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Posted: 5/21/2005 6:32:44 PM EDT
Getting ready to open (transfer) a Roth IRA to Vanguard. Cant decide whether to put it in Vanguard 500 Index Fund (VFINX) or Vanguard Target Retirement 2045 (VTIVX).
VFINX
VTIVX

The VFINX has a much higher per share cost with lower expense ratio vs the VTIVX which has a much lower per share fee with slightly higher expense ratio.
VFINX: $109/share, Expense ratio: 0.18%
VTIVX: $11/share, Expense ratio: 0.21%

I would think the fact I get 10 times as many shares with the VTIVX vs VFINX for the same investment am ount would more then offset the higher expense ratio. If you compare the 2 funds they have virtually identical performance so i cant see an advatnage of taking one over the other based on rate of return.

Thoughts? I'm leaning towards the VTIVX right now due to the much lower cost per share while maintaining the same rate of return, but obviously I want to make sure I make the best choice.
Link Posted: 5/21/2005 10:43:55 PM EDT
No one knows?
Should i just spend it on hookers and blow?
Link Posted: 5/21/2005 10:50:59 PM EDT
Load or no load, what is the fund itself doing?
Link Posted: 5/21/2005 10:55:42 PM EDT
[Last Edit: 5/21/2005 10:59:21 PM EDT by The_Macallan]

Cost per share makes absolutely no difference in Index Funds.
Expense ratio DOES make a difference. Both are relatively low - but VFINX is obviously better valued.

Is this for your retirement?
What's your asset allocation?
What's your investment horizon? 10 years? 20 years? 40 years?
What else do you have in your portfolio?

Without knowing the answer to any of these, no one can give you sound advice... BUT in general, for a retirement fund, long horizon (>10yrs) probably better off with VFINX due to lower expense ration.

Go to the Morningstar Discussion Forum, Vanguard Diehards - they LIVE for these kinds of questions. Taylor Larimore is THE man to ask there, though there are a LOT of good knowledgable people there.

Link Posted: 5/21/2005 10:59:04 PM EDT
Wait a minute...How does cost per share make no difference?
If I put in, say 1000 in VFINX i get 10 shares. If I put it in VTIVX I get 100 shares. If the price goes up $1 per share, I make 10 in VFINX and $100 in VTIVX.

Yes its for retirement, some 30-40 years away. I have plenty of time.
Asset allocation doesnt matter (In terms of the Roth IRA). I have a 401K nice broken up, a savings account and Scottrade account. Just getting a Roth IRA to round it out.
Link Posted: 5/21/2005 11:00:12 PM EDT

Originally Posted By MrClean4Hire:
Load or no load, what is the fund itself doing?


Uhhh....Didnt check that.
*bangs head*

Link Posted: 5/21/2005 11:05:36 PM EDT
[Last Edit: 5/21/2005 11:08:36 PM EDT by The_Macallan]

Originally Posted By Specop_007:
Wait a minute...How does cost per share make no difference?
If I put in, say 1000 in VFINX i get 10 shares. If I put it in VTIVX I get 100 shares. If the price goes up $1 per share, I make 10 in VFINX and $100 in VTIVX.

Why do you think it's only $10/share while VFINX is $100/share?

Both of these are Index funds that track major segments of the market, and there is a lot of overlap between them. Generally VFINX is more volatile - VFINX tracks the S&P500 (which dominates the movement of VTIVX as well) and so if there is a 10% gain in the market, there will likely be a similar PERCENTAGE gain in these funds (though VTIVX wont' match VFINX exactly, but you get the point).

Starting with $1000, a 10% return in VFINX will earn you more than a 10% gain in VTIVX at the end of the year because of the lower expense ration of VFINX.


Originally Posted By Specop_007:
Yes its for retirement, some 30-40 years away. I have plenty of time.
Asset allocation doesnt matter (In terms of the Roth IRA). I have a 401K nice broken up, a savings account and Scottrade account. Just getting a Roth IRA to round it out.


Asset allocation ALWAYS matters.

Diversify, diversify, diversify. (VTIVX is a more diversified than VFINX so that's a plus for it)

Check out Morningstar.
Link Posted: 5/21/2005 11:12:55 PM EDT

Originally Posted By The_Macallan:

Originally Posted By Specop_007:
Wait a minute...How does cost per share make no difference?
If I put in, say 1000 in VFINX i get 10 shares. If I put it in VTIVX I get 100 shares. If the price goes up $1 per share, I make 10 in VFINX and $100 in VTIVX.

Why do you think it's only $10/share while VFINX is $100/share?

Both of these are Index funds that track the market, and there is a lot of overlap between them. Generally VFINX is more volatile - VFINX tracks the S&P500 (which dominates the movement of VTIVX as well) and so if there is a 10% gain in the market, there will likely be a similar PERCENTAGE gain in these funds (though VTIVX wont' match VFINX exactly, but you get the point).

Starting with $1000, a 10% return in VFINX will earn you more than a 10% gain in VTIVX at the end of the year because of the lower expense ration of VFINX.


Originally Posted By Specop_007:
Yes its for retirement, some 30-40 years away. I have plenty of time.
Asset allocation doesnt matter (In terms of the Roth IRA). I have a 401K nice broken up, a savings account and Scottrade account. Just getting a Roth IRA to round it out.


Asset allocation ALWAYS matters.

Diversify, diversify, diversify.

Check out Morningstar.



I say $10 / $100 (rounded) becuase if you check the value thats what it shows, plus graphs show the price fluctuating around the $10 and the $100 mark, respectively.

Maybe I dont fully understand mutual funds. For example, with straight stocks if i have $100 and buy a stock valued at $10 per share I get 10 shares. If I have $100 and buy a mutual fund valued at $10 per share I assume I still get 10 shares correct?

In my case I have roughly $1000, so if VTIVX is $10/share and VFINX is $100/share (Again, rounded) I assume I would end up with 100 shares of VTIVX or 10 shares of VFINX correct?
Thus is there was, say, a $1 change in value (for both) then i would have a $100 gain with VTIVX vs a $10 gain with VFINX. This the extra $90 gain would more then cover then greater expense ratio.

Am i correct in my thinking, or are mutual funds handled differently then standard stocks/

In terms of diversify, I mean I dont have to diversify my IRA because I already have diversification in my other investments. Thus the IRA, even dumped all into 1 investment, would still add to my overall diversification when you included my Scottrade account, savings account and various assets in my 401k.
Link Posted: 5/21/2005 11:22:38 PM EDT
[Last Edit: 5/21/2005 11:33:10 PM EDT by The_Macallan]
Don't look at the cost/share. You're not interested in HOW MANY shares you get but rather on the total DOLLAR VALUE of your investment.

$1,000 at $10/share of VTIVX = $1,000 investment.
$1,000 at $100/share of VFINX = $1,000 investment.

Nothing from this point on that would depend on the number of shares of each you own is going to affect your investment value.

Your returns (or losses) are based on percentage changes in the value per share. So if the VTIVX goes up 10%, your value is now $1,100 (less expenses). Same with VFINX, if it goes up 10% next year, your value is still $1,100 (less expenses). For all intents and purposes, the per-share values at the end of each day, quarter, year, etc. are assessed as a percentage gain or loss on the previous per-share value, not an actual dollar value gain/loss. Yes, the share prices change, but that's not what I look at because I just want to know what percentage did my total investment gain or lose that year.


Does that help clear it up a little?

I'm not sure if I can re-state a better way but I'm sure others can.
Link Posted: 5/21/2005 11:25:08 PM EDT

Originally Posted By The_Macallan:
Go to the Morningstar Discussion Forum, Vanguard Diehards



Thanks for the link; I've been looking for something like that. Hell, they even have a discussion of Playboy Playmates!
Link Posted: 5/21/2005 11:29:52 PM EDT

Originally Posted By heavily_armed:

Originally Posted By The_Macallan:
Go to the Morningstar Discussion Forum, Vanguard Diehards



Thanks for the link; I've been looking for something like that. Hell, they even have a discussion of Playboy Playmates!


Yeah, they even have a "Politics" discussion forum.

I used to be pretty active over there. Main Discussion Forums

Link Posted: 5/22/2005 12:09:14 AM EDT

Originally Posted By The_Macallan:
Don't look at the cost/share. You're not interested in HOW MANY shares you get but rather on the total DOLLAR VALUE of your investment.

$1,000 at $10/share of VTIVX = $1,000 investment.
$1,000 at $100/share of VFINX = $1,000 investment.

Nothing from this point on that would depend on the number of shares of each you own is going to affect your investment value.

Your returns (or losses) are based on percentage changes in the value per share. So if the VTIVX goes up 10%, your value is now $1,100 (less expenses). Same with VFINX, if it goes up 10% next year, your value is still $1,100 (less expenses). For all intents and purposes, the per-share values at the end of each day, quarter, year, etc. are assessed as a percentage gain or loss on the previous per-share value, not an actual dollar value gain/loss. Yes, the share prices change, but that's not what I look at because I just want to know what percentage did my total investment gain or lose that year.


Does that help clear it up a little?

I'm not sure if I can re-state a better way but I'm sure others can.



It makes perfect sense. I can even work examples using the numebrs, or different numbers, and follow along.
For some reason I just cant wrap my mind around the concept though. Too early. Need coffee.
Link Posted: 5/22/2005 9:37:08 AM EDT
If it were me I might do half and half. Still, investing in a growth fund is theoretically the way to go for a young person. Growth funds will have some bad years but the terrific years should make up for it over the next 20-30 years.
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