Rebalancing Investing Accounts | TigerDroppings.com

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RickAstley
LSU Fan
Reno, Nevada
Member since May 2011
1630 posts

Rebalancing Investing Accounts



I started an account rebalancing effort this past month to consolidate my funds and reduce fees/taxes. I am interested in some of the board's knowledge on the type of funds that I should keep primarily in a tax-advantaged account versus a taxable account.

I have a 401k, Roth IRA, and a taxable account. I only own index funds and I plan to maintain that for the foreseeable future. Is there a preference for where the dividend paying funds should go, bond funds, and total stock market between the three accounts? I am very much a novice on the topic though I am making a push to be more active in managing my money for the long term.

If more information is needed, I will do the best I can to provide it. I fall in the mid-20s age group, and my accounts are through either John Hancock or Vanguard.







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Maderan
LSU Fan
Member since Feb 2005
491 posts

re: Rebalancing Investing Accounts


Rebalance into your losers. You are buying into to a category you like at a lower price. Will help your long term performance.





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BennyAndTheInkJets
Arkansas Fan
NYC / Orange County
Member since Nov 2010
3959 posts

re: Rebalancing Investing Accounts


The type of funds isn't necessarily that important for your Roth and 401k in terms of taxability as only contributions or distributions will be taxed depending on which one of these you're talking about. However, the taxable account will have more sensitivities towards the type of returns your recieve whether it be through dividends or capital appreciation. I'll defer to poodlebrain for the specific tax implications as I hate accounting and taxes.

If you would like information on asset allocation I'd be much more helpful. What's your current allocation look like? You can categorize it any way you want, I'll get a pretty good idea regardless.






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RickAstley
LSU Fan
Reno, Nevada
Member since May 2011
1630 posts

re: Rebalancing Investing Accounts


quote:

Rebalance into your losers. You are buying into to a category you like at a lower price. Will help your long term performance.


Taking that into consideration, I wish to own index funds for stocks, bonds, and REITs. In order to minimize any tax hit I may take, would it be in my best interest to keep all of one fund in a Roth IRA versus a taxable account. Or in a 401k rather than a Roth IRA?






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Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
40771 posts

re: Rebalancing Investing Accounts


Be very aware of which funds have a high turnover rate, as they will incur taxes that will eat at you if held in a taxable account.

I personally put everything in some form of tax shielded. .

What I have in a taxable account are mostly dividend centric ETFs which I buy and hold with no intention of selling unless a dire emergency happens.




This post was edited on 9/18 at 10:29 am


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Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
40771 posts

re: Rebalancing Investing Accounts


For what you are talking about, there is no difference in fund choices in either Roth or 401k.

Given the same investment choices in either, will give the same result.

The differences comes in on: the tax rate paid on the money put into it, and the tax rate in retirement for a given amount of withdrawals.

Roth is better if you are lower now than in retirement (typically those just starting off)






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RickAstley
LSU Fan
Reno, Nevada
Member since May 2011
1630 posts

re: Rebalancing Investing Accounts


I am practically ~100% in stocks right now. On Vanguard I am:
Vanguard Dividend Appreciation VDAIX - 26.12%
Vanguard Total Stock Market VTSMX - 56.07%
Vanguard Target Retirement 2055 VFFVX - 17.81%
Which comes out to 98.2% stocks, 1.8% bonds

My 401k through John Hancock is:
Total Stock Market Index Fund - 71.23%
500 Index Fund - 28.77%

I am reaching the end of the first year of my investing career with a 30-40 year timeline before I see retirement happening. Yes this is weighted very heavily in stocks, though if it all went to $0 today I would not be living on ramen. I still maintain a sustainable emergency fund and a savings account which I have not included in the numbers above. Simply due to that money being used for expenses while my current paychecks are being used to dollar cost average my contributions in my 401k and my taxable account through Vanguard.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30031 posts

re: Rebalancing Investing Accounts


Try to put investments that you expect to have high volatility in your Roth, b/c you don't get taxed on gains.





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jimbeam
USA Fan
University of LSU
Member since Oct 2011
31410 posts
 Online 

re: Rebalancing Investing Accounts


ie bonds and dividend stock correct? (if and when he increases allocation in bonds)





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