Dr.
These are major ETFs, high-volume ETFs. And if you put a market order in, the spread is like a penny or less, and it’s going to execute right away. And so, that’s what I’ve been doing. I’ve just been putting in market orders and no big deal. I watch them make sure they actually execute it and pretty much that’s what happened. What I see is what I get and no big deal.

Dr.
I basically stopped using limit orders. I just use market orders for those ETF purchases. Whether I’m doing it in my 401(k) at Fidelity, whether I’m doing it in my taxable account at Vanguard, I’ve been using market orders.

Jim Dahle:

The following question is, if you do that cool function, that it fractional display function? And that i imagine it is extremely easier since it removes one of the issues of using ETFs. One of the reasons I really like conventional mutual financing over ETFs is you can simply place the cash during the. It’s not necessary to calculate out of the offers in addition to the proven fact that you can place the purchase inside the and it also merely happen at the conclusion of the new trading time. But you can accomplish that.

Dr.
Essentially, it’s the same thing with fractional shares. You can just pick the dollar amount. I want to put $5,000 into VTI and you can just do that at Fidelity.
But if your brokerage is a place that allows it, sure, why not? I think it’s super convenient. It’s no big deal to have fractional shares in there.

Dr.
I wish all brokerages would do it. I suspect all will eventually, but I think it’s actually probably a better system to allow that. So, I wouldn’t worry about it all. I don’t think there’s an extra fee. You’re not losing anything there. If you are, it’s pretty trivial, especially with these very liquid ETFs that most of us are using, which are basically Vanguard index fund type ETFs.

Dr.
All right. Next question is about the recent fiasco at Vanguard. If you want a reason to hate Vanguard, this is a reason to hate Vanguard. Take a listen.

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Chad:
Hi Jim. This is Chad from Georgia. Jason Zweig had an interesting article in the Wall Street Journal on January 22nd. He reported that Vanguard’s target-date retirement fund 2035 and 2040 distributed approximately 15% of their total assets as capital gains.

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Chad:
This was felt to be related to a change in the minimum investment requirement for institutions which prompted many institutions to get helpful resources out of the standard fund and into an institutional equivalent.

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Chad:
Jason Zweig goes on to report how individual investors holding these retirement funds and taxable accounts got hit with large tax bills. One person with $3.6 million in the fund got a $150,000 tax bill. I’m curious what your take is on this situation and what lessons can be learned. I assume holding ETFs as opposed to mutual funds in taxable accounts could protect someone from an event like this. Thank you for all you do.

Dr.
All right. Yeah. So, if you want my take on it, you can go back and read a blog post I published on called Four Lessons from the Vanguard Target Retirement Long-term Capital Gains Distribution Disaster. And that’s what it was. Vanguard totally dropped the ball here. They did not stop to think about what the consequences of what they were doing was.