If I wanted to automatically invest say $500 each month in a taxable brokerage account, and I wanted that money to go into the SPY, would selecting the ETF or the Mutual Fund to do this make more sense?
most brokerages will give you fractional shares when you purchase the MF, but force you to purchase whole shares when you buy the ETF.
So if SPY was at $30 when you executed the transaction, you'd end up with 16 shares of the ETF and $20 in cash, whereas with the MF you'd get 16.66 shares.
If you have access to good fund with low expense ratios like Vanguard or Fidelity, then the mutual fund makes more sense. With the ETF, you’d have to pay a brokerage fee with each transaction.
I know Fidelity has a lot of ETF's that trade for no commission. SPY is one of them, and also the small cap ETF.
I don't believe fractional shares are a problem for these.
Could just be a Vanguard thing. Even when trading their own ETFs (no fees), they don't give you fractional shares (though you can accumulate fractional shares through dividend reinvestments).
on a monthly trade, and then timing the trade to the day you deposit the funds isnt great.
Set it up with the lowest SP500 MF, and then elect to buy the same day you deposit the $500 each month. Most brokerages like Fidelity or ETrade will be able to do this for you.
Mutual Funds must distribute cap gains at the end of the year and you are responsible for the tax hit even though you haven't touched the money.
The ETF is treated like a stock and you only pay taxes when you sell shares for a gain. If the ETF pays a dividend you'll have to pay taxes on those funds each year.
Mutual Funds must distribute cap gains at the end of the year and you are responsible for the tax hit even though you haven't touched the money.
The ETF is treated like a stock and you only pay taxes when you sell shares for a gain. If the ETF pays a dividend you'll have to pay taxes on those funds each year.
K so to my thick head what does this mean in terms of strategizing? Is investing in a taxable account then not ideal?
through Schwab where I can just set it to invest 500 / month automatically and forget about it.
Absolutely stick with an index fund. They are managed by computers (No fund managers) and their expense ratios are minute. Expense can pile up over the years.
I invest mainly in index funds but my fidelity blue chip growth fund has done better by quite a bit.I think that some of the big mutual funds such as fidelity and trowe price have growth funds that have beat the index by quite a bit.Expense ratio generally .7%
Mutual funds can generate significant tax liability as they declare capital gains even if the share price has not appreciated.Vanguard Total Market Index will minimize taxable income.
So if SPY was at $30 when you executed the transaction, you'd end up with 16 shares of the ETF and $20 in cash, whereas with the MF you'd get 16.66 shares.
I don't believe fractional shares are a problem for these.
I don't believe fractional shares are a problem for these.
Could just be a Vanguard thing. Even when trading their own ETFs (no fees), they don't give you fractional shares (though you can accumulate fractional shares through dividend reinvestments).
MF or ETF?
Set it up with the lowest SP500 MF, and then elect to buy the same day you deposit the $500 each month. Most brokerages like Fidelity or ETrade will be able to do this for you.
The ETF is treated like a stock and you only pay taxes when you sell shares for a gain. If the ETF pays a dividend you'll have to pay taxes on those funds each year.
The ETF is treated like a stock and you only pay taxes when you sell shares for a gain. If the ETF pays a dividend you'll have to pay taxes on those funds each year.
K so to my thick head what does this mean in terms of strategizing? Is investing in a taxable account then not ideal?
The cap gain dist in a fund is taxable
you should set up a dividend re-investment plan for either.
there is usually no cost for that.
Absolutely stick with an index fund. They are managed by computers (No fund managers) and their expense ratios are minute. Expense can pile up over the years.
I invest mainly in index funds but my fidelity blue chip growth fund has done better by quite a bit.I think that some of the big mutual funds such as fidelity and trowe price have growth funds that have beat the index by quite a bit.Expense ratio generally .7%
Mutual funds can generate significant tax liability as they declare capital gains even if the share price has not appreciated.Vanguard Total Market Index will minimize taxable income.