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Alright, I'm already showing (more of) my ignorance, but could somebody explain the difference between the two (VTI and VTSMX)?
As others have said, VTI is an ETF and VTSMX is a mutual fund. An ETF is traded on the open market so you have to find a buyer. That causes liquidity issues - if there is no buyer you cannot sell it. A mutual fund on the other hand always has a buyer - the fund itself is obligated to buy back your shares if you choose to sell them. This is not a big deal for a total-stock-market fund like VTI, but can be a serious issue for a specialty fund that is not traded much. There are other differences between an ETF and mutual fund having to do with tax issues. Mutual funds can (but do not always) generate higher taxes due to how they deal with short term cap gains generated internally. ETF's can be traded at any point in the trading day while mutual funds are only traded at end of day. This makes ETF's more susceptible to point spreads but also better for day traders.
Note that as far as cost, VTSMX is available at the same cost as VTI in a share class called VTSAX. But you have to open an account with Vanguard to get the latter.
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And why they're a better bet than the Vanguard 500 Index Fund or Vanguard Growth ETF?
You will get many different answers to that question and really need to decide for yourself as it is a complex question with lots of subtle issues. I suggest you read some basic investing books. Burt Malkiel's book A Random Walk Down Wall Street is a classic. So is Four Pillars of Investing by William Bernstein.
As others have said, VTI is an ETF and VTSMX is a mutual fund. An ETF is traded on the open market so you have to find a buyer. That causes liquidity issues - if there is no buyer you cannot sell it. A mutual fund on the other hand always has a buyer - the fund itself is obligated to buy back your shares if you choose to sell them. This is not a big deal for a total-stock-market fund like VTI, but can be a serious issue for a specialty fund that is not traded much. There are other differences between an ETF and mutual fund having to do with tax issues. Mutual funds can (but do not always) generate higher taxes due to how they deal with short term cap gains generated internally. ETF's can be traded at any point in the trading day while mutual funds are only traded at end of day. This makes ETF's more susceptible to point spreads but also better for day traders.
Wow, this is a lot to take in! Thank you so much--I didn't know any of this.
If you buy an index fund or ETF now, you will buy near a top in the market and be aware that the funds are weighted heavily in momentum stocks since they are prominent parts of indexes.
My advice: look into contrarian funds like Vanguard or Fidelity. These funds buck market sentiment and over time outperform most funds. This has been my preferred method of investing.
If you buy an index fund or ETF now, you will buy near a top in the market and be aware that the funds are weighted heavily in momentum stocks since they are prominent parts of indexes.
My advice: look into contrarian funds like Vanguard or Fidelity. These funds buck market sentiment and over time outperform most funds. This has been my preferred method of investing.
I didn't write "the top of the market," I wrote "near A top." I used the indefinite article. The market's been bumping up against a ceiling, world growth is slowing, oil prices are rebounding and US interest rates are rising.
I recall that during the stock market bubble of the late 1990s, a book came out entitled, "Dow 36,000" by Glassman and Hassett. The market crashed shortly after the book came out. "Irrational exuberance" is what the treasury secretary called the boom.
People get sucked into the market because they think that bull markets go on forever but more often than not, they jump in near the top.
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