Tax Loss Harvesting - Alternative List

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drummerboy
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Tax Loss Harvesting - Alternative List

Post by drummerboy » Thu Mar 23, 2017 5:35 pm

Disclaimer: I utilize Schwab as my brokerage provider. But, I utilize funds from Vanguard and others as investments

If I'm looking to setup a Tax Loss Harvesting plan. What would be considered reliable "alternatives"? In other words for example, if I'm selling Total Stock Market (VTI) for a loss, could I then purchase another Total Stock Market fund if it tracked a different index? Or is it safer to purchase an S&P 500 fund? I'm looking to purchase the alternative fund without having to wait 31 days but don't want to trigger wash sales.

Small Cap Value:
VBR (CRSP US Small Cap Value Index) -> TLH Alternative: SLYV (S&P SmallCap 600 Value Index) or FNDA (Russell RAFI U.S. Small Company Index)

International Emerging Markets Value:
FNDE (Russell RAFI Emerging Markets Large Company Index) -> TLH Alternative: ????

Total US Stock Market:
VTI (CRSP US Total Market Index) -> TLH Alternative: S&P 500 Index or SCHB (Dow Jones U.S. Broad Stock Market Index)

International Small Cap Value:
FNDC (Russell RAFl Developed ex-U.S. Small Company Index) -> Alternative: SCZ ?? (MSCI EAFE Small Cap Index)

I appreciate any suggestions regarding good alternatives.

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in_reality
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Re: Tax Loss Harvesting - Alternative List

Post by in_reality » Fri Mar 24, 2017 7:47 am

drummerboy wrote:Disclaimer: I utilize Schwab as my brokerage provider. But, I utilize funds from Vanguard and others as investments

If I'm looking to setup a Tax Loss Harvesting plan. What would be considered reliable "alternatives"? In other words for example, if I'm selling Total Stock Market (VTI) for a loss, could I then purchase another Total Stock Market fund if it tracked a different index? Or is it safer to purchase an S&P 500 fund? I'm looking to purchase the alternative fund without having to wait 31 days but don't want to trigger wash sales.
I don't know that there is a definitive answer to whether the CRSP US Total Market Index would be substantially identical to the Dow Jones U.S. Broad Stock Market Index if the IRS decided to make an issue of it. I think they are different enough that you could plead your case to the IRS with a straight face and have them understand your logic. Not sure how they'd rule, but odd are yours wouldn't be the first case to get chosen and if it were you'd get famous.

Small Cap Value:
VBR (CRSP US Small Cap Value Index) -> TLH Alternative: SLYV (S&P SmallCap 600 Value Index) or FNDA (Russell RAFI U.S. Small Company Index) [or FNDA (Russell RAFI U.S. Small Company Index) -> TLH Alternative:PowerShares FTSE RAFI US 1500 Small-Mid Portfolio (PRFZ)]

International Emerging Markets Value:
FNDE (Russell RAFI Emerging Markets Large Company Index) -> PXH PowerShares FTSE RAFI Emerging Markets Portfolio

Total US Stock Market:
VTI (CRSP US Total Market Index) -> TLH Alternative: SCHB (Dow Jones U.S. Broad Stock Market Index) or SCHX (largest 754 companies) [if you worry SCHB is too close]

International Small Cap Value:
FNDC (Russell RAFl Developed ex-U.S. Small Company Index) -> Alternative: PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio (PDN)

Theoretical
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Re: Tax Loss Harvesting - Alternative List

Post by Theoretical » Fri Mar 24, 2017 8:05 am

in_reality wrote:
drummerboy wrote:Disclaimer: I utilize Schwab as my brokerage provider. But, I utilize funds from Vanguard and others as investments

If I'm looking to setup a Tax Loss Harvesting plan. What would be considered reliable "alternatives"? In other words for example, if I'm selling Total Stock Market (VTI) for a loss, could I then purchase another Total Stock Market fund if it tracked a different index? Or is it safer to purchase an S&P 500 fund? I'm looking to purchase the alternative fund without having to wait 31 days but don't want to trigger wash sales.
I don't know that there is a definitive answer to whether the CRSP US Total Market Index would be substantially identical to the Dow Jones U.S. Broad Stock Market Index if the IRS decided to make an issue of it. I think they are different enough that you could plead your case to the IRS with a straight face and have them understand your logic. Not sure how they'd rule, but odd are yours wouldn't be the first case to get chosen and if it were you'd get famous.

Small Cap Value:
VBR (CRSP US Small Cap Value Index) -> TLH Alternative: SLYV (S&P SmallCap 600 Value Index) or FNDA (Russell RAFI U.S. Small Company Index) [or FNDA (Russell RAFI U.S. Small Company Index) -> TLH Alternative:PowerShares FTSE RAFI US 1500 Small-Mid Portfolio (PRFZ)]

International Emerging Markets Value:
FNDE (Russell RAFI Emerging Markets Large Company Index) -> PXH PowerShares FTSE RAFI Emerging Markets Portfolio

Total US Stock Market:
VTI (CRSP US Total Market Index) -> TLH Alternative: SCHB (Dow Jones U.S. Broad Stock Market Index) or SCHX (largest 754 companies) [if you worry SCHB is too close]

International Small Cap Value:
FNDC (Russell RAFl Developed ex-U.S. Small Company Index) -> Alternative: PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio (PDN)
Commission Free Options:

SCV - I'd recommend FNDA and paying a commission for IJS rather than SLVY. Why? Because IJS is more than twice as tax efficient as SLVY.

Emerging Markets Value

Same as above, with iShares IEMG as the non-value choice (negative net expense ratio w/ securities lending and high tax efficiency)

Total Stock Market:

I think you're fine - SCHB has 1900 companies and VTI has far more. Since you're at Schwab, if you're willing to have a large value tilt, FNDB is also an option with 1400 companies fundamentally weighted.

International Small Cap Value:

Alternatively, if you have tax-advantaged space, you could shift domestic IRA holdings or bonds to the ISV place and replace the fund with DLS.

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cookymonster
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Re: Tax Loss Harvesting - Alternative List

Post by cookymonster » Fri Mar 24, 2017 8:22 am

Theoretical wrote: Commission Free Options:

SCV - I'd recommend FNDA and paying a commission for IJS rather than SLVY. Why? Because IJS is more than twice as tax efficient as SLVY.
This is rather hard to believe, as SLYV and IJS both track the same index. Do you have the data of QDI ratio for SLYV in 2016?

MotoTrojan
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Re: Tax Loss Harvesting - Alternative List

Post by MotoTrojan » Fri Mar 24, 2017 8:33 am

cookymonster wrote:
Theoretical wrote: Commission Free Options:

SCV - I'd recommend FNDA and paying a commission for IJS rather than SLVY. Why? Because IJS is more than twice as tax efficient as SLVY.
This is rather hard to believe, as SLYV and IJS both track the same index. Do you have the data of QDI ratio for SLYV in 2016?
Assuming you were replacing VBR and are a Vanguard account holder, why not use VIOV (Vanguards equivalent to IJS) and skip the commission? Worth nothing that VIOV is smaller than VBR, and more closely resembles Russell 2000 funds.

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cookymonster
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Re: Tax Loss Harvesting - Alternative List

Post by cookymonster » Fri Mar 24, 2017 8:43 am

MotoTrojan wrote:
cookymonster wrote:
Theoretical wrote: Commission Free Options:

SCV - I'd recommend FNDA and paying a commission for IJS rather than SLVY. Why? Because IJS is more than twice as tax efficient as SLVY.
This is rather hard to believe, as SLYV and IJS both track the same index. Do you have the data of QDI ratio for SLYV in 2016?
Assuming you were replacing VBR and are a Vanguard account holder, why not use VIOV (Vanguards equivalent to IJS) and skip the commission? Worth nothing that VIOV is smaller than VBR, and more closely resembles Russell 2000 funds.
I'm not a Vanguard account holder, but SLYV also has a 0.05% lower expense ratio. If you are planning to hold TLH partners forever, these permanent costs eventually make up for one-time trading costs. Especially if you are trading sums of over $25,000.

Theoretical
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Re: Tax Loss Harvesting - Alternative List

Post by Theoretical » Fri Mar 24, 2017 10:14 am

https://us.spdrs.com/en/resources/distr ... x_code2=NA

SLYV spits out significant capital gains, including short term gains. Neither VIOV or IJS do. For some reason, State Street isn't as good as Blackrock, Vanguard, or Schwab at this tax efficiency art.

The other reason for choosing IJS is that if you're using it as a tax loss harvester and want to return to the original VBR position because IJS has much lower trading spreads than SLYV or VIOV, though being the most expensive.

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Earl Lemongrab
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Re: Tax Loss Harvesting - Alternative List

Post by Earl Lemongrab » Fri Mar 24, 2017 1:25 pm

drummerboy wrote:If I'm looking to setup a Tax Loss Harvesting plan. What would be considered reliable "alternatives"? In other words for example, if I'm selling Total Stock Market (VTI) for a loss, could I then purchase another Total Stock Market fund if it tracked a different index? Or is it safer to purchase an S&P 500 fund? I'm looking to purchase the alternative fund without having to wait 31 days but don't want to trigger wash sales.
There is no direction and no IRS rulings that anyone has produced, so nothing like what you want can be provided.

I have one of the most aggressive stances on wash sales here on the forums. I don't believe that mutual funds or ETFs from different fund companies are substantially identical even if they follow the same index. There was at one time an IRS publication that stated something along the lines of “Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund.” That publication was declared obsolete, so the sentiment expressed might or might not still be IRS policy.

Some of my thoughts on the subject are in this thread:

viewtopic.php?f=10&t=198883&p=3043351
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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