When bogleheads do TLH

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Topic Author
core4portfolio
Posts: 672
Joined: Thu Dec 26, 2013 1:12 pm

When bogleheads do TLH

Post by core4portfolio »

Hi

I like to know how much drop in percentage can trigger for a tax loss harvesting.
For example, if I have invested in June for 10000 in VTSAX and it loss almost 1k then do you
perform tax loss harvesting or not

I understood we need to be invest all time which we can swap the VTSAX to VLACX.
But whats the trigger point for this swapping aka Tax loss harvesting ??
10% drop or 15% drop in value or 25% drop.... when will bogleheads do TLH ?
Allocation : 80/20 (90% TSM, 10% on ARKK,XBI,XLK/individual stocks and 20% TBM) | | Need to learn fishing sooner
livesoft
Posts: 86077
Joined: Thu Mar 01, 2007 7:00 pm

Re: When bogleheads do TLH

Post by livesoft »

It is more complicated than that. For instance,

1. Suppose one owns VTSAX with an unrealized loss and expects the market to keep dropping for the next 30 days. Why not tax-loss harvest now no matter what the dollar amount of the loss is into VLCAX, so that in 31 days one can then TLH the VLCAX and get back into VTSAX.

-or-

2. One can try to minimize the number of TLH sales that one does, so try to time the TLH so that one exchanges into VLCAX at the market bottom.

I have written the amount of loss I will TLH will depend on the time of year and the time of purchase. I have a lower dollar amount for TLHing in December than I do in June because I want to start the next year with no losses. I will TLH any losing position that is about to become a long-term loss.

I imagine that folks with smaller portfolios will have lower dollar amounts that they will TLH, while folks with larger portfolios will not bother with small losses.

So I guess there is probably no universal percentage or dollar amount that suits even most investors.
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Topic Author
core4portfolio
Posts: 672
Joined: Thu Dec 26, 2013 1:12 pm

Re: When bogleheads do TLH

Post by core4portfolio »

livesoft wrote:It is more complicated than that. For instance,

1. Suppose one owns VTSAX with an unrealized loss and expects the market to keep dropping for the next 30 days. Why not tax-loss harvest now no matter what the dollar amount of the loss is into VLCAX, so that in 31 days one can then TLH the VLCAX and get back into VTSAX.

-or-

2. One can try to minimize the number of TLH sales that one does, so try to time the TLH so that one exchanges into VLCAX at the market bottom.

I have written the amount of loss I will TLH will depend on the time of year and the time of purchase. I have a lower dollar amount for TLHing in December than I do in June because I want to start the next year with no losses. I will TLH any losing position that is about to become a long-term loss.

I imagine that folks with smaller portfolios will have lower dollar amounts that they will TLH, while folks with larger portfolios will not bother with small losses.

So I guess there is probably no universal percentage or dollar amount that suits even most investors.

Assume if I do swap my funds from VTSAX to (SP 500 or VLCAX), then do I need to worry about the year end distribution of VTSAX or (SP500/VLCAX) or the
dividends I have received already from VTSAX ?
Allocation : 80/20 (90% TSM, 10% on ARKK,XBI,XLK/individual stocks and 20% TBM) | | Need to learn fishing sooner
placeholder
Posts: 8421
Joined: Tue Aug 06, 2013 12:43 pm

Re: When bogleheads do TLH

Post by placeholder »

I think it depends on the individual's situation so people with no losses on the year should be more proactive in doing TLH where someone with 50k of carryover losses gets less benefit so the threshold is probably higher (it is for me anyway).
DreamHigher
Posts: 49
Joined: Tue Apr 15, 2014 10:36 pm

Re: When bogleheads do TLH

Post by DreamHigher »

Rather than a percentage, my threshold is absolute in dollars. I use $3000 of loss to trigger a TLH -- (1) because that is how much you can deduct on your taxes in one year (2) makes it easy to see when to do TLH. I recently did one with the TISM fund when it crossed $3000 mark.
placeholder
Posts: 8421
Joined: Tue Aug 06, 2013 12:43 pm

Re: When bogleheads do TLH

Post by placeholder »

DreamHigher wrote:Rather than a percentage, my threshold is absolute in dollars. I use $3000 of loss to trigger a TLH -- (1) because that is how much you can deduct on your taxes in one year (2) makes it easy to see when to do TLH. I recently did one with the TISM fund when it crossed $3000 mark.
I'm not sure that makes much sense as if you had a $2999 loss you'd pass it up and have no deduction for the year and the opportunity is then lost forever.
avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: When bogleheads do TLH

Post by avalpert »

placeholder wrote:
DreamHigher wrote:Rather than a percentage, my threshold is absolute in dollars. I use $3000 of loss to trigger a TLH -- (1) because that is how much you can deduct on your taxes in one year (2) makes it easy to see when to do TLH. I recently did one with the TISM fund when it crossed $3000 mark.
I'm not sure that makes much sense as if you had a $2999 loss you'd pass it up and have no deduction for the year and the opportunity is then lost forever.
Sure but that argument can be made for any dollar number - whatever line you draw will be arbitrary. Personally my trigger is $1000 but i could see it getting larger as my taxable account grows and I try to balance effort/cost with the reward.
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