Author Topic: Tax Loss Harvesting Rule of Thumb?  (Read 2052 times)

Spitfire

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #50 on: March 18, 2020, 03:31:40 PM »

On that note, I didn't get around to selling my position in FSPSX today but am debating now if I should just sell it off (rather than fund exchange it) and purchase VXUS with the funds from that sale.    If I were to do this, would it mean that I wouldn't be able to buy VXUS until Friday at this point? I thought, from what I read above, that mutual fund orders are executed pretty much at close of market/4pm. So if I place the sell order tomorrow (Thurs) with the intent of using the funds to purchase the VXUS ETF, I basically won't be able to purchase until market open on Friday, right?

Whichever day you put the order in, it will go in at the end of that day (or next day if you put the order in after 4pm). If you execute the trade tomorrow before 4pm it will go through tomorrow. I am going off of experience with Vanguard and assuming it is the same at Fidelity, I suppose it could be different.

terran

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #51 on: March 18, 2020, 03:39:42 PM »
Quick question regarding timing (of the day) to place orders. So since the market closes at 4pm EST, considering I'm on PST, would I want to submit the sell and buy orders at 12:30pm PST at the latest?

Yeah, probably. Make sure you leave yourself enough time to buy the new investment too.

I'm thinking even 12pm now. But yep, there's an option in Fidelity to "sell all shares and buy new fund" or something like so you can execute the two orders in a single action rather than submitting multiple individual sells and buys.

For some reason I though you were trading ETFs (which don't let you sell and buy another). If you're trading mutual funds then when you place the order is much less important and doing at 3:30pm EST seems like a good plan so you can make sure the markets you're trading are going in the right direction for your tax loss harvesting purposes.

jeromedawg

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #52 on: March 18, 2020, 03:48:27 PM »

On that note, I didn't get around to selling my position in FSPSX today but am debating now if I should just sell it off (rather than fund exchange it) and purchase VXUS with the funds from that sale.    If I were to do this, would it mean that I wouldn't be able to buy VXUS until Friday at this point? I thought, from what I read above, that mutual fund orders are executed pretty much at close of market/4pm. So if I place the sell order tomorrow (Thurs) with the intent of using the funds to purchase the VXUS ETF, I basically won't be able to purchase until market open on Friday, right?

Whichever day you put the order in, it will go in at the end of that day (or next day if you put the order in after 4pm). If you execute the trade tomorrow before 4pm it will go through tomorrow. I am going off of experience with Vanguard and assuming it is the same at Fidelity, I suppose it could be different.

"If you execute the trade tomorrow before 4pm it will go through tomorrow" - I take that to mean that if I trade at 12pm EST, the trade won't actually be executed until 4pm EST, right?

secondcor521

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #53 on: March 18, 2020, 03:53:37 PM »

On that note, I didn't get around to selling my position in FSPSX today but am debating now if I should just sell it off (rather than fund exchange it) and purchase VXUS with the funds from that sale.    If I were to do this, would it mean that I wouldn't be able to buy VXUS until Friday at this point? I thought, from what I read above, that mutual fund orders are executed pretty much at close of market/4pm. So if I place the sell order tomorrow (Thurs) with the intent of using the funds to purchase the VXUS ETF, I basically won't be able to purchase until market open on Friday, right?

Whichever day you put the order in, it will go in at the end of that day (or next day if you put the order in after 4pm). If you execute the trade tomorrow before 4pm it will go through tomorrow. I am going off of experience with Vanguard and assuming it is the same at Fidelity, I suppose it could be different.

"If you execute the trade tomorrow before 4pm it will go through tomorrow" - I take that to mean that if I trade at 12pm EST, the trade won't actually be executed until 4pm EST, right?

If it's a mutual fund (not really following this thread closely and too lazy to go back and check), correct.  Mutual funds effectively collect trades throughout the day and execute them at the NAV for that day, which is determined, as others have said, a few hours after close.  I think the phrase is "close of day pricing" if you want to google it.

Vanguard usually posts their NAVs for the day right around 6pm Eastern, two hours after close.

jeromedawg

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #54 on: March 19, 2020, 02:52:57 PM »
Just curious but how does this reconcile with the whole idea of "buy low sell high?" - that idea sounds like market timing, so I'm guessing *that's* the difference? Just curious because I've been seeing a number of people seeking to "buy low/sell high" even here - maybe they just know exactly what they're doing so they feel the risk is less? But if someone were to look at TLH from that perspective, it seems they would call it a bad idea no? Primarily because of the "selling low" part - or because it's really "sell low/buy low" it mitigates that concern? I guess I'm just trying to delineate when TLH is no longer considered TLH (particularly in the case where you might be looking to get out of a mutual fund position and into a 'partner' EFT for example... I'm guessing it would be when you try to wait out and time the market, waiting for it to go down further after selling before buying again).
« Last Edit: March 19, 2020, 02:59:06 PM by jeromedawg »

terran

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #55 on: March 19, 2020, 02:58:07 PM »
Just curious but how does this reconcile with the whole idea of "buy low sell high?" - that idea sounds like market timing, so I'm guessing *that's* the difference? Just curious because I've been seeing a number of people seeking to "buy low/sell high" even here - maybe they just know exactly what they're doing so they feel the risk is less?

The difference is that you are both selling and buying low in highly correlated (but not substantially identical) assets.

Systems101

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #56 on: March 19, 2020, 09:44:07 PM »
(snip)or because it's really "sell low/buy low" it mitigates that concern?

Kind of.  TLH done correctly is really "trade lower".  You aren't really a NET seller or buyer.  You're net neutral, so you aren't timing the market.  You just shifted from one broad index to another (e.g. SPY to SCHX) to capture losses for tax purposes.

jeromedawg

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Re: Tax Loss Harvesting Rule of Thumb?
« Reply #57 on: March 20, 2020, 05:48:21 PM »
Well, I put the order in to sell all my FSPSX today, which should generate a huge amount of loss. Hopefully things don't skyrocket on Monday. I'm looking to move some of that into VOO and the rest into VXUS. I'm curious if I should also dump FXAIX and a couple other ETFs that I have gains on currently, since I've generated so much loss, it'll more than offset these gains I'm pretty sure. Part of me wants to hold on those positions for some reason though.
« Last Edit: March 20, 2020, 06:01:04 PM by jeromedawg »