difference in performance over that time period is less than 50 basis points! Looking at the chart of VTEAX vs VTEB below, it is obvious that they are identical.

Risks of Fixed-Income ETFs

One of the risks of fixed-income ETFs is that they trade well below their net asset value (NAV) in times of distress. This is clear if we chart VTEAX vs VTEB during the first half of 2020. VTEB declined over 17.5% (peak-to-trough), while VTEAX “only” declined roughly 11.5%. Remember, these are simply different share classes of the exact same fund! However, VTEB trades at a market price and VTEAX is traded at a NAV.

This is caused by the fact that fixed-income typically trades at wide bid-ask spreads, which widen even further during market volatility. Sometimes the bids will disappear altogether. Mutual funds generally publish a NAV based on market prices (or estimated values for fixed-income), so estimating a NAV is difficult if the market freezes or bids disappear.

The consensus is that ETFs provide better “price discovery” than mutual funds, since ETFs represent actual market prices. In this example, it is widely assumed that the VTEB value was closer to value of the underlying portfolio than the VTEAX NAV. Interestingly, holders of VTEAX could have sold their holdings and rotated into VTEB (which is the exact same portfolio) at a substantial discount.

Differences Between VTEAX and VTEB

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VTEAX or VTEB. However, only VTEB is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .02% for VTEB and individual investor trades will not generally be large enough to “move” the market. In the case of VTEB, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VTEB is able to extend its tax benefits to VTEAX.

One additional consideration is that fixed-income ETFs are not quite as tax-efficient as equity ETFs. Neither VTEAX nor VTEB have ever made a capital gains distribution. I noticed some posts on the internet saying that VTEB is more tax-efficient than VTEAX, but this incorrect.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VTEAX. If all ETFs, I might lean more towards VTEB.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VTEAX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VTEB is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VTEAX vs VTEB

VTEAX and VTEB are literally the same portfolio. However, I personally shy away from fixed-income ETFs due to their tendency to trade below NAV during episodes of extreme volatility. If two options provide the same risk and return, but one does not have periodic blowups then I’ll go with that one. Of course, there are other factors to consider (such as the above).

VHCIX vs VHT

The Vanguard Health Care Index Fund (Admiral Shares) (symbol VHCIX) and the Vanguard Health Care ETF (symbol VHT) are two of the largest and most popular healthcare sector index funds. Some compare VHCIX vs VHT not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.

The Short Answer

VHCIX and VHT are different share classes of the same portfolio, which is made possible by Vanguard’s ETF share class structure. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VHCIX and VHT are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VHCIX vs VHT

VHT was launched on January 26, 2004, while VHCIX was launched a few weeks later on February 5, 2004. Since that time, performance has been nearly identical to VHCIX: 10.52% vs 10.55% annually. Despite changes in fees and expenses over this time period, there is only about a three percent difference in cumulative performance since inception! Looking at the chart of VHCIX vs VHT below, it is obvious that they are identical.

Differences Between VHCIX and VHT

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VHCIX or VHT. However, only VHT is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .04% for VHT and individual investor trades will not generally be large enough to “move” the market. In the case of VHT, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VHT is able to extend its tax benefits to VHCIX. A more in-depth explanation of Vanguard mutual fund tax-efficiency can be found here.

VHCIX has never paid a capital gain distribution! I noticed some posts on the internet saying that VHT is more tax-efficient than VHCIX, but this incorrect as neither fund has ever made a capital gains distribution.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VHCIX. If all ETFs, I might lean more towards VHT.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VHCIX does have a stated minimum initial purchase of $100,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VHT is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VHCIX vs VHT

VHCIX and VHT are literally the same. However, investors should consider the above factors when deciding which one is best for them.

Those looking for other health care ETFs may want to read my posts comparing VHT and XLV (State Street’s health care ETF) or VHT vs FHLC (Fidelity’s health care ETF)

VSIAX vs VBR

The Vanguard Small-Cap Value Index Fund (Admiral Shares) (symbol VSIAX) and the Vanguard Small-Cap Value ETF (symbol VBR) are two of the largest and most popular small-cap index funds. Some compare VSIAX vs VBR not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VSIAX and VBR are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VSIAX and VBR are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VSIAX vs VBR

VBR was launched on January 26, 2004, while VSIAX was launched a few years later on September 27, 2011. Since that time, performance has been identical: both funds have returned 12.38% annually! Despite changes in fees and expenses over this time period, there has only been about a 30 basis point difference in cumulative performance since inception! Looking at the chart of VSIAX vs VBR below, it is obvious that they are identical.

Differences Between VSIAX and VBR

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VSIAX or VBR. However, only VBR is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .06% for VBR and individual investor trades will not generally be large enough to “move” the market. In the case of VBR, individual investors should not have a problem trading. Interestingly, the bid-ask spread of VBR is more than the annualized performance difference of VSIAX vs VBR.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VBR is able to extend its tax benefits to VSIAX.

VSIAX paid a capital gain distribution in 2000, but has not made any since then (nor do I expect it to make any in the future due to the existence of VBR). I noticed some posts on the internet saying that VBR is more tax-efficient than VSIAX, but this incorrect as neither fund has ever made a capital gains distribution.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VSIAX. If all ETFs, I might lean more towards VBR.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VSIAX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VBR is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VSIAX vs VBR

VSIAX and VBR are literally the same. However, investors should consider the above factors when deciding which one is best for them.

Further Reading

Investors who are interested in the Vanguard’s non-value small-cap funds should read our comparison of VVIAX vs VTV.

VGSLX vs VNQ

The Vanguard Real Estate Index Fund (Admiral Shares) (symbol VGSLX) and the Vanguard Real Estate ETF (symbol VNQ) are two of the largest and most popular REIT index funds. Some compare VGSLX vs VNQ not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VGSLX and VNQ are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VGSLX and VNQ are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VGSLX vs VNQ

VGSLX was launched on November 12, 2001, while VNQ was launched a few years later on September 23, 2004. Since that time, performance has been identical: 7.72% vs 7.73% annually! Despite changes in fees and expenses over this time period, there has been less than a 1% difference in cumulative performance since inception! Looking at the chart of VGSLX vs VNQ below, it is obvious that they are identical.

Differences Between VGSLX and VNQ

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VGSLX or VNQ. However, only VNQ is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for VNQ and individual investor trades will not generally be large enough to “move” the market. In the case of VNQ, individual investors should not have a problem trading. Interestingly, the bid-ask spread of VNQ is more than the annualized performance difference of VGSLX vs VNQ.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VNQ is able to extend its tax benefits to VGSLX.

Both funds have made capital gain distributions in the past, but neither has made any since 2006. I noticed some posts on the internet saying that VNQ is more tax-efficient than VGSLX, but this incorrect as neither fund has ever made a capital gains distribution.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VGSLX. If all ETFs, I might lean more towards VNQ.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VGSLX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VNQ is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VGSLX vs VNQ

VGSLX and VNQ are literally the same. However, investors should consider the above factors when deciding which one is best for them.

VFWAX vs VEU

The Vanguard FTSE All-World ex-US Index Fund (Admiral Shares) (symbol VFWAX) and the Vanguard FTSE All-World ex-US ETF (symbol VEU) are two of the largest and most popular global “ex-US” index funds. Some compare VFWAX vs VEU not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VFWAX and VEU are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VFWAX and VEU are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VFWAX vs VEU

VEU was launched on March 3, 2007, while VFWAX was launched a few days later on September 27, 2011. Since that time, performance has been identical: 5.53% vs 5.55% annually. Despite changes in fees and expenses over this time period, there is less than a half percent difference in cumulative performance since inception! Looking at the chart of VFWAX vs VEU below, it is obvious that they are identical.

Differences Between VFWAX and VEU

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VFWAX or VEU. However, only VEU is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .04% for VEU and individual investor trades will not generally be large enough to “move” the market. In the case of VEU, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VEU is able to extend its tax benefits to VFWAX.

VFWAX has never paid a capital gain distribution! I noticed some posts on the internet saying that VEU is more tax-efficient than VFWAX, but this incorrect as neither fund has ever made a capital gains distribution.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VFWAX. If all ETFs, I might lean more towards VEU.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VFWAX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VEU is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VFWAX vs VEU

VFWAX and VEU are literally the same. However, investors should consider the above factors when deciding which one is best for them.

Further Reading

Investors curious about Vanguard’s other popular global ETF offering may want to read our review of VEU vs VXUS.

VITAX vs VGT

The Vanguard Information Technology Index Fund (Admiral Shares) (symbol VITAX) and the Vanguard Information Technology ETF (symbol VGT) are two of the largest and most popular tech index funds. Some compare VITAX vs VGT not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VITAX and VGT are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VITAX and VGT are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VITAX vs VGT

VGT was launched on January 27, 2004. Since that time, performance has been nearly identical to VITAX: 11.98% vs 11.94% annually. Despite changes in fees and expenses over this time period, there is only about a five percent difference in cumulative performance since inception! Looking at the chart of VITAX vs VGT below, it is obvious that they are identical.

Differences Between VITAX and VGT

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VITAX or VGT. However, only VGT is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .03% for VGT and individual investor trades will not generally be large enough to “move” the market. In the case of VGT, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VGT is able to extend its tax benefits to VITAX.

VITAX has never paid a capital gain distribution! I noticed some posts on the internet saying that VGT is more tax-efficient than VITAX, but this incorrect as neither fund has ever made a capital gains distribution.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VITAX. If all ETFs, I might lean more towards VGT.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VITAX does have a stated minimum initial purchase of $100,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VGT is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VITAX vs VGT

VITAX and VGT are literally the same. However, investors should consider the above factors when deciding which one is best for them.

VBIRX vs BSV

The Vanguard Short-Term Bond Index Fund (Admiral Shares) (symbol VBIRX) and the Vanguard Short-Term Bond Index ETF (symbol BSV) are two of the largest and most popular short-term bond index funds. Some compare VBIRX vs BSV not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VBIRX and BSV are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VBIRX and BSV are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VBIRX vs BSV

VBIRX was launched on November 11, 2001 and BSV was launched a few years later on April 3, 2007. Perhaps not surprisingly, performance has been identical since that time: 2.15% vs 2.13% annually. Despite changes in fees and expenses over that time period, the cumulative difference in performance over that time period is just 30 basis points! Looking at the chart of VBIRX vs BSV below, it is obvious that they are identical.

Risks of Fixed-Income ETFs

One of the risks of fixed-income ETFs is that they trade well below their net asset value (NAV) in times of distress. This is clear if we chart VBIRX vs BSV during the first half of 2020. BSV declined nearly 5% (from +3% to -2%), while VBIRX only declined 2%. Remember, these are simply different share classes of the exact same fund! However, BSV trades at a market price and VBIRX is traded at a NAV.

This is caused by the fact that fixed-income typically trades at wide bid-ask spreads, which widen even further during market volatility. Sometimes the bids will disappear altogether. Mutual funds generally publish a NAV based on market prices (or estimated values for fixed-income), so estimating a NAV is difficult if the market freezes or bids disappear.

The consensus is that ETFs provide better “price discovery” than mutual funds, since ETFs represent actual market prices. In this example, it is widely assumed that the BSV value was closer to value of the underlying portfolio than the VBIRX NAV. Interestingly, holders of VBIRX could have sold their holdings and rotated into BSV (which is the exact same portfolio) at a substantial discount.

Differences Between VBIRX and BSV

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VBIRX or BSV. However, only BSV is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for BSV and individual investor trades will not generally be large enough to “move” the market. In the case of BSV, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, BSV is able to extend its tax benefits to VBIRX.

One additional consideration is that fixed-income ETFs are not quite as tax-efficient as equity ETFs. Both VBIRX AND BSV have made capital gains distributions in the past and will likely continue to do so. For instance, in 2021 both distributed an identical percentage. I noticed some posts on the internet saying that BSV is more tax-efficient than VBIRX, but this incorrect.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VBIRX. If all ETFs, I might lean more towards BSV.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VBIRX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for BSV is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VBIRX vs BSV

VBIRX and BSV are literally the same portfolio. However, I personally shy away from fixed-income ETFs due to their tendency to trade below NAV during episodes of extreme volatility. If two options provide the same risk and return, but one does not have periodic blowups then I’ll go with that one. Of course, there are other factors to consider (such as the above).

VCSH vs VSCSX

The Vanguard Short-Term Corporate Bond Index Fund (Admiral Shares) (symbol VSCSX) and the Vanguard Short-Term Corporate Bond Index Fund ETF (symbol VCSH) are two of the largest and most popular corporate bond index funds. Some compare VSCSX vs VCSH not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VSCSX and VCSH are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VSCSX and VCSH are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VSCSX vs VCSH

Both VSCSX and VCSH were launched on November 19, 2009. Perhaps not surprisingly, performance has been identical since that time: 2.27% vs 2.28% annually. Despite changes in fees and expenses over that time period, the cumulative difference in performance over that time period is only 15 basis points! Looking at the chart of VSCSX vs VCSH below, it is obvious that they are identical.

Risks of Fixed-Income ETFs

One of the risks of fixed-income ETFs is that they trade well below their net asset value (NAV) in times of distress. This is clear if we chart VSCSX vs VCSH during the first half of 2020. VCSH declined about 13% (from +2% to -11%), while VSCSX “only” declined 7.5%+. Remember, these are simply different share classes of the exact same fund! However, VCSH trades at a market price and VSCSX is traded at a NAV.

This is caused by the fact that fixed-income typically trades at wide bid-ask spreads, which widen even further during market volatility. Sometimes the bids will disappear altogether. Mutual funds generally publish a NAV based on market prices (or estimated values for fixed-income), so estimating a NAV is difficult if the market freezes or bids disappear.

The consensus is that ETFs provide better “price discovery” than mutual funds, since ETFs represent actual market prices. In this example, it is widely assumed that the VCSH value was closer to value of the underlying portfolio than the VSCSX NAV. Interestingly, holders of VSCSX could have sold their holdings and rotated into VCSH (which is the exact same portfolio) at a substantial discount.

VCSH mostly invests in corporate bonds, which are less liquid than Treasuries. However, even funds that invest 100% in Treasuries ran into the same issue, as evidenced by looking at VBTLX vs BND.

Differences Between VSCSX and VCSH

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VSCSX or VCSH. However, only VCSH is free to trade in non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for VCSH and individual investor trades will not generally be large enough to “move” the market. In the case of VCSH, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VCSH is able to extend its tax benefits to VSCSX.

One additional consideration is that fixed-income ETFs are not quite as tax-efficient as equity ETFs. Both VSCSX AND VCSH have made capital gains distributions in the past and will likely continue to do so. For instance, in 2021 both distributed an identical percentage. I noticed some posts on the internet saying that VCSH is more tax-efficient than VSCSX, but this incorrect.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VSCSX. If all ETFs, I might lean more towards VCSH.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VSCSX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VCSH is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VSCSX vs VCSH

VSCSX and VCSH are literally the same portfolio. However, I personally shy away from fixed-income ETFs due to their tendency to trade below NAV during episodes of extreme volatility. If two options provide the same risk and return, but one does not have periodic blowups then I’ll go with that one. Of course, there are other factors to consider (such as the above).

VICSX vs VCIT

The Vanguard Intermediate-Term Corporate Bond Index Fund (Admiral Shares) (symbol VICSX) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF (symbol VCIT) are two of the largest and most popular corporate bond index funds. Some compare VICSX vs VCIT not realizing that they are just two different share classes of the same portfolio.

A quick reminder that this site does NOT provide investment recommendations.

The Short Answer

VICSX and VCIT are different share classes of the same portfolio. The decision to buy one or the other depends on investor-specific factors (some of which are listed below).

The Longer Answer

Vanguard ETFs are structured as share classes of their mutual funds. This is a patented structure that is scheduled to expire in 2023, so we may see this structure more frequently in the near future. In other words, VICSX and VCIT are not two funds pursuing an identical strategy; they are the same fund!

Historical Performance: VICSX vs VCIT

Both VICSX and VCIT were launched on November 19, 2009. Perhaps not surprisingly, performance has been identical since that time: 3.86% vs 3.88% annually. Despite changes in fees and expenses over that time period, the cumulative difference in performance over that time period is just over 40 basis points! Looking at the chart of VICSX vs VCIT below, it is obvious that they are identical.

Risks of Fixed-Income ETFs

One of the risks of fixed-income ETFs is that they trade well below their net asset value (NAV) in times of distress. This is clear if we chart VICSX vs VCIT during the first half of 2020. VCIT declined about 18% (from +5% to -13%), while VICSX “only” declined 14%. Remember, these are simply different share classes of the exact same fund! However, VCIT trades at a market price and VICSX is traded at a NAV.

This is caused by the fact that fixed-income typically trades at wide bid-ask spreads, which widen even further during market volatility. Sometimes the bids will disappear altogether. Mutual funds generally publish a NAV based on market prices (or estimated values for fixed-income), so estimating a NAV is difficult if the market freezes or bids disappear.

The consensus is that ETFs provide better “price discovery” than mutual funds, since ETFs represent actual market prices. In this example, it is widely assumed that the VCIT value was closer to value of the underlying portfolio than the VICSX NAV. Interestingly, holders of VICSX could have sold their holdings and rotated into VCIT (which is the exact same portfolio) at a substantial discount.

VCIT mostly invests in corporate bonds, which are less liquid than Treasuries. However, even funds that invest 100% in Treasuries ran into the same issue, as evidenced by looking at VBTLX vs BND.

Differences Between VICSX and VCIT

Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating otherwise, but these are incorrect.

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VICSX or VCIT. However, only VCIT is free to trade in non-Vanguard accounts.

Unfortunately, Vanguard does charge a .25% fee on purchases of VICSX, no matter where the account is held. So investors should consider whether their allocation will be a one-time purchase or averaged in over time, as that may help them determined whether the mutual fund or ETF is a better choice.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for VCIT and individual investor trades will not generally be large enough to “move” the market. In the case of VCIT, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, VCIT is able to extend its tax benefits to VICSX.

One additional consideration is that fixed-income ETFs are not quite as tax-efficient as equity ETFs. Both VICSX AND VCIT have made capital gains distributions in the past and will likely continue to do so. For instance, in 2021 both distributed an identical percentage. I noticed some posts on the internet saying that VCIT is more tax-efficient than VICSX, but this incorrect.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VICSX. If all ETFs, I might lean more towards VCIT.

On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”

Tradability

VICSX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position. The minimum purchase size for VCIT is typically one share, although fractional shares are becoming more common.

Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: VICSX vs VCIT

VICSX and VCIT are literally the same portfolio. However, I personally shy away from fixed-income ETFs due to their tendency to trade below NAV during episodes of extreme volatility. If two options provide the same risk and return, but one does not have periodic blowups then I’ll go with that one. Of course, there are other factors to consider (such as the above).

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