I was interested in adding an index ETF’(s) into my portfolio. I viewed the five(5) ETF’s that the Fool has listed in “Our top investments to hold for 5 years” page which lists the timely stocks, foundational stocks and ETF’s. I currently hold an S&P 500 index mutual fund so I would like to add an ETF that doesn’t overlap. (Example-I read that a total market index ETF may overlap the S&P 500). I noticed when researching Vanguard ETF’s (I’m interested in these) there seems to be several ETF’s for large, medium, and small cap that tracks different indexes. For example, the VB small cap index tracks the CRSP US Small Cap Index but the Vanguard VTWO Russell 2000 tracks the Russell 2000. Why is the Fool recommending the VB? Does this ETF hold all the small cap companies? Is there a way to buy an ETF that holds all these small caps to make it easier? It’s a little confusing.

Secondly, my understanding is ETF’s don’t have many capital gains taxes, but may have dividends. And if held in an IRA one doesn’t need to worry about paying these taxes until making distributions during retirement. On the other hand, if an ETF is held in a taxable account the taxes are paid on the dividends that year but the capital gains taxes are paid when you sell shares. Is this correct?

Lastly, If I did buy an index ETF in a taxable account which market cap or sector(large,medium,small/growth,value/technology,) would be best in this type of account to reduce dividend taxes and/or capital gains taxes?

Basically, I felt it necessary to add an ETF’(s) into my portfolio and I knew where to come with my questions knowing this community has very knowledgeable people.

Thank you Fools.

Hi Moooohead,

The best place for info on Vanguard’s ETF’s is the Vanguard site. Here is VOO for example:

You can see the fees, .03%, the last couple years of distributions, the portfolio info, price performance and a basic overview of the fund makeup.

Just type the symbol on the end of the line, replacing VOO, to look at another fund.

For my money, I do not have a “need” for an ETF. The only one we own is BIV, an intermediate bond fund at 0.61% of our portfolio.

I will not own a mutual fund anymore. I had to own some when I had a 401K and they were terrible performers and high fee. Even when I was paying a $45 broker fee in the late 1980’s, it was a 1.5% fee on a $3,000 block of stock. As long as I held the stock, no more fees. With mutual funds it is every year.

Does that help you?

All holdings and some statistics on my Fool profile page