I recently discovered MMM and have been inspired by all the great advice to take action to get my finances in better order. I’d really appreciate a few perspectives on the right course of action, as I’m having trouble weighing the pros and cons of my next steps.
First, a little about me and my current situation. I’m 33, earn a regular paycheck, and live comfortably in Manhattan. I have a pretty sweet deal on housing that helps me keep living costs low.
I consider myself a semi-sophisticated investor. That being said, I’m a big believer in passive investing at the lowest cost possible.
At the moment, the vast majority of my assets are invested in taxable and tax advantaged accounts with Personal Capital. They charge 0.89% for professional management, which I now realize is outrageous and unnecessary. One consideration to keep in mind with Personal Capital is that they invest in individual securities that mimic index-based ETFs to reduce expenses and avoid market-capitalization weighting biases. As a result, I’m holding on to small holdings in hundreds of stocks.
To make my situation slightly more complex, I recently got married and am in the process of consolidating our assets. My husband (who has no interest in finance) is still invested in the high-cost mutual funds his parents set him with up. I’d like to either consolidate or at least synchronize our assets.
Oh, and, to the extent that matters - I have a considerable amount of long term capital losses to potentially offset. Don’t ask.
Anyways, here are the three options I’ve identified
Option 1: Move everything over to Betterment
Pros
Tax location investing (optimizing tax advantaged vs. taxable accounts)
Tax loss harvesting
Cons
Still paying 0.25% for something I could theoretically do myself for free
Would require I sell most of my current assets, potentially incurring cap gain taxes to bring them over to Betterment
Option 2: Move everything over to Wealthfront
Pros
Direct indexing tax loss harvesting for my accounts over $100K
Tax minimized transfer allowing me to transition from PC efficiently
Asset allocation includes REITs and commodities
Cons
Still paying 0.25% for something I could theoretically do myself
No tax location investing
Option 3: Do it myself @ Vanguard
Pros
No professional management fees
Cons
No tax loss harvesting (not sure I can do this myself)
I only rebalance 1x – 2x a year
Would incur tax hit when transferring over from PC and for selling all the hundreds of individual securities I’m invested in at the moment
No tax location investing. I’m not clear on what should sit in an IRA vs. Taxable account.
Option 4: You tell me?
Are there good options I’m not even considering? Another robo advisor? Free investing at RobinHood?
How would you all advice weighting these different options? Any other considerations?
Separately, I’d love thoughts on the right amount of cash to keep on hand for emergencies. I’ve heard everything from 3 months pay to a full year.
Thank you in advance for your advice and reading this extra-long post!
