Vanguard Funds vs ETFs

After researching Vanguard funds vs. ETFs I still haven’t found a good resource that lists in detail the benefits and downsides of each.

This is my attempt to compile a comprehensive list of tradeoffs.

Tradeoff Mutual Funds ETFs
Can you exchange?1 Yes No, you must sell shares to cash to exchange.
Can buy fractional shares? Yes Yes and no2
Can reinvest dividends? Yes Yes
Price updates Once a day Continuously
Expense ratio Sometimes lower
Control over price Can buy at exact price.
Can set up limit orders.
Tax Slightly more tax efficient3
Auto-scheduled investing Possible Not possible
Default cost basis4 Average FIFO

Overall, ETFs give you more precise control over your investment, but lack the ability to exchange and set up automatic investments. If you’re looking for the absolute best ROI or you plan to trade frequently, ETFs look like the way to go. If your approach is more “set it and forget it,” it looks like mutual funds win out in that category. Let me know your thoughts or if I missed anything below!

Disclaimer: obviously I am the farthest thing from any sort of financial advisor—this is just information aggregated for your convenience.

Update December 2020: The Bogleheads website has a thorough resource on this exact distinction - check it out.

  1. Both of these trigger capital gains tax. [return]
  2. This is not possible through Vanguard, but it is possible to buy fractional shares of Vanguard ETFs through other brokers that support it. Thanks to Sinan for pointing this out. [return]
  3. Thanks to @alexmingoia for pointing this out. [return]
  4. (via) [return]