I've read a tip somewhere to buy a fund that doesn't move much so the value doesn't change during the backdoor Roth IRA conversion. And then exchange the fund for what you actually want later.
Is this a good tip? What fund at Vanguard would be best for this?
What's a good fund to do a backdoor Roth IRA with?
Re: What's a good fund to do a backdoor Roth IRA with?
A money market mutual fund (such as Vanguard Prime) is designed to have a constant value. Any high quality, very short term bond should be relatively stable.
How long will your conversion take?
How long will your conversion take?
Re: What's a good fund to do a backdoor Roth IRA with?
Why would you take yourself out of the market if you don't have to? Sow hat if it gains/loses that is why you are investing in the fund of your choice to begin with - worst case is it goes up a bit in the short period of time it takes to transfer and you pay a little bit of taxes on the gains.
Re: What's a good fund to do a backdoor Roth IRA with?
Why would you care if you were out of the market for a few days with a small percentage of your portfolio? On average, you might gain a few cents, but if it requires more bookkeeping, I would avoid it.
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Re: What's a good fund to do a backdoor Roth IRA with?
It doesn't require any more bookkeeping. Only difference is the 8606 taxable amount of the conversion might not be exactly zero, or you might have a little non-zero carryover basis. Your tax software can handle a non-zero number just as well as a zero.rkhusky wrote:Why would you care if you were out of the market for a few days with a small percentage of your portfolio? On average, you might gain a few cents, but if it requires more bookkeeping, I would avoid it.
JW
Last edited by JW-Retired on Mon Oct 20, 2014 4:33 pm, edited 1 time in total.
Retired at Last
Re: What's a good fund to do a backdoor Roth IRA with?
I deposit first to my traditional IRA money market. Once the contribution is posted (1-2 days) I transfer from traditional money market to Roth IRA in the fund I want (usually VTSAX or VTIAX).