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Recommendations on index funds for taxable account?
Posted on 10/30/14 at 8:25 am
Posted on 10/30/14 at 8:25 am
Specifically Vanguard
Roth (VFFVX) and 401k match is maxed and will be going forward, but I'm looking for a good index to put a fairly significant amount in that's already in cash and non-index mutual funds. Long-term.
Along those lines, should your taxable account(s) differ from your Roth if the Roth is already in a low cost, tax-efficient index?
Roth (VFFVX) and 401k match is maxed and will be going forward, but I'm looking for a good index to put a fairly significant amount in that's already in cash and non-index mutual funds. Long-term.
Along those lines, should your taxable account(s) differ from your Roth if the Roth is already in a low cost, tax-efficient index?
4
Posted on 10/30/14 at 9:14 am to Books
The Roth holdings don't have to be tax efficient, the Roth wrapper makes any holding tax efficient. If tax efficiency is of the utmost importance to you the total market types of funds/ETFs, ie total market + international will be very tax efficient and low costs. I hold a significant position in an international small cap ETF in taxable and the tax effect has been negligible. If you hold more volatile asset classes in taxable they can provide more tax loss harvesting opps over the years as well to offset future capital gains and QDI. I don't like losing money, but in an IRA/Roth there are no tax loss opps, and those in taxable have saved a lot of taxes over the years.
Posted on 10/30/14 at 9:26 am to tirebiter
quote:I understand this, but most of the Vanguard indexes are tax-efficient by nature, which is why my Roth happens to be as well.
The Roth holdings don't have to be tax efficient, the Roth wrapper makes any holding tax efficient.
However, for my non-Roth, tax efficiency is important to me for obvious reasons. I'm trying to find specific funds that would best efficiently handle my non-Roth investments. I'm not very familiar w/ ETF's in general, though.
Posted on 10/30/14 at 9:50 am to Books
VTI
VXUS
If you're trying to keep it simple for taxable account ETFs
VXUS
If you're trying to keep it simple for taxable account ETFs
Posted on 10/30/14 at 10:35 am to Teddy Ruxpin
quote:can you give me a quick overview of ETF's vs regular index funds and the advantage/disadvantage?
If you're trying to keep it simple for taxable account ETFs
Shouldn't I have some bonds holdings as well?
This post was edited on 10/30/14 at 10:37 am
Posted on 10/30/14 at 11:06 am to Books
quote:
can you give me a quick overview of ETF's vs regular index funds and the advantage/disadvantage?
I would say (and someone expound or correct me) that they are essentially the same to you as an investor (if you're a Vanguard client buying Vanguard funds/etfs) except a few things:
1) ETFs can be traded intraday
2) This means you have to watch the bid/ask spread
3) There are no minimums for investing in ETFs
When I started with Vanguard, they still had "high" $3k minimums and I wanted to build a portfolio that had more than the US Stock market. So I went with ETFs. I also like the fact that I can take advantage of a "flash crash" when it occurs.
The bid/ask spread thing rarely pops up but sometimes it does for very large amounts. Usually goes away within minutes though.
Of course, if you have tons of money then going Admiral shares all around makes things "simpler." But its not as if ETFs are complicated.
quote:
Shouldn't I have some bonds holdings as well?
I was under the impression bond holdings (for the most part) aren't tax efficient and therefore having them in a taxable account is a bad idea.
Posted on 10/30/14 at 11:28 am to Teddy Ruxpin
Admiral shares are do-able in this case. Regarding bonds, I guess I can hold the proper amount desired in Roth relative to the whole portfolio.
Posted on 10/30/14 at 11:31 am to Books
quote:
Admiral shares are do-able in this case. Regarding bonds, I guess I can hold the proper amount desired in Roth relative to the whole portfolio.
That's what a lot of people do. Shift stock ETFs to taxable and let bonds make up their ROTH. Fill in the gaps to reach whatever percentage allocations you like.
Posted on 10/30/14 at 11:57 am to Teddy Ruxpin
My taxable account (such as it is) has really "safe" investments. I don't want a ton of risk since I may need to withdraw at any moment. 401k/IRA is different since any short term losses are irrelevant; that money's not being touched for decades.
Posted on 10/30/14 at 3:09 pm to Teddy Ruxpin
Would someone that's holding long term w/ no plans to trade other than annual re-balancing benefit from ETF's?
Posted on 10/30/14 at 3:18 pm to Books
Not any more than index funds id day
Posted on 10/30/14 at 9:57 pm to Books
T Rowe Price Blue Chip
Posted on 10/31/14 at 2:00 am to Teddy Ruxpin
quote:
I was under the impression bond holdings (for the most part) aren't tax efficient and therefore having them in a taxable account is a bad idea.
The only reason why I can see you having bonds in a taxable is if you want to use them to produce supplemental income while you are still working.
It is a nice, somewhat regular monthly payment you can budget around.
It might be stupid, but I am building holdings with that in mind: Bonds and equity income funds. Currently reinvesting but it would be nice to be able to flip a switch and boost income 5+ years down the road if my career stagnates and doesn't compensate what I would like.
In terms of buy and sell rebalancing investing....yeah....very bad move in a taxable.
This post was edited on 10/31/14 at 2:02 am
Posted on 10/31/14 at 6:03 am to Volvagia
quote:so what's the solution/alternative?
In terms of buy and sell rebalancing investing....yeah....very bad move in a taxable.
Posted on 10/31/14 at 10:03 am to Books
It is not necessarily a bad move. If you are making systematic investments and take advantage of tax loss opportunities as they arise. You would have a tax lot with each investment, pick those with the highest cost and sell them to minimize gains. You will always have a cost basis in the investment which is netted against the sale proceeds, then you may have LTCG which may or may not be taxed depending on your tax situation, and/or tax losses to net against gains. The total market funds are very efficient. If someone is trading/churning in a taxable account, yeah they are going to pay a lot more in taxes than you would with your approach as they are not benefiting from LTCG rates...if they are successful.
It is good to diversify the types of accounts you invest in, ie tax deferred, Roth, taxable and what you are asking about is a good addition to your long term investment plan. If you put in a little work understanding tax impacts you will be able to minimize tax costs.
It is good to diversify the types of accounts you invest in, ie tax deferred, Roth, taxable and what you are asking about is a good addition to your long term investment plan. If you put in a little work understanding tax impacts you will be able to minimize tax costs.
Posted on 10/31/14 at 10:07 am to Books
Go to Morningstar.com and look up VTI or the admiral fund. Look at the tax adjusted returns, and those are calculated at the highest US marginal rate. If you manage wisely you can greatly reduce the posted drag on investment return.
Posted on 10/31/14 at 10:14 am to Volvagia
quote:
It might be stupid, but I am building holdings with that in mind: Bonds and equity income funds. Currently reinvesting but it would be nice to be able to flip a switch and boost income 5+ years down the road if my career stagnates and doesn't compensate what I would like.
I'm somewhere in the "intermediate" level of knowledge on the subject, and this sounds nice, but what about this approach?
Why wouldn't you have those funds in stocks until you want to make the switch? While I understand that stocks are seen as more volatile, your horizon for turning on the switch seems to be long, so why not take the stock gains in the interim, then convert those into bonds when you want to start regular payments in the case of subpar work income?
Of course, the above goes out the window if you want the monthly contributions to begin now.
Posted on 10/31/14 at 5:38 pm to Teddy Ruxpin
quote:
Why wouldn't you have those funds in stocks until you want to make the switch? While I understand that stocks are seen as more volatile, your horizon for turning on the switch seems to be long, so why not take the stock gains in the interim, then convert those into bonds when you want to start regular payments in the case of subpar work income?
I'm more heavily in stocks (VEIPX specifically) than bonds for that reason.
The argument for putting money into bonds now rather than putting it in stocks and transferring over when I reach the point of wanting income is mostly over interest rates, a factor which is emphasized by the fact that I am purchasing long term bonds.
If you hold a bond to maturity while reinvesting, interest rates don't really matter in terms of your investment. Movements in capital gains is checked by opposite motions in yields.
However, if you purchase bonds without reinvesting your yield, and you do so in a rising interest rate environment, you stand to to take a huge hit on your principal.
If you would do an approach similar to what you said your trade off would be having to get a far shorter term (and lower yield).
I just find it simpler to hold a portion of long term bonds (whose high risk allows for returns that are pretty respectable even though they don't quite match the average for stocks.
I fully expect to see one more knowledgable than I call me foolish though.
This post was edited on 10/31/14 at 5:40 pm
Posted on 10/31/14 at 11:30 pm to Books
Vanguard total stock market fund for the core of your account.
Posted on 11/1/14 at 10:50 am to Teddy Ruxpin
quote:100% of my wife and my Roth IRAs are in stock mutual funds. No bonds in the Roth. Historically, stocks increase their value more than bonds. I want the biggest increases to be tax free.
Shift stock ETFs to taxable and let bonds make up their ROTH
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