PSA: VOO and chill is NOT the same as FXAIX and chill

Original Reddit post

Author argues that FXAIX is inferior to VOO in taxable accounts due to capital gains tax drag outweighing the lower expense ratio.

VOO — LONG The author argues that while FXAIX has a slightly lower expense ratio than VOO, the tax savings from VOO's ETF structure in a taxable account far outweigh the fee difference. Over 30 years on a $1 million investment, FXAIX may save about $40k in expenses but incur $120k-$180k in capital gains taxes, making VOO the better choice for taxable accounts. The main risk is that tax laws or personal situations could change.

any savings from the lower fee will be more than offset by the capital gains taxes incurred by holding a mutual fund in a taxable account. For example, on a $1 million investment held over 30 years, FXAIX may save about $40k in expenses, but any benefit is lost after the $120k–$180k in capital gains taxes... which is not something you'll have to worry about with an ETF

FXAIX — AVOID The author argues that while FXAIX has a slightly lower expense ratio than VOO, the tax savings from VOO's ETF structure in a taxable account far outweigh the fee difference. Over 30 years on a $1 million investment, FXAIX may save about $40k in expenses but incur $120k-$180k in capital gains taxes, making VOO the better choice for taxable accounts. The main risk is that tax laws or personal situations could change.

any savings from the lower fee will be more than offset by the capital gains taxes incurred by holding a mutual fund in a taxable account. For example, on a $1 million investment held over 30 years, FXAIX may save about $40k in expenses, but any benefit is lost after the $120k–$180k in capital gains taxes... which is not something you'll have to worry about with an ETF