Pre-Boglehead tax efficiency

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Pre-Boglehead tax efficiency

Post by graphite01 » Tue Sep 12, 2017 6:13 pm

Hello everyone,
Before I found Bogleheads I was investing in individual stocks within my employers 401K's self directed account option. Now that I have seen the light of the Boglehead way I am trying to wrap my head around how to begin restructuring my 401k so that I allocate things in a more tax efficient manner. I am looking for some feedback regarding my current asset allocation and steps I might take going forward to rectify the situation if I'm not allocated correctly. I have reviewed the wiki regarding tax efficiency multiple times and I believe I do not have any tax inefficient assets nor do I plan to hold any going forward.

Currently I have maybe 10-12 individual stocks and the following funds within my 401K; Vanguard Value ETF, Vanguard growth ETF, SPDR 500 ETF trust, Vanguard short term bond, Vanguard total bond mrkt, and Fidelity Biotech mutual fund.

My biggest concern lies in allocating investments in a tax efficient manner as I wans't aware of that information before I began investing. I'm wondering if I should sell any of my current holdings and re-purchase assets that make more sense to be held in a 401K or if my current holdings are ok as is from a tax standpoint.


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Re: Pre-Boglehead tax efficiency

Post by livesoft » Tue Sep 12, 2017 6:18 pm

Tax efficiency does not matter in a 401(k) nor in an IRA, Roth or Traditional.

What's in your taxable account? And what's your marginal income tax bracket (federal and state)?
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Re: Pre-Boglehead tax efficiency

Post by BHUser27 » Tue Sep 12, 2017 6:23 pm

What livesoft said.
Also, this... ... _placement

In a nutshell, use your tax-advantaged accounts for inefficient funds. Put efficient ones in your taxable account.
It's all in the linked wiki above. Tax bracket matters.

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Uncle Pennybags
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Re: Pre-Boglehead tax efficiency

Post by Uncle Pennybags » Tue Sep 12, 2017 6:54 pm

Tax avoidance is hard, tax deferred accounts make it easy. That is until they make one start taking distributions.

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Re: Pre-Boglehead tax efficiency

Post by triceratop » Tue Sep 12, 2017 7:25 pm

Uncle Pennybags wrote:
Tue Sep 12, 2017 6:54 pm
Tax avoidance is hard, tax deferred accounts make it easy. That is until they make one start taking distributions.
tax efficiency refers to fund placement across tax-advantaged and taxable accounts. It does not refer to the decision of whether to defer taxes in tax-advantaged accounts. In general I would prefer IRA contributions to taxable; the annual drag on returns in a taxable account is not nothing, and can really sting when you need more bonds.
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