[Morgan]

I hear most about VOO. Is that more tax efficient in a taxable brokerage account than Vfiax?

How does taxing work between the two when I hold or decide to sell?

[Brian]

VFIAX being structured as a mutual fund has to hold a certain amounts of cash at all times inside the fund for when people buy and sell. That cash isn’t doing anything growth wise as it’s there for transaction purposes. VOO or any other ETF is not required to hold as much cash thus a higher % of the fund is always invested in the companies (a very small %).

ETF’s are more tax efficient because as they add or subtract companies from the fund it is done by trading funds within the fund where as a mutual fund would have to sell the companies before buying different companies. The “selling” of these companies is what creates the taxable event to the shareholders. Since ETF’s are only exchanging via trade the companies no taxable event is occurring.

[Joanne]

VOO is an ETF which trades like a stock whereas VFIAX is a index fund which trades only once per day….ETFs are more tax efficient.

[Joe]

SPY is better if you ever want to write calls on your holdings in the future IMO.

[Mark]

VTI/VOO/VFIAX/VTSAX. If you are doing longterm buy and hold for 15+ years the returns on all 4 of these will be nearly identical. Differences between them are small and likely don’t apply to you.

Don’t use a lot of brainpower and energy into picking one. pick one and move on.

Don’t miss: Is rental income a better investment than the S&P 500?

[Joshua]

If anyone has any questions about the differences feel free to reach out to me directly. I can answer it very in depth. 😀

[Rawee]

Buy both from different types of accounts. VOO (ETF) on the taxable brokerage account and VFAIX (mutual fund) from any IRA, 401k or HSA account.

I own VOO in the brokerage account because the expense ratio is lower than SPY (0.0945% vs. 0.03%).

Mutual fund will have the lowest expense ratio because it’s designed to sit for 10-25 years. VOO ETF also allows fractional shares (e.g. $100 4x in a month) via Vanguard, so you can dollar cost average vs. buying a $418 share once.

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