We no longer hold any VTSAX. A bold statement when just a few months ago it was our largest holding. We didn’t sell it all and move to cash or bitcoin or even international. Instead I simply converted the shares of VTSAX to VTI. Vanguard makes it incredibly easy to do this with a few clicks on their website.
The mutual fund to ETF conversion has no tax implications. You go to bed owning shares of a mutual fund and wake up the next morning with shares of an equivalent ETF. Magic. In this instance, the expense ratio goes from 0.04% to 0.03% which isn’t a compelling argument on its own. However a more efficient investment vehicle adds up over time.
So why did I do it? 2 reasons. Portability and simplicity. ETF shares can be held, bought and sold at many different brokerages. VTSAX has to be held, bought and sold at Vanguard. Mrs. Dress Pockets and I are going to buy a new house in a few months. More on the financing options behind this decision in a later post but holding VTI allows us to transfer it to another brokerage with more favorable margin loan interest rate than Vanguard’s 10-12%
Mrs. Dress Pockets already held VTI in her numerous accounts. It didn’t make much sense for me to keep VTSAX in my IRAs just out of habit or precedent. Covert it and keep things simple. Done and done.
Interestingly you cannot convert shares of VBLTX to BND. This has something to do with how dividends are handled differently. So I sold all shares of VBTLX in my rollover IRA and bought shares of BND a few days later. Because this was done in an IRA there were no tax consequences.
