Discuss Latest WCI Blog Post: 4 Lessons to Learn from the Vanguard Target Retirement LTCG Distribution Disaster

[artemis]

So I was one of the idiots that had a Vanguard Target Retirement Fund in a taxable account. With the recent market drops and drop in share value from the cap gains distribution, many of the shares I had now show a loss. I went ahead and sold a bunch for tax loss harvesting - You can specify which shares you are selling. I'll then put the money into index funds or maybe ETF's.

If you haven't already done so now might be a good time.

Indexed ETFs are the way to go if you want to do tax loss harvesting on a regular basis, because they trade much faster than mutual funds do (mutual funds don't trade until market close, even if you place your sell order before the market has opened). But nearly every indexed mutual fund Vanguard owns has an ETF equivalent, so switching to EFTs isn't significantly limiting.

I wouldn't be surprised if the tax loss harvesting mostly offsets the capital gains, so the overall harm will be minimal. It's a wake-up call for sure, though: if you want Target Retirement Funds, hold them in a retirement account, and stick with more tax-efficient vehicles for taxable.