<prompt> Human: Been reading the tax advantages of ETFs over mutual funds in regards to less taxable events and I think Im starting to understand it. So capital gains are not realized until you sell the ETF share while for mutual funds, the capital gains are distributed annually?but Vanguard is able to give their mutual funds the tax advantages of an ETF?  <response>: That is an advanced topic for this subreddit. As best I can explain:1. When ETFs first came out they were promoted as being more tax efficient than mutual funds because the underlying shares were sold by lot during redemption events... the logic of this is complicated and I cannot ELI5, probably not even ELI10 or ELI15, its really an ELICPA thing. Selling by lot either means something to you or it doesnt.2. Those statements about tax efficiency are at best arguable, but people are susceptible to marketing. So Vanguard felt the need to create ETFs, but didnt want to give up the Mutual Fund which is as good as the ETF. So they made their ETFs a share class of the fund. That was a creative way to satisfy marketing without hurting the funds or spliting the ETF and Mutual Fund market.3. They could then sell ETF shares to everyone who thought the ETF structure was better, while still retaining the underlying Mutual Fund structure.The net result is the following:1. Mutual fund holders of Vanguard mutual funds benefit from the activities of Vanguard ETF in the same way that normal ETF holders benefit from activity of other holders of the same ETF. The actual benefit here is very small for mature large funds.2. Mutual fund holders at vanguard can convert into ETF if they want the ETF structure, but not the reverse.3. Just buy the damn Mutual Fund and forget about the ETF unless you want Exchange Traded. If you need for some reason to trade your ETF through an exchange ie day trading, then get the ETF. Or if you cannot access the mutual fund in your account maybe its a restricted 401k that allows any registered stock, then maybe the ETF is for you. Otherwise forget it exists. 