Cleaning up my room… I mean funds.

[couscous]

A three years ago I transitioned all of my disparate accounts (Edward Jones, and two old employer retirement accounts) to Vanguard. Since then, I’ve been focusing on a simple approach to investing- purchasing total stock market and total bond market funds.

As I continue along this path, the funds that deviate from  VBTLX and VTSAX start to bug me for two reasons: the expense ratio and the messy-ness. I keep thinking I need to consolidate all random funds into my main funds :  (VTSAX and a small portion into VBTLX) . See the details of all the accounts below.

When talking this through with a friend they mentioned that the tax implication may be too burdensome and I should leave it be. How do I figure out if selling off old funds like my American Funds and re-purchasing the total stock market funds is the right thing to do?

A few notes:
- I’m working on figuring out the true expense of my Simple IRA with my employer (which is my only fund not through Vanguard…) it seems really expensive from the bit of reading I’ve done
- When I first started with Vanguard I purchased the “Vanguard 500 Index Fund” but as I read more I transitioned to buying “Vanguard Total Stock Market Index Fund” because it had a bit more diversity
- Currently my stock versus bond split is 94% stocks 6% bonds. I plan to stick with stocks for a few more years then balance it later
- I’m 33 and have several years until I plan to take any money out

Account                                   Symbol   Name                                                                                      Expense ratio        Quantity     Price 7/9
Rollover IRA Brokerage Account   VFIAX   Vanguard 500 Index Fund Admiral Shares                                        0.04%                227.486     $292.59
Rollover IRA Brokerage Account   VTSAX   Vanguard Total Stock Market Index Fund Admiral Shares                  0.04%               136.331      $77.96
Roth IRA Brokerage Account    VFIAX   Vanguard 500 Index Fund Admiral Shares                                            0.04%                103.116     $292.59
Roth IRA Brokerage Account   VGSLX   Vanguard Real Estate Index Fund Admiral Shares                                 0.12%                 83.697     $111.02
Roth IRA Brokerage Account   CWGIX   American Funds Capital World Growth and Income Fund® Class A         0.78%              1,080.37      $50.58
Individual 401(k)   VBTLX   Vanguard Total Bond Market Index Fund Admiral Shares                                        0.05%               384.647      $11.65
Individual 401(k)   VTSAX   Vanguard Total Stock Market Index Fund Admiral Shares                                       0.04%               525.119      $77.96
Brokerage Account   VFIAX   Vanguard 500 Index Fund Admiral Shares                                                           0.04%             369.374     $292.59
Brokerage Account   VBTLX   Vanguard Total Bond Market Index Fund Admiral Shares                                       0.05%           1,587.10         $11.65
Brokerage Account   VTSAX   Vanguard Total Stock Market Index Fund Admiral Shares                                       0.04%         306.614                $77.96
Brokerage Account   CWGIX   American Funds Capital World Growth and Income Fund® Class A                        0.78%          380.485              $50.58
Brokerage Account   ANCFX   American Funds Fundamental Investors® Class A                                               0.62%          203.708              $58.78
Brokerage Account   AGTHX   American Funds The Growth Fund of America® Class A                                       0.65%         292.191              $57.18
*Simple IRA                      American Funds 2050 Target Date-A                                                        I'm trying to figure this out but... high I think      
*Not through Vanguard      

[MDM]

How do I figure out if selling off old funds like my American Funds and re-purchasing the total stock market funds is the right thing to do?

Start by determining the basis (amount you paid) for each lot of each fund. 

Then, assuming they were all purchased >1 year ago (in other words, you aren't reinvesting dividends into those funds), the long term capital gain (LTCG) for selling a lot will be (current price - basis) * (number of shares).  The tax cost will then depend on your other income and where you fall in the federal and state tax systems.

See Vanguard cost basis information: Know your options | Vanguard for more.

[MustacheAndaHalf]

Roth IRA Brokerage Account   CWGIX   American Funds Capital World Growth and Income Fund® Class A         0.78%              1,080.37      $50.58

Selling and buying in a Roth IRA will not incur taxes.  I would sell this holding now, and use the cash to rebalance (buy to bring things back to your original allocation).

Brokerage Account   CWGIX   American Funds Capital World Growth and Income Fund® Class A                        0.78%          380.485              $50.58
Brokerage Account   ANCFX   American Funds Fundamental Investors® Class A                                               0.62%          203.708              $58.78
Brokerage Account   AGTHX   American Funds The Growth Fund of America® Class A                                       0.65%         292.191              $57.18

In your Vanguard account, the menu at the top should have "My accounts", which offers many choices.  The leftmost choices includes "Cost Basis", which is what you need to find.  On the "Cost basis" screen, you should be looking at "unrealized gains".  Vanguard should neatly divide it into short-term and long-term gains, which is what you need to know for the tax impact of selling each fund.

[Catbert]

If you decide that selling now will generate more capital gains than you want to deal with consider:
*spread out sales over more than one year.
*Immediately change how dividends and capital gains internal to the funds are handled.  Have them paid out so you can reinvest as you want rather than reinvested in the fund you want out of.
*Consider setting up a Donor Advised Charitable account. Donate the funds you want to get rid of and take the tax deduction without the need to pay capital gain.  Funnel all you charitable donations through The Donor Advised account.  This assumes you make significant charitable donations.

[couscous]

@MDM @MustacheAndaHalf @Catbert - Thanks so much for the replies- based on your recommendation I’ve sold my unwanted holdings within my Roth account. And after looking at the unrealized gains and totaling up my income this year, I plan to sell the other funds next year because I expect to make less income than this year. All great thoughts and recommendations- thanks again.

[MDM]

...after looking at the unrealized gains and totaling up my income this year, I plan to sell the other funds next year because I expect to make less income than this year.

Seems a well thought plan - good luck!