TLH from VTI, why VV over VOO? Use Roth Small to supplement?

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MotoTrojan
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TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by MotoTrojan » Fri Mar 17, 2017 10:09 pm

Working on my first IPS and want a specific plan called out for TLH of VTI (Total Stock Market) & VXUS (Total Int).

For VXUS, VEU (All World Ex-us) seems like a no brainer; almost 1-1 funds, same cost, etc... No need for additional funds to tilt it.

As to VTI, any reason most people recommend VV (Vanguard Large-cap ETF) over VOO (S&P 500) to TLH VTI? VOO is 3 basis points cheaper, and is negligibly larger. Also, do most people supplement VV/VOO with a Small-cap to get the same exposure as VTI had? I suppose if the TLH is a small portion of the full VTI allocation that may be in the news.

On that note, if a large majority of VTI was TLH'd, would it be totally taboo to add proportional allocation of VIOV (S&P 600 Small-cap Value) to VV/VOO to maintain allocation of small-caps?

My nominal AA is 100% equities for investments, plus 3-6 months (over time) in 1% savings account and eventually CD ladder:
55% VTI in Taxable
25% VXUS in Taxable/Roth
20% VIOV in Roth

Again though, the proper ratio of a smaller fund like S&P 600 would be 10% of VV/VOO, so it is probably in the noise of overall VIOV allocation, unless a majority of VTI is sold at a loss.

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White Coat Investor
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by White Coat Investor » Fri Mar 17, 2017 10:43 pm

I'd just use the Large Cap Index Fund. The correlation is just fine. Honestly, so is 500 index. But bear in mind you may need 2 or even 3 tax loss partners. Those are a good first two.
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cookymonster
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by cookymonster » Fri Mar 17, 2017 10:48 pm

The reason people recommend VV over VOO is because many DCA an S&P 500 index in their 401K index throughout the year. If this doesn't apply to you, VOO is fine.

My preferred TLH partner for VTI would be ITOT (followed by SCHB), assuming I have a large enough sum to trade such that the lower ER (0.03%) and tax efficiency is enough to overcome the possible trading fees.

MotoTrojan
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by MotoTrojan » Fri Mar 17, 2017 10:53 pm

cookymonster wrote:The reason people recommend VV over VOO is because many DCA an S&P 500 index in their 401K index throughout the year. If this doesn't apply to you, VOO is fine.

My preferred TLH partner for VTI would be ITOT (followed by SCHB), assuming I have a large enough sum to trade such that the lower ER (0.03%) and tax efficiency is enough to overcome the possible trading fees.
That is a good point on the 401K. I am currently working for a small company without one, so Roth is my only tax advantaged account. But it may be good to start this precedent for the future.

As to having multiple TLH partners, this would allow say a loss in VTI & VV (which was accumulated from TLH) to be sold in exchange for VOO? I suppose depending on the circumstance I could do that, but I would probably attempt to LTH between the VV & VTI a month apart, assuming this was a long down-market.

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Earl Lemongrab
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by Earl Lemongrab » Sat Mar 18, 2017 5:32 pm

cookymonster wrote:The reason people recommend VV over VOO is because many DCA an S&P 500 index in their 401K index throughout the year. If this doesn't apply to you, VOO is fine.
Why is that relevant?
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livesoft
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by livesoft » Sat Mar 18, 2017 5:45 pm

You get about 250 more stocks that an S&P500 fund doesn't have.

Plus we need more people to use VV so that its e.r. goes down.
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livesoft
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by livesoft » Sat Mar 18, 2017 5:50 pm

MotoTrojan wrote:... between the VV & VTI a month apart, assuming this was a long down-market.
With 3 funds one doesn't even have to wait a month. See, e.g., viewtopic.php?p=3215172#p3215172
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cookymonster
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by cookymonster » Sat Mar 18, 2017 6:26 pm

Earl Lemongrab wrote:
cookymonster wrote:The reason people recommend VV over VOO is because many DCA an S&P 500 index in their 401K index throughout the year. If this doesn't apply to you, VOO is fine.
Why is that relevant?
Because of the concern that buying an S&P 500 index in your 401k within 30 days of selling VOO creates a potential wash sale. I know that the IRS hasn't ruled on this. I also know that you TLH between different S&P 500 index ETF's. Each investor can play as loose with wash sale rules as he likes, but those who choose to TLH to VV over VOO usually aren't comfortable with loose interpretations.

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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by TropikThunder » Sat Mar 18, 2017 6:55 pm

MotoTrojan wrote: My nominal AA is 100% equities for investments, plus 3-6 months (over time) in 1% savings account and eventually CD ladder:
55% VTI in Taxable
25% VXUS in Taxable/Roth
20% VIOV in Roth
Why VIOV (S&P Small-Cap 600 Value, er 0.20%) rather then VBR (CRSP US Small Cap Value, er 0.08%) ? Even Vanguard itself recommends using VBR.
https://personal.vanguard.com/us/funds/ ... IntExt=INT
MotoTrojan wrote: For VXUS, VEU (All World Ex-us) seems like a no brainer; almost 1-1 funds, same cost, etc... No need for additional funds to tilt it.
VEU doesn't have Int'l Small Caps (VSS does).
livesoft wrote:You get about 250 more stocks that an S&P500 fund doesn't have.

Plus we need more people to use VV so that its e.r. goes down.
VV has 611 stocks, VOO has 508. I wasn't a math major but my interweb calculator says 611 - 510 < 250. :twisted:
cookymonster wrote:
Earl Lemongrab wrote:
cookymonster wrote:The reason people recommend VV over VOO is because many DCA an S&P 500 index in their 401K index throughout the year. If this doesn't apply to you, VOO is fine.
Why is that relevant?
Because of the concern that buying an S&P 500 index in your 401k within 30 days of selling VOO creates a potential wash sale. I know that the IRS hasn't ruled on this. I also know that you TLH between different S&P 500 index ETF's. Each investor can play as loose with wash sale rules as he likes, but those who choose to TLH to VV over VOO usually aren't comfortable with loose interpretations.
For those following at home, IRS Rule 2008-5 says you trigger a wash sale buy selling in taxable and then buying the same in an IRA: "the IRS explained that when shares are sold in a non-retirement account and substantially identical shares are purchased in an IRA within 30 days, the investor cannot claim tax losses for the sale". The rule does not specifically address 401k/403b accounts, and I have never found anything online that clarifies.
https://www.irs.gov/irb/2008-03_IRB/ar08.html

livesoft
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by livesoft » Sat Mar 18, 2017 7:03 pm

TropikThunder wrote:
livesoft wrote:You get about 250 more stocks that an S&P500 fund doesn't have.

Plus we need more people to use VV so that its e.r. goes down.
VV has 611 stocks, VOO has 508. I wasn't a math major but my interweb calculator says 611 - 510 < 250. :twisted:
Thanks for the correction. I haven't read the prospectus in about 8 years.

Ah, yes:
*MSCI US Prime Market 750 Index through January 30, 2013; CRSP US Large Cap Index thereafter.
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MotoTrojan
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by MotoTrojan » Sat Mar 18, 2017 7:32 pm

TropikThunder wrote:
MotoTrojan wrote: My nominal AA is 100% equities for investments, plus 3-6 months (over time) in 1% savings account and eventually CD ladder:
55% VTI in Taxable
25% VXUS in Taxable/Roth
20% VIOV in Roth
Why VIOV (S&P Small-Cap 600 Value, er 0.20%) rather then VBR (CRSP US Small Cap Value, er 0.08%) ? Even Vanguard itself recommends using VBR.
https://personal.vanguard.com/us/funds/ ... IntExt=INT
MotoTrojan wrote: For VXUS, VEU (All World Ex-us) seems like a no brainer; almost 1-1 funds, same cost, etc... No need for additional funds to tilt it.
VEU doesn't have Int'l Small Caps (VSS does).

VBR has a median cap-size ~2X that of VIOV, and if you believe in the Small-cap premium, the smaller the better. Most people that I have seen tilting to Small-cap Value in large quantities go with IJS (same fund as VIOV) or RZV, which is pricey but even more small/valuey. MorningStar X-ray for example shows VBR as being 31% mid-cap, with VIOV only being 2%.

Good point on VXUS including small-caps. I guess 1-1 comparison was off base, but if you compare the median cap-size of VXUS <-> VEU vs. VTI <-> VV, it is a good bit closer; 24% difference vs. 45% difference.

TropikThunder
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by TropikThunder » Sat Mar 18, 2017 8:17 pm

MotoTrojan wrote: VBR has a median cap-size ~2X that of VIOV, and if you believe in the Small-cap premium, the smaller the better. Most people that I have seen tilting to Small-cap Value in large quantities go with IJS (same fund as VIOV) or RZV, which is pricey but even more small/valuey. MorningStar X-ray for example shows VBR as being 31% mid-cap, with VIOV only being 2%.

Good point on VXUS including small-caps. I guess 1-1 comparison was off base, but if you compare the median cap-size of VXUS <-> VEU vs. VTI <-> VV, it is a good bit closer; 24% difference vs. 45% difference.
I have read that VBR is less "valuey" then other SCV funds, but I hadn't compared whether it was less "small-ey" (that's an alternative word). I wonder why Vanguard prompts people to consider VBR instead of VIOV, I've never seen them list that on a fund page (then again, they usually don't have more then one fund for a particular asset subclass). And Int'l indexes have less small cap to start with so it's less of a gap to only have Int'l Large.
livesoft wrote: Thanks for the correction. I haven't read the prospectus in about 8 years.

Ah, yes:
*MSCI US Prime Market 750 Index through January 30, 2013; CRSP US Large Cap Index thereafter.
Well then, your analysis was correct before the index change. I'm new enough at this that I don't have any knowledge from more then 2 years ago to color my memory. That and my scientist training won't let me post anything without checking to see if it's correct, so I had to look up VV and VOO on Vanguard to check their holdings. ;)

MotoTrojan
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by MotoTrojan » Sun Mar 19, 2017 4:54 am

TropikThunder wrote:
MotoTrojan wrote: VBR has a median cap-size ~2X that of VIOV, and if you believe in the Small-cap premium, the smaller the better. Most people that I have seen tilting to Small-cap Value in large quantities go with IJS (same fund as VIOV) or RZV, which is pricey but even more small/valuey. MorningStar X-ray for example shows VBR as being 31% mid-cap, with VIOV only being 2%.

Good point on VXUS including small-caps. I guess 1-1 comparison was off base, but if you compare the median cap-size of VXUS <-> VEU vs. VTI <-> VV, it is a good bit closer; 24% difference vs. 45% difference.
I have read that VBR is less "valuey" then other SCV funds, but I hadn't compared whether it was less "small-ey" (that's an alternative word). I wonder why Vanguard prompts people to consider VBR instead of VIOV, I've never seen them list that on a fund page (then again, they usually don't have more then one fund for a particular asset subclass). And Int'l indexes have less small cap to start with so it's less of a gap to only have Int'l Large.
Vanguard is of course going to push their own home-brewed product, I wouldn't read much into that. Not inherently a bad fund, but doesn't check all the boxes I desire. They don't feature it on their list of ETFs without a few extra clicks, which is a secondary reason I am trying to only hold it in my tax-advantaged account; that way any sort of fund closure won't trigger taxable events.

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Earl Lemongrab
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Re: TLH from VTI, why VV over VOO? Use Roth Small to supplement?

Post by Earl Lemongrab » Sun Mar 19, 2017 11:06 am

cookymonster wrote:
Earl Lemongrab wrote:
cookymonster wrote:The reason people recommend VV over VOO is because many DCA an S&P 500 index in their 401K index throughout the year. If this doesn't apply to you, VOO is fine.
Why is that relevant?
Because of the concern that buying an S&P 500 index in your 401k within 30 days of selling VOO creates a potential wash sale. I know that the IRS hasn't ruled on this. I also know that you TLH between different S&P 500 index ETF's. Each investor can play as loose with wash sale rules as he likes, but those who choose to TLH to VV over VOO usually aren't comfortable with loose interpretations.
I think that's a poor characterization of the situation. The IRS has specific rules for wash sale accounts (IRAs, spousal accounts). To me, leaving out a particular account is NOT a loose interpretation, but the sensible one. There are many rules for various account types and in general trying to apply the rules for those to other account types is the wrong thing to do.

There are many good reasons why qualified plans aren't and won't be in the wash sale rules.
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