Author Topic: Vanguard Total Stock Market Fund  (Read 5916 times)

TheAnonOne

  • Handlebar Stache
  • *****
  • Posts: 1424
Vanguard Total Stock Market Fund
« on: January 30, 2015, 10:11:23 AM »
Hey All,

I have been lurking for nearly a year now, and have been reading MMM for longer than that. While I wouldn't call myself as frugal as some on this board I am at about a 50/50 split on income/savings.

I am looking into starting to use taxable accounts to supplement my investments. Everyone around here seems to love the Total Stock Fund from Vanguard.

Question- Some of these stocks pay dividends right? Where does that money go? Into my account? or is it automatically reinvested into the fund?

Thanks.
« Last Edit: January 30, 2015, 10:14:14 AM by TheAnonOne »

BarkyardBQ

  • Pencil Stache
  • ****
  • Posts: 667
Re: Vanguard Total Stock Market Fund
« Reply #1 on: January 30, 2015, 10:20:57 AM »
Distributions: https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT#tab=4


edit: I totally misread you and thought you asked do you get those dividends... post below has your options.
« Last Edit: January 30, 2015, 10:36:10 AM by zdravé »

themagicman

  • Bristles
  • ***
  • Posts: 325
  • Age: 28
  • Location: Atlanta, GA
Re: Vanguard Total Stock Market Fund
« Reply #2 on: January 30, 2015, 10:21:12 AM »
You can set it up either way when you buy it! I would be easier to have it automatically added back into the investment!

nanu

  • Bristles
  • ***
  • Posts: 345
  • Age: 30
  • Location: Cambridge, MA
Re: Vanguard Total Stock Market Fund
« Reply #3 on: January 30, 2015, 11:01:08 AM »
Sorry for kinda stealing the topic... but if I set it to re-invest dividends automatically, are they taxable (before actually selling the fund)?
How does that work?

Thanks :)

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1006
  • Location: Suburban Chicago, IL
Re: Vanguard Total Stock Market Fund
« Reply #4 on: January 30, 2015, 11:06:24 AM »
I am looking into starting to use taxable accounts to supplement my investments. Everyone around here seems to love the Total Stock Fund from Vanguard.

Yes, for the US stock portion of your overall asset allocation, Vanguard's Total Stock Fund is an excellent choice. But that doesn't mean that's automatically what you should buy in a taxable account. What is the allocation of your other (presumably 401(k)/IRA) investments? What do you want your overall asset allocation (US stocks/International stocks/bonds) to look like?

But yes, for dividend payments, it's up to you to decide what you want to happen to them. Choosing to reinvest is usually the most sensible choice when you're in the accumulation phase, and especially if you have only one fund in your taxable account.

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1006
  • Location: Suburban Chicago, IL
Re: Vanguard Total Stock Market Fund
« Reply #5 on: January 30, 2015, 11:07:54 AM »
Sorry for kinda stealing the topic... but if I set it to re-invest dividends automatically, are they taxable (before actually selling the fund)?
How does that work?

Yes, dividends are always taxed at the time they're distributed (at the applicable dividend tax rate for you), regardless of whether you take them in cash or reinvest them.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4524
  • Age: 34
  • Location: Seattle, WA
Re: Vanguard Total Stock Market Fund
« Reply #6 on: January 30, 2015, 11:10:11 AM »
Sorry for kinda stealing the topic... but if I set it to re-invest dividends automatically, are they taxable (before actually selling the fund)?
How does that work?

Yes, the dividends are taxable. From a tax perspective, automatic dividend reinvestment is the same as if you received a cash dividend and then manually spent that cash on more shares. You will owe tax on the value of the dividend. The amount that is reinvested will become a new lot of shares with a cost basis equal to the value of the dividend and a purchase date that's the same as the dividend date (or perhaps a few days afterward).

TheAnonOne

  • Handlebar Stache
  • *****
  • Posts: 1424
Re: Vanguard Total Stock Market Fund
« Reply #7 on: January 30, 2015, 11:13:42 AM »
I am looking into starting to use taxable accounts to supplement my investments. Everyone around here seems to love the Total Stock Fund from Vanguard.

Yes, for the US stock portion of your overall asset allocation, Vanguard's Total Stock Fund is an excellent choice. But that doesn't mean that's automatically what you should buy in a taxable account. What is the allocation of your other (presumably 401(k)/IRA) investments? What do you want your overall asset allocation (US stocks/International stocks/bonds) to look like?

But yes, for dividend payments, it's up to you to decide what you want to happen to them. Choosing to reinvest is usually the most sensible choice when you're in the accumulation phase, and especially if you have only one fund in your taxable account.

Being 24 now, last year was the first year I could invest anything.

22-23
Paying off loans- debt free now! (75k in student loans in 12 months woo!)

23-24
Played around with lending club - 40k invested-
Maxed 401k - No Emp match - some pretty bad mutual fund choices all with 2%+ managerial fees.

24-25 (Phase I am in now)
Maxing 401k again...
I plan on opening a IRA- (Maybe? No idea if this helps me being that my income is too high to deduct it....)
I plan on opening a Vanguard account to move extra money- I could have anywhere from 40k to 70k a year to move into taxable locations.


Does that help?

themagicman

  • Bristles
  • ***
  • Posts: 325
  • Age: 28
  • Location: Atlanta, GA
Re: Vanguard Total Stock Market Fund
« Reply #8 on: January 30, 2015, 11:53:14 AM »
Sorry for kinda stealing the topic... but if I set it to re-invest dividends automatically, are they taxable (before actually selling the fund)?
How does that work?

Thanks :)

Yes, they are taxable. Assuming you are in at least the 25% federal tax bracket. If you are in the 10% or 15% then you do not pay dividend or cap gain taxes (for now)

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1006
  • Location: Suburban Chicago, IL
Re: Vanguard Total Stock Market Fund
« Reply #9 on: January 30, 2015, 12:34:24 PM »
24-25 (Phase I am in now)
Maxing 401k again...
I plan on opening a IRA- (Maybe? No idea if this helps me being that my income is too high to deduct it....)
I plan on opening a Vanguard account to move extra money- I could have anywhere from 40k to 70k a year to move into taxable locations.

Your income is never too high to contribute to a Roth IRA (though you might need to contribute through the backdoor), and there is essentially no reason to invest in a taxable account rather than a Roth IRA, so yeah, you should probably do that.

What you should invest in in your taxable account depends on what you're already invested in in your 401(k), and what you'll be investing in in your Roth IRA.

Read http://www.bogleheads.org/wiki/Investment_policy_statement (not that you need to create an IPS right now, but that page gives a good overview of what questions you need to ask yourself and the order in which you need to ask them). Then click through to the link on asset allocation, and finally, once that's all figured out, principles of tax-efficient fund placement.

TheAnonOne

  • Handlebar Stache
  • *****
  • Posts: 1424
Re: Vanguard Total Stock Market Fund
« Reply #10 on: January 30, 2015, 02:39:46 PM »
24-25 (Phase I am in now)
Maxing 401k again...
I plan on opening a IRA- (Maybe? No idea if this helps me being that my income is too high to deduct it....)
I plan on opening a Vanguard account to move extra money- I could have anywhere from 40k to 70k a year to move into taxable locations.

Your income is never too high to contribute to a Roth IRA (though you might need to contribute through the backdoor), and there is essentially no reason to invest in a taxable account rather than a Roth IRA, so yeah, you should probably do that.

What you should invest in in your taxable account depends on what you're already invested in in your 401(k), and what you'll be investing in in your Roth IRA.

Read http://www.bogleheads.org/wiki/Investment_policy_statement (not that you need to create an IPS right now, but that page gives a good overview of what questions you need to ask yourself and the order in which you need to ask them). Then click through to the link on asset allocation, and finally, once that's all figured out, principles of tax-efficient fund placement.

It looks like the Total Stock Fund is a decent thing to hold in a taxable account. I don't really have a ton of options for what I can be invested in under my 401k but it is mostly in stocks as well.

Thanks for the IRA tip as well. Is there any limit to the amount of times or value that can be rolled over into a ROTH?

OneCoolCat

  • Bristles
  • ***
  • Posts: 409
  • Age: 31
  • Location: SoFla
Re: Vanguard Total Stock Market Fund
« Reply #11 on: January 30, 2015, 06:55:06 PM »
When looking at a funds summary on any of the sites, is "YTD" the percentage amount of the annual dividend?

sol

  • Walrus Stache
  • *******
  • Posts: 7503
  • Age: 41
  • Location: Pacific Northwest
Re: Vanguard Total Stock Market Fund
« Reply #12 on: January 30, 2015, 07:01:47 PM »
One thing to remember if you set it up to automatically reinvest dividends: you have to change your dividend distribution to payout instead of reinvest if you're going to do any tax loss harvesting.

The wash sale rule forbids you from rebuying anything you've sold for a deductible tax loss within 30 days.  Automatically reinvested dividends count as buying. 

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4524
  • Age: 34
  • Location: Seattle, WA
Re: Vanguard Total Stock Market Fund
« Reply #13 on: January 31, 2015, 09:57:19 AM »
When looking at a funds summary on any of the sites, is "YTD" the percentage amount of the annual dividend?

YTD stands for "year to date." So if they're showing you how much the fund has returned in the past 1 year, 5 years, 10 years, etc., the YTD column is how much the fund has returned since January 1 of the current year.

zataks

  • Bristles
  • ***
  • Posts: 350
  • Location: Silicon Valley
Re: Vanguard Total Stock Market Fund
« Reply #14 on: January 31, 2015, 10:25:22 AM »
Your income is never too high to contribute to a Roth IRA (though you might need to contribute through the backdoor), and there is essentially no reason to invest in a taxable account rather than a Roth IRA, so yeah, you should probably do that.

What you should invest in in your taxable account depends on what you're already invested in in your 401(k), and what you'll be investing in in your Roth IRA.

Read http://www.bogleheads.org/wiki/Investment_policy_statement (not that you need to create an IPS right now, but that page gives a good overview of what questions you need to ask yourself and the order in which you need to ask them). Then click through to the link on asset allocation, and finally, once that's all figured out, principles of tax-efficient fund placement.

Where are you getting this information?  Everything I've seen is a person filing as single can not contribute to a Roth if they earn more than $129k; married filing jointly is $191k. 

PEIslander

  • Stubble
  • **
  • Posts: 170
  • Age: 57
  • Location: Prince Edward Island, Canada
Re: Vanguard Total Stock Market Fund
« Reply #15 on: January 31, 2015, 10:42:13 AM »
When looking at a funds summary on any of the sites, is "YTD" the percentage amount of the annual dividend?

YTD stands for "year to date." So if they're showing you how much the fund has returned in the past 1 year, 5 years, 10 years, etc., the YTD column is how much the fund has returned since January 1 of the current year.

OneCoolCat - Further to what seattlecyclone writes, note that the performance percentages you see in those returns columns (YTD, 1 year, 5 years, 10 years, etc.) usually indicate both the growth and the dividends reinvested. The fine print on the sponsor's website (Vanguard, Fidelity, Invesco etc.) will clarify if you want to be sure. To know what the dividends would have been all by themselves you need to look at the "Yield" which is usually expressed as a percent. Note mutual funds & ETFs are structured by their sponsors to address different objectives. You can buy mutual funds & ETFs that have been designed with a focus on yields -- they will typically have "income" or "dividend" in their names. Mutual fund/ETF yields can be dividends and/or "distributions". Distributions are a transfer of profit from the fund to the unit holder that is done to keep the fund/ETF from having to pay tax on those profits. (The idea is that it is more tax efficient to let the unit holders be responsible for taxes than to have the fund pay them. Complicated eh?)

Other mutual funds & ETFs are designed to focus on growth and will often have "growth" in their name. Growth ones can still pay dividends & Income ones can still have growth.
« Last Edit: January 31, 2015, 10:59:42 AM by PEIslander »

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4524
  • Age: 34
  • Location: Seattle, WA
Re: Vanguard Total Stock Market Fund
« Reply #16 on: January 31, 2015, 11:04:49 AM »
Your income is never too high to contribute to a Roth IRA (though you might need to contribute through the backdoor), and there is essentially no reason to invest in a taxable account rather than a Roth IRA, so yeah, you should probably do that.

What you should invest in in your taxable account depends on what you're already invested in in your 401(k), and what you'll be investing in in your Roth IRA.

Read http://www.bogleheads.org/wiki/Investment_policy_statement (not that you need to create an IPS right now, but that page gives a good overview of what questions you need to ask yourself and the order in which you need to ask them). Then click through to the link on asset allocation, and finally, once that's all figured out, principles of tax-efficient fund placement.

Where are you getting this information?  Everything I've seen is a person filing as single can not contribute to a Roth if they earn more than $129k; married filing jointly is $191k. 

Anyone can make non-deductible contributions to a traditional IRA. Anyone can roll over balances from a traditional IRA to a Roth IRA. Thus the "backdoor Roth IRA" for those who earn too much to contribute to a Roth IRA directly. The caveat to this is that the strategy doesn't work if you already have a pre-tax traditional IRA balance because the law treats any traditional IRA rollover to contain pre-tax and post-tax amounts proportional to your overall balance.

zataks

  • Bristles
  • ***
  • Posts: 350
  • Location: Silicon Valley
Re: Vanguard Total Stock Market Fund
« Reply #17 on: January 31, 2015, 11:29:42 AM »
Thank you for the clarification!

OneCoolCat

  • Bristles
  • ***
  • Posts: 409
  • Age: 31
  • Location: SoFla
Re: Vanguard Total Stock Market Fund
« Reply #18 on: January 31, 2015, 03:35:38 PM »
When looking at a funds summary on any of the sites, is "YTD" the percentage amount of the annual dividend?

YTD stands for "year to date." So if they're showing you how much the fund has returned in the past 1 year, 5 years, 10 years, etc., the YTD column is how much the fund has returned since January 1 of the current year.

OneCoolCat - Further to what seattlecyclone writes, note that the performance percentages you see in those returns columns (YTD, 1 year, 5 years, 10 years, etc.) usually indicate both the growth and the dividends reinvested. The fine print on the sponsor's website (Vanguard, Fidelity, Invesco etc.) will clarify if you want to be sure. To know what the dividends would have been all by themselves you need to look at the "Yield" which is usually expressed as a percent. Note mutual funds & ETFs are structured by their sponsors to address different objectives. You can buy mutual funds & ETFs that have been designed with a focus on yields -- they will typically have "income" or "dividend" in their names. Mutual fund/ETF yields can be dividends and/or "distributions". Distributions are a transfer of profit from the fund to the unit holder that is done to keep the fund/ETF from having to pay tax on those profits. (The idea is that it is more tax efficient to let the unit holders be responsible for taxes than to have the fund pay them. Complicated eh?)

Other mutual funds & ETFs are designed to focus on growth and will often have "growth" in their name. Growth ones can still pay dividends & Income ones can still have growth.

Thanks guys, makes perfect sense!

Davids

  • Pencil Stache
  • ****
  • Posts: 974
  • Location: Somewhere in the USA.
Re: Vanguard Total Stock Market Fund
« Reply #19 on: January 31, 2015, 06:14:33 PM »
I love VTI, in my opinion it is the best ETF. As part of my after tax brokerage account with Vanguard I try to maintain a ratio when I purchase ETFs of 50% VTI, 25% VIG, 15% VNQ and 10% BND. I have purchased a few other ETFs as well but this is the current allocation I am now using on purchases. I threw a few bones in VXUS but that performance has been garbage.