What is investor share

Same fund in ETF and investor share, different expense ratio?

I'm looking at the Vanguard 500 Index Fund. There are three different options.

Admiral's portion (VFIAX) for individuals with more than $ 10,000 and an expense ratio of 0.05%

Investor share (VFINX) with a minimum investment of USD 3,000 and an expense ratio of 0.17%.

Finally, the ETF version (VOO), which doesn't seem to have any minimum purchase requirements but still has a low expense ratio of 0.05%.

My question is based on the expense ratio and the minimum fund required. The ETF seems to be the best. Are there circumstances where people choose the two best options?

JoeTaxpayer ♦

Let's not ignore VIIIX, the institutional version with an expense of 0.02%.

Craig W.

Some reasons people might choose mutual funds over equivalent ETFs:

  • If you're new to investing, you may not know about ETFs that didn't emerge until the 1990s. Even if you do, they can be intimidating as they trade like stocks. With mutual funds, you just say how much you want and it'll do it for you.
  • In some cases, there may be commissions on ETFs, but not on mutual funds.
  • You cannot buy partial shares of ETFs as long as you can do so for mutual finds. Buying ETFs can therefore result in uninvested cash.
  • If this is included in a 401 (k) or similar plan, you can likely only buy mutual funds, not ETFs.

There may be other reasons that I don't think about. I think the first is the most important explanation, meaning ETFs are still pretty new and a little intimidating for people who don't think about investing a lot.