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I have invested 90K around 2 weeks back. Today the asset is decreased to 89600. Can I tax loss harvest in this situation? What would be few index stock mutual fund that I can choose?
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Its not worth it, 400 dollars? You could technically but it doesnt make much sense. -
this is in a taxable account, right? I think most people prefer having target date funds in 401k/IRA due to the bond allocation. Depending on your marginal tax rate it might be better to have muni bonds in your taxable account instead of the bonds that are in the target date fund.
Funds I have in my taxable account are VTSAX (total domestic) VTIAX (total international) and VWIUX (muni bond).Comment
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I would sell it and switch to either VTSAX or VTIAX as triad mentions (in my case the ETF versions). Whether otherwise doing this for $400 tax loss harvesting is worth your time is a matter of discussion. But in your case regardless I would not be holding a target retirement fund in taxable.Comment
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Can I switch to VTSAX etc. fom the target date fund as the Target date fund has VTSAX, etc in it?Comment
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Use the ETF equivalents. They are more tax efficient.Comment
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Can I switch to VTSAX etc. fom the target date fund as the Target date fund has VTSAX, etc in it?
Interesting question, I am pretty sure it is not a wash sale if target date has underlying mutual fund inside it. After all all mutual funds have individual stocks in them and we wouldn't be concerned about wash sale from VTSAX vs selling GE or something.Comment
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I wanted to exchange the target date fund to individual index funds (to not to keep a TDF in a taxable account). It lost around 400 dollars in 2 weeks. Should I wait longer to see if I loose more to get more advantage of tax loss harvesting ? Or I can wait to see if the value improves before exchage to lessen capital loss.
Please advise!Comment
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Please advise!
I would sell now. The $400 paper loss will earn you maybe $150 to $200 on your 2017 tax return. If you wait, the loss could disappear quickly. That's only a half percent we're talking about, which the market can gain back in a day. When you sell, you'll get the end of the day's trading price. If Monday is a good day, you might not get to harvest any losses.
The main reason to sell isn't to harvest the minimal loss, though. It's to break up the target fund into individual components. If you keep bonds in taxable, go with a municipal bond fund.
This would also be a good time to tell you that you need an investor policy statement.
Cheers!
-PoFComment
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I was wondering if someone could explain why you should keep bonds out of a taxable account. And why ETFs are more tax efficient?
I have a VSMGX fund in a taxable account. I've been thinking of breaking that up anyway since the expense ratio is higher than the admiral components. I typically buy and hold. Would it make more sense to hold onto it and direct future funds to the individual components (with the bonds going into my backdoor roth), or to sell it and start from scratch? Also, I direct most of my investments into taxable accounts, after maxing a backdoor roth and 401k employee contribution. In order to keep a balanced portfolio, I'd like to invest much more than $5500 a year into bonds. How do you do this while keeping bonds out of taxable accounts?
Please let me know if I misread the advice.Comment
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I was wondering if someone could explain why you should keep bonds out of a taxable account. And why ETFs are more tax efficient?
I have a VSMGX fund in a taxable account. I’ve been thinking of breaking that up anyway since the expense ratio is higher than the admiral components. I typically buy and hold. Would it make more sense to hold onto it and direct future funds to the individual components (with the bonds going into my backdoor roth), or to sell it and start from scratch? Also, I direct most of my investments into taxable accounts, after maxing a backdoor roth and 401k employee contribution. In order to keep a balanced portfolio, I’d like to invest much more than $5500 a year into bonds. How do you do this while keeping bonds out of taxable accounts?
Please let me know if I misread the advice.
The issue is that regular bonds are not tax-efficient. If you are wanting bonds in taxable, most would recommend municipal bonds instead. The target date funds and vsmgx have total bond / international bond rather than munis.
For me I use ETFs because I don't have to worry about the "end of the day" price when tax loss harvesting.
In your situation it would depend on how much gains you have in the current VSMGX. If it is a lot you may just want to change with new funds. In terms of your bond portion, you presumably have access to bonds in 401k as well?Comment
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Compare http://performance.morningstar.com/fund/tax-analysis.action?t=VBTLX®ion=usa&culture=en-US
To http://performance.morningstar.com/fund/tax-analysis.action?t=VWIUX®ion=usa&culture=en-US
Bonds earn primarily on interest earned from bonds is usually taxed as income, causing "tax drag." Interest earned from municipal bonds is tax-free.Comment
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My taxable Tax Loss harvesting rule as @childay mentioned:
Use ETFs - order fills right away and you know the price vs end-of-day pricing which you're at the mercy of the market for such.
@Dr P - Taxable bonds in taxable generates distributions that are TAXED at normal income rates which for many here is 39%+ before you can do anything with it. For long term holds, this is very inefficient. Even dividend stocks are taxed at 20% and can hurt in taxable IF intended for long term reinvestment.Comment
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