Mututal Funds converted into ETFs

patel

Hi: I recently converetd some of my Vanguard Admiral Mutual Funds into Equivalent Vanguard ETFs. Would like to know a correct way to enter this transaction in Quicken. Will this be a BUY/SELL vs. Mutual Fund Conversion Vs. Share Transfer? Do not want to loose the historical aspect of the data as it relates to performance / returns etc. Please advise.

Tom Young

A Vanguard FAQ on this process:

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Can I convert my conventional Vanguard mutual fund shares to Vanguard ETF Shares?

Yes. Most funds that offer ETF Shares will allow you to convert from conventional shares of the same fund to ETF Shares. (Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—don't allow for conversions.)

Conversions are allowed from both Investor and Admiral™ Shares and are tax-free if you own your mutual fund and ETF Shares through Vanguard.

Keep in mind that you can't convert ETF Shares back to conventional shares. If you decide in the future to sell your Vanguard ETF Shares and repurchase conventional shares, that transaction could be taxable.

If you have a brokerage account at Vanguard, there's no charge to convert conventional shares to ETF Shares. If you have questions, call us at 866-499-8473.

If you own your Vanguard mutual fund shares through another broker, keep in mind that some brokers may not be able to convert fractional shares, which could result in a modest taxable gain for you. Other brokers may also charge a fee for a conversion. Contact your broker for more information.

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So it shouldn't be a "Buy/Sell", something along the lines of the Mutual Fund Conversion or Corporate Acquisition (stock for stock) might be the best way of handling this.  (The Mutual Fund Conversion seems to be having some problems if you're using "average cost" - https://community.quicken.com/discussion/7858412/mutual-fund-conversion-erroneous-cost-basis - so the Corporate Acquisition might be better if you don't hold those shares in any other Quicken Account.)

Wait and see how Vanguard handles this first - without accepting any transactions - to see if there's some other wrinkles, like moving from a mutual fund account at Vanguard to a brokerage account at Vanguard.

Tom Young

A Vanguard FAQ on this process:

---------------------------------------------------------------------------------------------------

Can I convert my conventional Vanguard mutual fund shares to Vanguard ETF Shares?

Yes. Most funds that offer ETF Shares will allow you to convert from conventional shares of the same fund to ETF Shares. (Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—don't allow for conversions.)

Conversions are allowed from both Investor and Admiral™ Shares and are tax-free if you own your mutual fund and ETF Shares through Vanguard.

Keep in mind that you can't convert ETF Shares back to conventional shares. If you decide in the future to sell your Vanguard ETF Shares and repurchase conventional shares, that transaction could be taxable.

If you have a brokerage account at Vanguard, there's no charge to convert conventional shares to ETF Shares. If you have questions, call us at 866-499-8473.

If you own your Vanguard mutual fund shares through another broker, keep in mind that some brokers may not be able to convert fractional shares, which could result in a modest taxable gain for you. Other brokers may also charge a fee for a conversion. Contact your broker for more information.

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So it shouldn't be a "Buy/Sell", something along the lines of the Mutual Fund Conversion or Corporate Acquisition (stock for stock) might be the best way of handling this.  (The Mutual Fund Conversion seems to be having some problems if you're using "average cost" - https://community.quicken.com/discussion/7858412/mutual-fund-conversion-erroneous-cost-basis - so the Corporate Acquisition might be better if you don't hold those shares in any other Quicken Account.)

Wait and see how Vanguard handles this first - without accepting any transactions - to see if there's some other wrinkles, like moving from a mutual fund account at Vanguard to a brokerage account at Vanguard.

patel

Thank you Tom. My question was more related to "How should I enter the Mutual Fund conversion in Quicken?" and I think what you suggest is to use "Corporate Acquisition" functionality in Quicken. Please note, I do have few Mutual Funds (e.g. VFIAX) in 2 different Vanguard Accounts and I have mirrored the same in Quicken. Let me know your thoughts. Thank you in advance.

Jim_Harman

If you are running the current version of Quicken AND you do not have "Use average cost" set for the "old" mutual fund then I believe the Mutual Fund Conversion will work correctly. 

If these conditions are not met, you will probably be best off with the Corporate Acquisition, but then you will have to delete the transactions created by the acquisition in any accounts where you hold the security and it was not converted.

Make sure you make a backup before entering these transactions.

Ps56k2

thanks for the topic - didn't know you could do that at Vanguard...
Why change from the MF to the ETF - ?

NotACPA

ps56k said:

thanks for the topic - didn't know you could do that at Vanguard...
Why change from the MF to the ETF - ?

I'd suspect that the ETF has lower fees associated with it, thus a bit higher return.

Tom Young

NotACPA said:

ps56k said:

thanks for the topic - didn't know you could do that at Vanguard...
Why change from the MF to the ETF - ?

I'd suspect that the ETF has lower fees associated with it, thus a bit higher return.

Even more important can be the tax efficiency since ETFs almost never distribute capital gains but mutual funds can and do all the time.

RCinNJ

I am about to do this and found this thread looking for answers on how to maintain the exiting lots. My advisor at Vanguard tells me that the ETFs, for various reasons, are actually cheaper for Vanguard to manage and they are passing on the savings. Hence, he expects the cost advantage to be permanent.

Regarding capital gains: As I understand it Vanguard has been doing some moves behind the scenes to keep the capital gains the same between the funds and the corresponding ETFs, so not so much for the difference in capital gains distributions for many other non-Vanguard ETFs (if interested you can Google the reason).

Not clear to me from the answers so far the best way to convert and keep existing lots. I assume, but am not sure if, they will all be converted by Vanguard at the same time and hence the same conversion ratio. Can anyone with experience speak to this?

Will "Mutual Fund Conversion" or "Corporate Acquisition" do the trick?

Quicken for Mac Premier 2019, 5.12.2

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