Forum Mailbag: Vanguard Expands Commission-Free ETFs, Deliver Amazon Packages, Closing Old Credit Card, And More!

There is so much great information on personal finance forums. I participate on several message boards, including the Bogleheads and White Coat Investor forums. Here are some of the discussions happening around the internet.

1. White Coat Investor: Vanguard Expands Commission-Free ETF Offerings

Question: Marko-ER wanted to discuss the implications of Vanguard’s announcement that they would offer commission-free trading on nearly all ETFs, including those from their rivals such at Blackrock/iShares, State Street, and Schwab.

WSP’s Take: This is a pretty remarkable move by Vanguard. Since they are likely to set boundaries on trading frequency to limit short-term trading of these ETFs, they probably won’t lose too much money on ETF trade commissions from this move.

Nevertheless, what’s surprising about this move is that it could potentially drive business away from Vanguard’s mutual funds and ETFs. While Vanguard has very low expense ratios, they generally do not have the lowest expense ratios in the industry, so Vanguard investors may choose to invest in iShares or Schwab ETFs. It will be interesting to see if the growth of Vanguard’s index funds and ETFs is affected by this move.

I anticipate that Fidelity and Schwab will likely expand their commission-free ETF offerings in response to this move from Vanguard. All in all, this decision by Vanguard is a plus for index investors.

2. Choose FI Facebook Group: Small Business Delivering Amazon Packages

Question: The ChooseFI Facebook group is discussing Amazon’s recent announcement that they are hiring Amazon Delivery Partners to run fleets of vans to deliver Amazon packages. Prospective business owners will need to own multiple vans (5-20 to start with the opportunity to scale up), hire drivers, and manage the fleet. Amazon will direct the routes that drivers will take to deliver the packages.

WSP’s Take: While physicians can endeavor on any number of side hustles, managing a fleet of Amazon delivery trucks would not be the one I would choose. With the introduction of this program, Amazon is clearly aiming to reduce the cost of shipping their packages. They already have significant bargaining power over traditional shipping carriers such as USPS and FedEx. They will have even more power when they have the option of routing business to their own delivery trucks.

And unlike USPS or Fedex, individual business owners will likely have little negotiating power over things such as the price to deliver a package. While my guess is that early adopters will probably be successful if they manage the business well, Amazon can choose to squeeze their delivery drivers at any time in the future. I would pass on this opportunity.

3. Bogleheads: Closing Old Credit Card

Question: Mikemagz11 has an old credit card that he opened in college about 6 years ago. It has a low credit limit ($1,000) and he currently only puts two recurring expenses on it. He plans on moving those new expenses to another credit card. He was wondering whether he should just close this credit card since he won’t be using it anymore. His credit score is currently over 800.

WSP’s Take: One major component of the credit score is the length of credit history, which is determined in part by the age of the oldest credit line, which in this case is the credit card from college.

If he closes this credit card, his credit score would likely take a hit because his credit history length would drop. He can always just leave the credit card in the sock drawer to collect dust.

He would have to occasionally check his credit card statements to ensure that a fraudulent charge was not put on the card. If the card is on the same login as a bank account, then this should be pretty easy.

On the other hand, since his credit score is currently 800, he would probably still be eligible for the lowest rates on things like a mortgage even if he were to close the credit card.

I would keep the credit card, but closing it would likely not affect him financially.

4. White Coat Investor: HSA For A Young Family

Question: Run19 is part of a family of four who currently has a traditional health insurance plan. He is interested in an HSA because of the tax benefits, but is concerned that he would have higher out-of-pocket costs because each doctor visit would be $200-300 because of the higher deductible of HSA-eligible health insurance plans. While his family is generally healthy, he does bring the kids to the doctor 4-7 times per year for sick visits.

WSP’s Take: You’d have to run the numbers to see whether the total healthcare cost (premiums + out-of-pocket cost) of a high-deductible health plan (HDHP) would be higher than for a traditional insurance plan. This of course depends on your typical healthcare usage, the plan benefits, and the premiums of the two health plans.

My guess is that based on the described healthcare usage of 4-7 sick visits, but no chronic illnesses, the HDHP would have slightly higher total costs than a traditional insurance plan. However, this difference likely would be overcome by the tax benefits derived from contributing to an HSA. Remember that an HSA effectively turns into a 401(k) at age 65 (money can be withdrawn as taxable income without penalty).

Also, your healthcare usage would probably decline if you were on a HDHP — you’d be less likely to bring your sick child in to see the pediatrician if you had to pay 100% of the cost instead of 10% of the cost of the visit.

Wall Street Shares: 5 Articles To Read This Week

1. Smart Money MD: Why do young doctors hate medicine so much? — While the millennial generation may be entitled, medicine also ain’t what it used to be.
2. Chief Mom Officer via Go Curry Cracker: Teaching Kids Mathematical and Intangible Money Lessons — This mother of three explains how she is instilling sound personal finance principles to her children.
3. XRayVSN: Become a Capitalist, Not A Laborer (Building Your Financial Dam) — A nicely-written article by a radiologist comparing building and deploying financial capital to the potential energy in a dam.
4. White Coat Investor: Financial Waterfalls for New Residents and Attendings — WCI’s order of financial operations for new residents and attendings.
5. Physician On FIRE: Top 5 Ways I Make Poor Choices With Money — These 5 decisions may be poor money choices, but for PoF, they are also good life choices.

What do you think? Do you agree or disagree with any of my responses? What’s your take on the topics in this week’s forum mailbag?