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re: Emergency Fund Allocation?
Posted on 1/24/15 at 9:25 am to Volvagia
Posted on 1/24/15 at 9:25 am to Volvagia
I like the fund but I'm trying to use all of my ROTH contributions to DCA into an energy fund (VDE) to take advantage of their current low cost. It would take two fulls years of contributions to get 1/2 my emergency fund in my ROTH.
Is there a disadvantage to having this in my taxable E*Trade account? I hope that I never have to cash it out at all, but in the event I did, I wouldn't be taxed on the gains until I sold. Correct?
Is there a disadvantage to having this in my taxable E*Trade account? I hope that I never have to cash it out at all, but in the event I did, I wouldn't be taxed on the gains until I sold. Correct?
1
Posted on 1/24/15 at 7:00 pm to SomeGuyFromLA
Incorrect.
1) it is an actively traded mutual fund; as the manager reallocates/rebalances and basically sells on your behalf, these count as taxable events. This past year each share had $0.70 long term capital gains (which will probably be taxed at 15% in a taxable account) and $0.22 short term capital gains, which is taxed as income.
2) The majority of the bond returns will be coming as payments, which is paid at the same as income as far as taxes are concerned. The stock dividends will be charged at a likely 15% tax.
3) You mention with distaste the idea of it taking years to move you annual fund over.....even without the legal restrictions you almost want it to take that long. The name of the emergency fund game is conservative and you are already pushing the envelope investing that amount. You do NOT want to move it around in a huge lump sum. You DCA in. Granted, 4 years is on the longer side of that curve, but the principle stands.
Especially as whatever fund you want is going to be bond heavy and prices have GOT to start tumbling at some point.
1) it is an actively traded mutual fund; as the manager reallocates/rebalances and basically sells on your behalf, these count as taxable events. This past year each share had $0.70 long term capital gains (which will probably be taxed at 15% in a taxable account) and $0.22 short term capital gains, which is taxed as income.
2) The majority of the bond returns will be coming as payments, which is paid at the same as income as far as taxes are concerned. The stock dividends will be charged at a likely 15% tax.
3) You mention with distaste the idea of it taking years to move you annual fund over.....even without the legal restrictions you almost want it to take that long. The name of the emergency fund game is conservative and you are already pushing the envelope investing that amount. You do NOT want to move it around in a huge lump sum. You DCA in. Granted, 4 years is on the longer side of that curve, but the principle stands.
Especially as whatever fund you want is going to be bond heavy and prices have GOT to start tumbling at some point.
This post was edited on 1/25/15 at 8:41 am
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