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Explorer ○○

ETF vs. Mutual Fund/VTWAX vs. VTI

I am advising my 30 year son as he leaves his employer's 401K to set up his own company. He will likely be doing a rollover to a Vanguard IRA.

While I do not hold these funds myself, I am looking for advice for what etfs/funds for him to invest in his future IRA at Vanguard. Given his young age and being all consumed with his start up and not wanting to monitor his investments, I am thinking broad index funds.

My question is whether to suggest putting the money into an ETF or mutual fund, as he will invest and not touch it for years on end. Since he is not Buying and Selling, wouldn't a mutual fund make more sense?

More specifically, would it be better to put most of it in VTWAX total global or VTSAX/VTI total U.S. only?

If the former, doesn't it make more sense to simply do VTWAX rather than total U.S. and total international funds traditionally associated with the Bogleheads Three Fund Portolio?

International has languished for so long that I am leery of VTWAX but for the long term a lot of people suggest that that is the way to go.

I am thinking 75 VTWAX and 25 VTBLX for a 30 year old professional.

Thoughts and insights? Thanks

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Frequent Contributor

Re: ETF vs. Mutual Fund/VTWAX vs. VTI

Under the circumstances, I do think mutual funds make more sense.  Vanguard has very low expenses on mutual funds, so that would be my choice. As to your choice, this is too much a personal decision for me to advise. I like VTWAX and would hold it with another large cap index fund and the extended market fund, but this is just my perference for holding more than three funds. On the other hand, holding the three boglehead funds make sense, as many do choose that for a long-term buy and hold investment strategy. 

I would not hold VTWAX as my sole equity fund. VTSAX with an international equity fund would make more sense.

I agree total bond fund would be a good simple holding.

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Explorer ○○

Re: ETF vs. Mutual Fund/VTWAX vs. VTI

Many thanks Fatcat!

If he does VTWAX, why then look at another LC index and Extended market when many of those holdings are in VTWAX?

Keeping in mind that he will barely look at the IRA for years.

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Frequent Contributor

Re: ETF vs. Mutual Fund/VTWAX vs. VTI

@Newer_Retiree I  would rather hold an S&P 500 fund with a sepatate international fund because the world's largest companies are more represented in this fund. VTSAX is also a good choice. I like VTWAX as a second holding , but would choose an index international ex US fund too.

Making more simple, I'd go with the three fund portfolio over holding VTWAX alone with your bond fund. 

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