Scope And Purpose Of This Post
This post will try to help inform people about the "ETF vs mutual fund" decision, and we're going to go through some examples, most notably ITOT (ETF) vs FZROX (mutual fund).Terminology notes:
- Percentage points are abbreviated "pp". Percentage points are for describing absolute amounts, not relative amounts (which we use percentages for). A tax rate increasing from 5% to 15% is an increase of 200% (relative) and is also an increase of 10pp (absolute).
- basis points (hundredths of a percentage point) are abbreviated ‘bp’. So 3 bp is the same as 0.03% and 0.0003
End Result For Jacob
Rule of thumb: assuming my choices are competitive, ETF (or certain Vanguard mutual funds) in taxable accounts and mutual funds in tax-advantaged accounts.For investing in the US equity asset class, I currently purchase ITOT in my taxable account and FZROX in my Roth IRA. I think ITOT will probably be notably better than FZROX in taxable accounts and is pretty much the same as FZROX in tax-advantaged accounts. In tax-advantaged accounts, I go with FZROX mostly for the extra ease/convenience and making sure I don't trigger wash sales (Wiki, Fairmark, tax code).
