Author Topic: Vanguard Consolidation Strategy?  (Read 2553 times)

CHstp

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Vanguard Consolidation Strategy?
« on: November 10, 2016, 06:11:30 AM »
Hello,

I've completed a transfer from working with advisors and a SEP with 27 funds, a joint Taxable with 23 or so to a Vanguard account.
The goal is to consolidate into a much tidier Allocation for pre retirement/retirement years. 

At this market high (11.10), part of me want to simply liquidate (to cash/bonds) and start over during some dip in the next 6 months.
That's referring to the retirement accounts.  I need to be more considered on the Taxable I know.

I'd appreciate any thoughts regarding a general procedure on how to think about this transition.  I think in particular regarding the retirement account. 

Go through, and pick the most expensive funds first?
Hang onto good performers?
Take 6 months to a year?
Or just do it all in one fell swoop?

Thanks for any thoughts on this.


2Birds1Stone

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Re: Vanguard Consolidation Strategy?
« Reply #1 on: November 10, 2016, 06:38:45 AM »
That is a very bad idea.

The market could run up another 10, 20, or even 30% before the next "dip" leaving you wishing you had invested now.

If you have investments in equities/bonds now I would keep them as such.

Trying to time the market is a fool's game where 99.99% of the time people lose.

AdrianC

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Re: Vanguard Consolidation Strategy?
« Reply #2 on: November 10, 2016, 06:45:00 AM »
Of course, you don't know that there will be "some dip in the next 6 months".

Perhaps you could come up with some stock/bond allocations you can live with, say 80/20 if you're feeling good about stocks, 60/40 if you're not. So now you'd be 60/40. If stocks dip, move towards 80/20. It gives you something to do, could improve results, and as long as you don't do it very often probably won't hurt results much.

CHstp

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Re: Vanguard Consolidation Strategy?
« Reply #3 on: November 10, 2016, 07:25:34 AM »
Thank you for the replies. So, for now, presuming I'll sell off and buy into VGUARD products over time, how shall I choose where to start generally speaking? Drop the most expensive ones?

2Birds1Stone

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Re: Vanguard Consolidation Strategy?
« Reply #4 on: November 10, 2016, 07:34:51 AM »
Thank you for the replies. So, for now, presuming I'll sell off and buy into VGUARD products over time, how shall I choose where to start generally speaking? Drop the most expensive ones?

Your OP didn't provide enough real information.

The first thing I would do as mentioned above is come up with a desired long term asset allocation.

We have no idea how old you are, how close to retirement, your income vs savings rate, job security, and personal ability to handle volatility, or current asset allocation.

If you are hesitant about the markets, I would take everything and move it into a conservative 50/50 or 60/40 (stock/bond) portfolio.

Use Vanguard Total Stock, Vanguard Total Bond funds or ETF's

Pretty simple.

Cottonswab

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Re: Vanguard Consolidation Strategy?
« Reply #5 on: November 10, 2016, 07:55:26 AM »
Capital gains taxes... transaction fees...  management fees...

Jack

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Re: Vanguard Consolidation Strategy?
« Reply #6 on: November 10, 2016, 08:00:52 AM »
If all this is happening in something like a 401k or IRA where buying and selling has no tax consequences, simply immediately exchange it all at once for the funds that you actually want.

Otherwise, do some tax planning and (most likely) spread it out over time to optimize the capital gains vs. the opportunity cost.

CHstp

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Re: Vanguard Consolidation Strategy?
« Reply #7 on: November 10, 2016, 08:52:36 AM »
Yes. Initially I'm talking only about retirement accounts.  And yes, I have a general allocation targeted for my timeline and situation.  So mostly my question has to do with the timing of
the turnover to VG funds in the retirement accounts specifically. So:

For Retirement Accts: Just sell and get into VG Allocations - timing and targeting particular funds over time not really that critical or advantageous, correct?

For Taxable: I understand I should be considerate here for gains, so any general thoughts on where to start and over what time period on this one?

Thanks!

Jack

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Re: Vanguard Consolidation Strategy?
« Reply #8 on: November 10, 2016, 03:26:09 PM »
For Retirement Accts: Just sell and get into VG Allocations - timing and targeting particular funds over time not really that critical or advantageous, correct?

Correct.

It's possible that some funds might have trading restrictions (can't sell if you've bought in the last X days or vice-versa), or back-end loads that you might want to delay paying for some reason -- so check for that kind of thing before you try to execute the order -- but it's not super likely. More to the point, it would have nothing to do with the state of the market.

For Taxable: I understand I should be considerate here for gains, so any general thoughts on where to start and over what time period on this one?

Do your taxes (in a spreadsheet program, reading the 1040 instructions and associated documents). Figure out how much you're actually paying, and how realizing $X in capital gains would affect them (for $X in the range [$0 - 100% of all gains]). For example, you may want to take [earned income] + $X = $37,499 (for filing single) to stay in the 0% capital gains bracket, if you can. Also, you should figure out whether you have any capital losses and how to use them to offset the gains. There's a limit to how many losses you can claim in one tax year, so if you have a lot you might want to spread them out.

MustacheAndaHalf

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Re: Vanguard Consolidation Strategy?
« Reply #9 on: November 10, 2016, 07:41:12 PM »
The easiest route is to visit the website where you have taxable investments now, and look for a "cost basis" area that shows what you paid for each investment.  Or maybe you can look at the history, and add up each purchase.  Think of "cost basis" as your cost, and anything above that is a gain.

If some funds have a negative cost basis, you can sell them now and switch those to Vanguard.  You can look up "tax loss harvesting" to read about how people do this as a strategy.  Although stocks are up, you might peek at your bond funds to see if they have a loss.

Most people are in the 15% long-term gains tax rate.  So if you had a fund you dislike that gained +$1,000 you're probably paying $150 tax on that gain.  You should size up the gains on each fund, to see the impact of selling all of them.  You could also sell some now, and sell others later.

I'd suggest:
* sell funds with at a loss first.  It's a tax benefit, but avoid buying then selling within 30 days - too soon for the IRS.  To avoid this "wash sale", you just wait for day 31.
* sell long-term gains next.  These have a better tax rate, 15% for most people.
* you can either sell short-term gains last, or wait for day 366 when they become long-term gains.  This will be like ordinary income tax, 25% if you're near the median income.

If it looks like you'll push into another tax bracket with these sales, consider doing half now and half in Jan 2017.  Then you'll be taking gains across two separate tax years.

CHstp

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Re: Vanguard Consolidation Strategy?
« Reply #10 on: November 14, 2016, 06:43:40 AM »
Thank you very much for your replies.