Vanguard emerging markets TLH question

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beammeupscotty
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Vanguard emerging markets TLH question

Post by beammeupscotty » Sun Nov 29, 2015 3:33 pm

I own the Vanguard Emerging Markets stock index fund in taxable. I have a loss of around $9,000 in it that I would like to tax lost harvest. I only have a Vanguard mutual fund account (no brokerage account), so I only have Vanguard funds to choose from for a TLH pair. I also have a NWFCU 3% add-on certificate account in taxable. If I were to a) in taxable, sell the Emerging Markets and add to the NWFCU certificate, and b) in tax deferred, sell Total Bond Market index and purchase the Vanguard Emerging Markets Select stock fund (to hold for 30 days, then switch to the Emerging index fund), would this avoid the wash sale rule? Would it be advisable?

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jhfenton
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Re: Vanguard emerging markets TLH question

Post by jhfenton » Sun Nov 29, 2015 4:20 pm

It would avoid the wash sale rule, because Vanguard Emerging Markets Select and Vanguard Emerging Markets Index are very different funds. Just make sure that you count the 30 days correctly: day 0 = day of sale -> 30 more days pass -> day 31 you can buy the replacement. :beer

It makes sense to me, especially if you have at least $6,000 in gains to offset.

small_index
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Re: Vanguard emerging markets TLH question

Post by small_index » Sun Nov 29, 2015 6:54 pm

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Last edited by small_index on Sat Dec 12, 2015 1:04 am, edited 1 time in total.

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saltycaper
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Re: Vanguard emerging markets TLH question

Post by saltycaper » Sun Nov 29, 2015 10:32 pm

To state the obvious, you will essentially be moving some fixed income assets to taxable and some stocks to tax-deferred. I'm not sure I would do this with a volatile stock fund that could be used to tax-loss harvest in the future. VEMAX also seems to be fairly tax efficient, with the foreign tax credit, 50-60% qualified dividends, and a history of not distributing capital gains.
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beammeupscotty
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Re: Vanguard emerging markets TLH question

Post by beammeupscotty » Sun Nov 29, 2015 10:52 pm

So maybe it's better to sell Emerging in taxable, buy Select in tax deferred, then sell after 30 days and buy the index again in taxable? Or just sell and buy again after 30 days?

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saltycaper
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Re: Vanguard emerging markets TLH question

Post by saltycaper » Sun Nov 29, 2015 11:32 pm

Can't sell one emerging markets fund and buy the other in taxable, and then do the reverse if desired after 30 days? I had mutual fund accounts only for a short time, so I can't remember the mechanics and if that is possible, but it seems the best way. A mail order might be necessary for one of the orders (if less than 60 days apart I believe, but double check, or you can just wait longer).

Of the last two ways you proposed, on the one hand, I'd rather be out of the bond market and have the money in cash for 30 days than be out of emerging markets for 30 days and have that money in cash. On the other hand, if emerging markets fall further while in tax-deferred, that would be too bad.

I would do what I could to accomplish this all in taxable without being out of the market.

Maybe you'll get a comment from one of the TLH aficionados here. If you haven't TLH'd much before, I'd read this for a couple important general points: https://www.bogleheads.org/wiki/Tax_loss_harvesting
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beammeupscotty
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Re: Vanguard emerging markets TLH question

Post by beammeupscotty » Mon Nov 30, 2015 8:33 am

If I do that, the Dec. qualified dividends for the newly purchased fund won't qualify since it will be held less than 60 days, and it will also add one more taxable event to report when switching back. I think I'll stick with my original plan and if/when Emerging markets and/or bond rates rise substantially, switch back since there will be a better chance to TLH again from that point.
Last edited by beammeupscotty on Thu Dec 03, 2015 11:34 am, edited 2 times in total.

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BL
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Re: Vanguard emerging markets TLH question

Post by BL » Mon Nov 30, 2015 10:25 am

Maybe this is an off the wall suggestion, but I personally might sell EM and buy more Total International to hold for 30+ days. It does throw the tilt off, but at least some of TI is EM. Disagreements welcome!

I do like the suggestion of buying the other EM in taxable rather than the more complex earlier idea.

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Re: Vanguard emerging markets TLH question

Post by livesoft » Mon Nov 30, 2015 10:27 am

That is not an off-the-wall suggestion. Instead it is a great suggestion. Furthermore since the correlation among equity classes is high, one could even use Total US Stock Market Index as replacement shares for a little while without much consequence. This issue is mostly would you keep your replacement shares "forever" if prices went up substantially after you bought them?
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BL
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Re: Vanguard emerging markets TLH question

Post by BL » Mon Nov 30, 2015 10:32 am

livesoft wrote:That is not an off-the-wall suggestion. Instead it is a great suggestion. Furthermore since the correlation among equity classes is high, one could even use Total US Stock Market Index as replacement shares for a little while without much consequence. This issue is mostly would you keep your replacement shares "forever" if prices went up substantially after you bought them?
We did something like this the only time we TLHd. Sold Total International Admiral, bought more Total Stock Admiral, then started buying TI Index again and left the other alone.

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