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Small cap value in taxable?

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  • Small cap value in taxable?

    How tax inefficient is it to have SCV in your taxable account?  I read PoF's allocation and see he doesn't have any at all in his taxable (presumably due to tax inefficiency?).  I'm not going to be able to contribute to my SEP IRA going forward and am not ready to pull the trigger on the 401k yet so I'm running out of tax deferred space.

    I guess I'll eventually have to add SCV to my taxable so that I can rebalance without tax consequence...  How do I calculate how much that will cost me (33% marginal tax rate, no state tax)?

  • #2
    I have small cap value in both. I am not sure why PoF has it only in tax-deferred. There is nothing inherently tax-inefficient about small cap value thought it might depend on what vehicle you use. If you compare IJS to SPY (both S&P index funds, for small cap value and S&P 500), the tax efficiency is very similar.


    • #3
      My portfolio is slanted to small-cap and I have them in both sides.  If it really matters to you, Vanguard has a tax-managed small cap.


      • #4

        I thought SCV was relatively inefficient because it gives off more dividends then total market and you don't get the foreign tax credit you can get with international.  according to a post from bogleheads ( SCV has half the efficiency of total international and his chart is based on a 15% marginal tax rate.

        I thought I read that the tax managed small cap fund wasn't very "valuey" and have read that small growth is supposed to be the black hole of investment classes.


        • #5
          Relative to TSM, I think it's probably a bad idea. Our SV is in Roth IRAs. In fact, with our new allocation, I think SV makes up most of our Roth IRAs. Unfortunate this year. It hasn't been a great year for SV.
          Helping those who wear the white coat get a fair shake on Wall Street since 2011