Purchase strategy for TLH in taxable account

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Purchase strategy for TLH in taxable account

Post by Bovinae » Mon Mar 20, 2017 9:19 am

I contribute several thousand dollars per month to a taxable account that I just opened at the beginning of this year. I am not thrilled at the thought of tax loss harvesting (simply because it seems like more work than I like to put into my investing) but I want to have it as an option. Do folks generally allow a certain amount to build up in your settlement fund (via distributions and ongoing contributions) before investing, e.g. $10K, in order to keep share identification a little simpler? Or should I immediately reinvest into the appropriate asset class, even if it is a relatively small amount of money (e.g. $3k)? It's hard for me to get a sense of how much of a pain TLH will be before having done it.


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House Blend
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Re: Purchase strategy for TLH in taxable account

Post by House Blend » Mon Mar 20, 2017 10:01 am

If you are just starting out, it will take a while before the dividends are more than just round off error compared to new purchases, even if you are purchasing weekly.

I make one purchase [in taxable] per month--whichever fund deserves it most. If it is a month with dividends, then I time the purchase to be after the dividends, and add them to the purchase. It does limit the number of tax lots I own, but I am paid monthly and would do this even with no intent to tax loss harvest.

After 18+ years of taxable investing I currently own ~50 tax lots. Didn't know anything about TLH until 2008 or so, and have since TLHd on maybe 15 occasions. (TLH frequency and the number of tax lots you own will also be correlated with the number of distinct asset classes you have in taxable.)

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Re: Purchase strategy for TLH in taxable account

Post by livesoft » Mon Mar 20, 2017 10:32 am

If one is investing several thousand dollars a month, then I think they should put the money in at least $2,000 chunks.

One doesn't have to invest in the same fund multiple times a month though. One can put money into 3 funds once a month each, so 3 contributions in total monthly.

Tax-loss harvesting will be trivial in such a situation. When the news media has headlines about worst day or big drops or whatever, take a casual look at your tax lots and exchange those in the red color if the sum of the loss is more than about $500. The benefit of this is that your replacement years will be at "buy low" prices.

If you don't read the news media and are afraid you might miss a loss, then have your broker send your smart phone an alert if the market index is below a certain level, say 3% from current prices. This is very trivial to do. You can think about the level that you want the price alert(s) to be sent to your phone, too.

If you spend more time on this than it took you to read my response, then you have overdone it.
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