Author Topic: Tax Loss Harvesting (First Time)  (Read 696 times)

Gatzbie

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Tax Loss Harvesting (First Time)
« on: March 25, 2020, 06:33:01 PM »
Problem:My portfolio was not setup to tax-loss harvest (TLH) at a moments notice. My taxable account was down $5k a few days ago but to TLH the loss would have been a wash sale. I want to re-design my portfolio for the future to be able to take advantage of opportunities like this if they ever show again:

Current Setup:

Vanguard:
Taxable Brokerage Account-- 100% VSTAX (Total Stock Market)
Traditional IRA -- 100% VSTAX
Roth IRA -- 100% VSTAX

Fidelity:
401k Account - 99% FSKAX (Total Stock Market) &  1% of an "US Large Company Stock Fund" —(was default 401k option when I first started.)

Automatic Dividend Reinvest: Activated
Weekly 401k & Traditional IRA Investment: Activated

99% of my investment are in in total stock market funds. With weekly checks going into my 401k FSKAX and automatic investments going into my Traditional IRA VTSAX.....a wash sale would have occurred if I tried to TLH the VTSAX in my taxable account with this setup due to substantially identical purchases in my 401k/Trad IRA.

Solution:

Was thinking of turning off automatic dividend reinvesting & exchanging everything in my 401k/IRA funds to S&P 500 index funds while keeping my taxable brokerage account in VTSAX (Total stock market).  Then I could just juggle between VSTAX & VLCAX (Vanguard Large Cap Index Fund Admiral) easily if a TLH opportunity occurs again.

See any flaws in this that I may be missing?


secondcor521

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Re: Tax Loss Harvesting (First Time)
« Reply #1 on: March 25, 2020, 06:44:23 PM »
No serious flaws.  That's about what I would do, although personally I switched between VTSAX and VFIAX.  Really not a whole lot of difference between VFIAX and VLCAX as far as I can see.

Note a few things:

1.  There's a minimum to buy VLCAX.  Probably not an issue for you.

2.  Since all of these are mutual funds, you'll only get end-of-day pricing.  TLH with end-of-day pricing in volatile times can be dicier than ETFs.  I just wait until close to the end of the trading day in situations where it matters.  But then I don't actually trade at all, so it's not that big of a deal for me.