Tax Loss Harvesting Planning

[PedsAZ]

Any tips to simplify future tax loss harvesting when initially purchasing funds/ETFs? I know each fund should have a partner fund. Is there any way you set up your initial purchases or sequence of purchasing between the parners to minimize overall portfolio complexity in the long run? It seems common to end up holding 2-3 funds for each asset allocation in taxable until a bear market comes along, but possibly forever. Also, is there a good list of tax loss harvesting partners others have used to start out?

[CordMcNally]

Don't TLH into something you don't want to hold forever.

[PedsAZ]

Don't TLH into something you don't want to hold forever.

Yes, I definitely want to be okay with holding the partner funds forever even if it gets complicated. I wanted to see if anyone more expierienced than me had any tips to streamline the process before I get myself into the weeds.

[Larry Ragman]

It depends a bit on how complicated you want it to be. I want the major advantages of TLH without allowing a lot of funds to distort my AA. In that context, I suggest Vanguard Total Stock Market as your core. In the short term no partner needed. Only contribute to TSM. Then, when there is a big market drop (and I start paying attention at -10%, but probably wait until -20%) open an Index 500 fund and TLH losses into it.

Other factors revolve around wash sale rules. First, in my scenario can’t buy TSM for 30 days prior and 30 days after the TLH transaction. Second, must decide how to deal with dividend reinvestment. The constant TLH traders do not reinvest dividends automatically, preferring instead to have them paid to a money market fund and deployed for rebalancing once a quarter or whatever. I don’t do that. I auto reinvest, but turn it off for TSM for 30 days after a TLH transaction. Please note the 30 day prior issue can also be handled by TLH all the 30 prior shares.

Many ways to approach it. Good luck.

[zlandar]

What I do:

1. Limit brokerage buying to once a month. 12 lots of a ETF in a year easier to manage than 24+ if you buy more frequently.
2. Minimum number of ETFs. For me that is VTI and VXUS in my brokerage. No small/mid/value/growth/sector etc.
3. Retirement accounts don't have similar funds to VTI and VXUS. I have a total bond fund and a target retirement fund in my retirement accounts. I pick a TR fund that gives me the equity/bond ratio I want for my overall portfolio.
4. No auto reinvestment in my brokerage ETFs.

My personal list of TLH ETFs:

Tax lost harvesting
US ETFs
VTI- 0.04%- CRSP US Total Market Index
SCHB- 0.03%- Dow Jones U.S. Broad Stock Market Index
VOO- 0.03%- S&P 500
VV- 0.04%- CRSP US Large Cap Index
VONE- 0.08%- Russell 1000 Index
VTWO- 0.10%- Russell 2000 Index
VTHR- 0.10%- Russell 3000
MGK- 0.07%- CRSP US Mega Cap Index

International ETFs
VXUS- 0.08%- FTSE Global All Cap ex US Index
SCHF- 0.06%- FTSE Developed ex US Index
VEU- 0.08%- FTSE All-World ex US Index
IXUS- 0.09%- MSCI ACWI ex USA IMI Index

[Zaphod]

I dont see the issue? After wash rule time you just switch back if you want. Why hold for any longer? The whole point of tlh is many of these funds are essentially identical as far as market beta and going in/out for the milliseconds you are causes no material slippage.

[Larry Ragman]

I dont see the issue? After wash rule time you just switch back if you want. Why hold for any longer? The whole point of tlh is many of these funds are essentially identical as far as market beta and going in/out for the milliseconds you are causes no material slippage.

Well, sure, as long as there is no market recovery in that period. Otherwise you generate capital gains that offset your losses.

[jacoavlu]

What I do:

1. Limit brokerage buying to once a month. 12 lots of a ETF in a year easier to manage than 24+ if you buy more frequently.
2. Minimum number of ETFs. For me that is VTI and VXUS in my brokerage. No small/mid/value/growth/sector etc.
3. Retirement accounts don't have similar funds to VTI and VXUS. I have a total bond fund and a target retirement fund in my retirement accounts. I pick a TR fund that gives me the equity/bond ratio I want for my overall portfolio.
4. No auto reinvestment in my brokerage ETFs.

My personal list of TLH ETFs:

Tax lost harvesting
US ETFs
VTI- 0.04%- CRSP US Total Market Index
SCHB- 0.03%- Dow Jones U.S. Broad Stock Market Index
VOO- 0.03%- S&P 500
VV- 0.04%- CRSP US Large Cap Index
VONE- 0.08%- Russell 1000 Index
VTWO- 0.10%- Russell 2000 Index
VTHR- 0.10%- Russell 3000
MGK- 0.07%- CRSP US Mega Cap Index

International ETFs
VXUS- 0.08%- FTSE Global All Cap ex US Index
SCHF- 0.06%- FTSE Developed ex US Index
VEU- 0.08%- FTSE All-World ex US Index
IXUS- 0.09%- MSCI ACWI ex USA IMI Index

why do you have 8 US funds?

[mamaham]

what happens if you accidentally create a wash sale(s)?

[Peds]

what happens if you accidentally create a wash sale(s)?

then you create a wash sale and pay the taxes.

the problem is when you create one that you have to self report.

[Tim]

Well, sure, as long as there is no market recovery in that period. Otherwise you generate capital gains that offset your losses.

"Don't TLH into something you don't want to hold forever."

You may hold that position "forever" to avoid the capital gains. Or you may convert to roth, or you may donate. Simplification may have an avoidable tax. No requirement to generate capital gains. Optional.

[zlandar]

why do you have 8 US funds?

A year ago when the market tanked I was still holding us equity index funds in some of my retirement accounts like a S&P 500 fund. I made a longer us equity list just in case but it was unnecessary.