portfolio review for tax efficiency

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portfolio review for tax efficiency

Postby feh » Fri May 17, 2013 1:17 pm

Hi folks.

Please provide feedback on this portfolio from a tax efficiency point of view; I'm still learning about this topic and I'm not sure I have the optimal setup.

Please use "conventional" wisdom here; in other words, ignore the fact that we may be in a small window where it may actually make sense to have bonds in taxable accounts.

First column is percentage of portfolio:

50% | taxable | TM, ITM, SV, ISV (funds: FSTVX, FSGDX, VBR, VSS)
30% | traditional IRA | TBM, REIT (funds: FSITX, PTTRX, FSRVX)
10% | Roth IRA | SV, ISV (funds: VBR, VSS)
10% | 401k | S&P 500 index

Thank you.
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Re: portfolio review for tax efficiency

Postby letsgobobby » Fri May 17, 2013 2:46 pm

seems ok to me; it's about what I do.
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Re: portfolio review for tax efficiency

Postby ziszew » Fri May 17, 2013 5:18 pm

You're pretty much there.

In an ideal world you could swap SV with the 500 in your 401k (it's QDI runs in the 50-75% range each year whereas 500 tends to be 100%), although most likely not possible given most 401k plan offerings. That would be good for about 25-50 basis points depending on your tax bracket. If you have a Fidelity managed 401k plan, consider using IJS through brokeragelink as it's commission free and a good substitute for VBR (what we do).

If the switch isn't simple or cost effective, consider yourself as tax-efficient as you're likely to get (IJS is more tax-efficient than VBR in taxable, but now we're really splitting hairs).
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Re: portfolio review for tax efficiency

Postby SpringMan » Fri May 17, 2013 5:38 pm

Looks okay but not sure I would classifyl VSS as international small value (ISV).
VSS Morningstar xray shows:
00 00 01
21 20 22
15 10 10
Predominately mid-cap growth
Best Wishes, SpringMan
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Re: portfolio review for tax efficiency

Postby feh » Fri May 17, 2013 8:10 pm

ziszew wrote:You're pretty much there.

In an ideal world you could swap SV with the 500 in your 401k (it's QDI runs in the 50-75% range each year whereas 500 tends to be 100%), although most likely not possible given most 401k plan offerings. That would be good for about 25-50 basis points depending on your tax bracket. If you have a Fidelity managed 401k plan, consider using IJS through brokeragelink as it's commission free and a good substitute for VBR (what we do).

If the switch isn't simple or cost effective, consider yourself as tax-efficient as you're likely to get (IJS is more tax-efficient than VBR in taxable, but now we're really splitting hairs).


Thanks for the analysis.

My 401K is not through Fidelity, and the S&P 500 fund is the best option available, so I'll keep things as they are.
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Re: portfolio review for tax efficiency

Postby feh » Fri May 17, 2013 8:12 pm

SpringMan wrote:Looks okay but not sure I would classifyl VSS as international small value (ISV).
VSS Morningstar xray shows:
00 00 01
21 20 22
15 10 10
Predominately mid-cap growth


Yes, I realize this. I'm a small-value tilter, and while VSS isn't really ISV, it's a popular approximation.
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Re: portfolio review for tax efficiency

Postby livesoft » Fri May 17, 2013 8:13 pm

Looks like a historical version of our portfolio, so I like it.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: portfolio review for tax efficiency

Postby letsgobobby » Fri May 17, 2013 8:18 pm

feh wrote:
SpringMan wrote:Looks okay but not sure I would classifyl VSS as international small value (ISV).
VSS Morningstar xray shows:
00 00 01
21 20 22
15 10 10
Predominately mid-cap growth


Yes, I realize this. I'm a small-value tilter, and while VSS isn't really ISV, it's a popular approximation.

VSS is not even advertised as value, just small international.
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Re: portfolio review for tax efficiency

Postby livesoft » Fri May 17, 2013 8:21 pm

I don't know if Fidelity Spartan index funds are as tax-efficient as Vanguard ones. I am talking with respect to percentage of qualified dividends and lack of cap gains distributions. I own Fidelity Spartan funds in my 401(k) where I am not concerned about tax-efficiency, so I have not looked up this aspect of them.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: portfolio review for tax efficiency

Postby 2beachcombers » Sat May 18, 2013 9:30 am

livesoft wrote:I don't know if Fidelity Spartan index funds are as tax-efficient as Vanguard ones. I am talking with respect to percentage of qualified dividends and lack of cap gains distributions. I own Fidelity Spartan funds in my 401(k) where I am not concerned about tax-efficiency, so I have not looked up this aspect of them.


FEH

My AA is similar with the following adds(ROTHs are 30% of equities) in Roths--IDV and VSS in roths and VTV in IRA.
In Taxable-moved to IEMG and FSIVX to capture additional int small and ?? hopefully a better QDI over VWO ?? VWO QDI last year was 57%. Don't know IEMG's QDI as it is new.
Moved VSS to Roths due to 49% QDI.

Total of all Int.----Net of all changes= 38% euro; 38 asia; 9% NA; 5% SA+Africa

Also sold FSGDX and replaced with FSIVX and IEMG in Taxable with IDV and VSS in deferred.(lower er and better tax situation for me). I am interested in your thoughts on this as I also liked FSGDX


livesoft----------------FIDO 2012 QDIs:

FSTVX---99%
FSIVX----86%
FSSVX----87%
VWO---------57%
VSS----------49%

Jerry
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Re: portfolio review for tax efficiency

Postby feh » Sat May 18, 2013 7:33 pm

2beachcombers wrote:[quote="livesoft"
Also sold FSGDX and replaced with FSIVX and IEMG in Taxable with IDV and VSS in deferred.(lower er and better tax situation for me). I am interested in your thoughts on this as I also liked FSGDX


Initially, my international was provided by FSIVX. I just (2 weeks ago) replaced it with FSGDX because FSIVX didn't have any EM and it was heavily centered on Europe and Japan. FSGDX is better at capturing ex-US.

Whether or not a combination of funds is better than FSGDX I cannot say. I wanted to keep things simple.
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Re: portfolio review for tax efficiency

Postby stan1 » Sat May 18, 2013 8:02 pm

This is a very minor point, but I have decided to use multiple ETFs to implement SCV and International Small to get more diversification. SCV is 9.5% of my portfolio and IS is 8.5% so I have a fairly strong tilt.

With SCV I use VBR and IJS. They use two different indexes so the Top 10 holdings are completely different. The top 10 holdings in VBR amount to 4.3% of its holdings, but I've never heard of 7 of the top 10 companies.

With International Small I use VSS, EWX, and VINEX (VINEX in tax deferred, I know there are other choices and I would not necessarily recommend you use VINEX but its expense ratio is lower than most non-Vanguard international small ETFs).

Like I said a very minor point. I didn't entirely plan it this way because I ended up with IJS after tax loss harvesting in 2008. Only drawback is iShares will never lower expense ratios so its a little frustrating knowing you are slightly subsidizing Blackrock executive dining rooms and yachts.
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