Learning, Sharing, and Teaching > Investor Alley
Starting a taxable account
hadabeardonce:
We're contributing up to the limit to two 403bs, a 457, two Roth IRAs, and a pension, but might have enough left over to start a taxable account this year. I'm working on getting my employer to enable a mega backdoor Roth pipeline, but not holding my breath. Are there things I should know about managing taxable accounts? I've only been messing with retirement accounts and those have been fairly simple.
What's the best way to get started? ETFs don't have a minimum, right? Just do those until we hit the minimum amounts required admiral funds like VTSAX?
Rob_bob:
The minimum for an ETF is one share, whatever the price may be and must buy full shares. You want to keep more tax efficient investments in a taxable account.
Other than that there really isn't any difference than a tax differed accounts.
MDM:
ETFs are fine but not required. $1000 will also get you into Vanguard target date funds, and the absolute cost difference between admiral vs. investor class is negligible (e.g., ~$5/yr for a $5000 balance).
See Tax-efficient fund placement for some thoughts, but note there are conflicting opinions even within that article.
In short, pretty much what Rob_bob said: not much difference (other than you may pay some tax on dividends, etc.) between taxable vs. tax-deferred accounts.
tralfamadorian:
--- Quote from: hadabeardonce on April 04, 2018, 04:03:37 PM ---What's the best way to get started? ETFs don't have a minimum, right? Just do those until we hit the minimum amounts required admiral funds like VTSAX?
--- End quote ---
I just use VTI (0.04% expense ratio) and call it good.
Radagast:
Stocks are most tax efficient. Municipal bonds are acceptable for marginal tax rates over ~30%. Regular bonds are not tax efficient and should be generally minimized here. Exception: Ibonds. Mutual funds at Vanguard are tax efficient, and at other places they are not. ETF's are the only road if you do not invest with Vanguard. I prefer ETF's anyhow because they are more flexible to harvest tax losses and gains, but avoid limit orders except under hypothetical dire circumstances.
I am ok with deviating widely in tax sheltered accounts because I can easily transfer to another company if for-profit-investment-firm suddenly jacks things up. In taxable accounts I prefer Vanguard, because there might be big tax implications if a fund company turns sour and I need to sell and leave.
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