I use Schwab and can’t buy fractional shares of ETFs, which limits monthly investments. However, SWPPX, which tracks the same index, allows fractional shares. Since it’s a mutual fund, I have heard it might be less tax-efficient than ETFs. Does this difference impact taxes significantly? Is SWPPX a worse option compared to SPLG or VOO?
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It should be a minimal amount of money. Check the distribution history for SWPPX to see how much it has generated in capital gains distributions. That’s the difference in taxable income compared to an ETF.
If you prefer to stick with an ETF, SCHB is Schwab’s broad market ETF, while SCHD is their large-cap ETF.
The performance should be comparable to SWPPX, and since its share price is under $70, fractional shares won’t be as significant an issue compared to VOO.
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SWPPX has a slightly different weight and includes a few more stocks. Its short-term returns can sometimes be better or at least equivalent to Vanguard’s offerings. Many people don’t realize that VOO has an expense ratio that’s 50% higher. If you hold a large index over the long term, you generally come out ahead. Almost all of Schwab’s in-house funds charge less. As someone already mentioned, the tax consequences are important to consider. The strategy is essentially to buy, add to, and hold. The longer you hold, the less you tend to lose over time. It’s not a good index for frequent trading, as its volatile nature can catch you off guard.
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It doesn’t really matter as long as you A. remain with Schwab or B. are discussing a retirement account.
Although mutual funds in general are less tax efficient and have more taxable events, index mutual funds are generally rather tax efficient. The mutual fund you are purchasing may have a capital gains dividend every five years.
The ability to transfer assets to another brokerage at any time during your investing career is the main justification for purchasing VOO (etc.). Stated differently, you can switch brokers without triggering a taxable event.
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Sounds good, thank you for insight.
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SWPPX has a slightly different weight and includes a few more stocks. Its returns over shorter periods can sometimes be better or at least on par with Vanguard’s offerings. Many people don’t realize that VOO has an expense ratio that’s 50% higher. Holding a large index for an extended period generally yields better results. Almost all of Schwab’s in-house funds charge less. Someone has already addressed the tax implications. The key strategy here is to buy, add to, and hold. The longer you maintain your position, the less you tend to lose over time. Frequent trading is not advisable due to its volatile nature, which can lead to unexpected challenges.