Author Topic: Total Market Index Funds  (Read 851 times)

Cmdm

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Total Market Index Funds
« on: March 09, 2020, 12:17:30 AM »
I just finalized transferring all of my funds from Waddell and Reed where my I had a financial advisor managing my accounts to Charles Schwab where I will manage it on my own. The goal is to have most of my money invested in Schwab’s total market index fund (no fees/ low expense ratio). Currently I have a number of holdings with various “Ivy” mutual funds and some individual stocks that aren’t doing great (even before the recent crash).  My question is, is now a good time to sell the Ivy funds and stocks and buy SWTSX? Although I  don’t want to take a loss selling low, it also seems like  a good since I will avoid capital gains and benefit from buying low. I am not planning on selling anything for much less than what I originally bought for. Any advice is appreciated.

MDM

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Re: Total Market Index Funds
« Reply #1 on: March 09, 2020, 12:29:40 AM »
If you have decided that a new asset allocation is appropriate, can sell all your existing holdings without incurring any tax liability, and will purchase your new holdings ASAP after selling the old ones, now would be a great time to do so.

Why wouldn't you sell anything for much less that what you originally bought it for?

Cmdm

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Re: Total Market Index Funds
« Reply #2 on: March 09, 2020, 12:32:50 AM »
Wishful thinking some of the individual stocks doing poorly will recover.

MustacheAndaHalf

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Re: Total Market Index Funds
« Reply #3 on: March 09, 2020, 02:28:29 AM »
SCHB is a fine choice for the US stock market, with ~2500 stocks that cost 0.03% in expense ratio.

Last year Vanguard introduced $0/trade for all ETFs, both Vanguard and non-Vanguard.  In order to stay competitive, Schwab and Fidelity followed suit.  That means at Schwab, you can buy any ETF - not just Schwab ETFs - for $0/trade.  So for your international allocation, I'd favor Vanguard's ETF over Schwab's - and it will cost the same to buy/sell.

Vanguard Total International (VXUS) holds ~7400 stocks with an expense ratio of 0.08%.  It tracks the "FTSE Global All Cap ex US Index", meaning both developed and emerging markets.  It's top holding is China's tech giant "Alibaba".

Schwab International ETF (SCHF) gets a lower expense ratio (0.06%) by holding only ~1500 stocks, and avoiding emerging markets.  Per the fund's description, it tracks the "FTSE Developed ex US Index", and doesn't hold "Alibaba" at all.

Emerging markets are important - that's why China is 8% of VXUS.  If you only buy SCHF, you will allocate 0% to China, so for international, consider VXUS.  At Schwab you will pay $0 to buy and $0 to sell non-Schwab ETFs, and can get better diversification by doing so.


Spitfire

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Re: Total Market Index Funds
« Reply #4 on: March 09, 2020, 09:21:24 AM »
If I were trading specifically to re-invest the money in a total market fund, I would actually prefer to do it at a loss. You are just flipping one down stock into a down index fund right now and getting a tax break to do it, great time to make the switch IMO.

nereo

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Re: Total Market Index Funds
« Reply #5 on: March 09, 2020, 10:07:44 AM »
If I were trading specifically to re-invest the money in a total market fund, I would actually prefer to do it at a loss. You are just flipping one down stock into a down index fund right now and getting a tax break to do it, great time to make the switch IMO.
This.
You limit your tax liability, and you won't lose money on a rebound provided you reinvest it in similar funds.
Depending on what your loses/gains are and what your income is, you could even increase your tax refund for 2020.

Rob_bob

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Re: Total Market Index Funds
« Reply #6 on: March 09, 2020, 01:29:36 PM »
If I were trading specifically to re-invest the money in a total market fund, I would actually prefer to do it at a loss. You are just flipping one down stock into a down index fund right now and getting a tax break to do it, great time to make the switch IMO.
This.
You limit your tax liability, and you won't lose money on a rebound provided you reinvest it in similar funds.
Depending on what your loses/gains are and what your income is, you could even increase your tax refund for 2020.

Yes, if your account is down and worth $xx and you sell it and immediately reinvest in another fund then your account is still worth $xx.  You haven't "lost" anything and you saved on taxes, unless in a retirement account of course.