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  • Tax loss harvesting

    I did TLH from Vanguard total stock to S&P 500, total international to developed market, and small cap value to tax managed small cap on 8/14. I wanted to do more TLH with market drop yesterday. Do I have any other option this time? How many TLH can I do in a Vanguard brokerage account in a month?

  • #2
    As many as you want, but you're going to have to find new partners to swap into (i.e. don't go back to your original position until > 30 days has passed).

    Large caps is a good option from S&P 500. Ex US for international. Maybe a mid cap fund instead of small cap?

     

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    • #3
      I just checked my taxable.  No losers except in short term bonds so not really worth it.

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      • #4
        I thought there was a 1-2% drop yesterday.

         

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        • #5
          I know some people have done TLH over 100K during 2008 market drop. How did you keep track of the loss to carry forward? Does Vanguard keep track of this?

          I did some TLH earlier this month, but I don't know how to find the exact amount in the Vanguard account. For these complexities, I wondered about betterment but don't want to pay that extra 0.25%(seems like they are changing their fee structure also time to time)  without knowing if it would bring long term benefit or not. I don't know if some one using Betterment for couple of years to give a perspective.

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          • #6
            Sorry for the novice question, but how do you actually go about doing TLH?

             

            I have been investing once per month in S&P 500 index funds with Vanguard. Some of the shares I've purchased were below the current price, but with the recent small dip in the market, some of them were purchased at a higher price.

             

            When tax loss harvesting, do you exchange your entire holdings? Do you look at the average price of your holdings versus the current price? Or do you instead sell specific shares that were purchased at a higher price?

             

            Also, do most people TLH by taking advantage of small dips in the market, or is it more common to just wait for a bigger market slump?

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            • #7
              I am also a novice. But I have done this couple times this year. I exchanged the entire holdings using average cost basis. If you want to do otherwise, you may need to use specific lot cost basis. I think it may take 24 hours for Vanguard to activate this. With doing TLH frequently, it is getting more complicated and I am wondering if switching to Betterment would be better.

               

              I have read usually people wait for around $500-3000 loss to do TLH.

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              • #8
                Vanguard will keep track of all this for you. Average cost funds can be TLH by any number of shares. I enjoy actually the process. I TLH all year long and especially in November when I will harvest just about any loss.  Remember the loss is "booked" until you die or you take cap gains or dividends . If you don't have cap gains, the loss goes against earned income up to 3K...kinda like a small IRA.

                The worst thing that can happen is the IRS will disallow the loss if you move back into a "similar" fund within 31 days. You don't go to prison or anything.

                Remember tax gain harvesting has no such requirements.

                Read Michael Kitces take on tax loss and tax gain harvesting.

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                • #9
                  Another thing since we are on the subject; Vanguard often has 30 or 60 days trading restrictions on re-entering back into the same fund with the same money. You can get around this restriction by making the transaction as an automatic, periodic  exchange and cancelling the transaction before the next exchange date.

                  You really don't want to be out of the Market for the 31 days to TLH, you give up the equity risk premium.

                  By the beginning of the new Year, there should no "red" in your Fund columns.

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                  • #10


                    Or do you instead sell specific shares that were purchased at a higher price?
                    Click to expand...


                    Yes, sell specific lots / shares. Be sure to specify "Specific ID" as your cost basis. Only sell the lots that are in the red. Keep the greens. If you're dealing with mutual funds, exchange into your similar but not substantially indentical TLH partner, rather than selling and buying.

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                    • #11




                      You really don’t want to be out of the Market for the 31 days to TLH, you give up the equity risk premium.
                      Click to expand...


                      While this is true, when you TLH this way, you are basically "dating" two different TLH partners back and forth and hoping the one with lower expenses and taxes is the one you wind up "marrying" after the market hits rock bottom and you have to commit to one of them.  Sometimes the TLH partners are really equally cute and it truly doesn't matter, but sometimes you really want Ashley and will end up with Mary-Kate, and that matters in the long run.

                       

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                      • #12
                        Does Betterment have a solution for this Ashley/ Mary-Kate problem?

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                        • #13
                          What would be the good way to do TLH between Vanguard and Schwab funds?

                          It seems like it takes 2-3 days to transfer money after selling funds from Vanguard to the linked bank account and also additional days to transfer money again to Schwab to buy funds.

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                          • #14
                            Maybe a TLH tutorial would be helpful if the WCI ever needs ideas for additional blog posts!

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                            • #15




                              What would be the good way to do TLH between Vanguard and Schwab funds?

                              It seems like it takes 2-3 days to transfer money after selling funds from Vanguard to the linked bank account and also additional days to transfer money again to Schwab to buy funds.
                              Click to expand...


                              These are better options:

                              - Pay the transaction fee and buy both funds at the same broker, as this is likely less than the cost of being out of the market a few days.

                              - Move your money to Merrill Edge, get Preferred Rewards, and get 30 free trades a month.

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