I am new to this forum and would appreciate the thoughts of all you savvy investors. Last year I moved our non qualified investment account from RBC to Vanguard. The account consists of about 20 different individual stocks and bonds ( Ishares). Ideally I would like to sell these funds and reinvest in some Vanguard index funds since I really don't know much about these stocks and bonds, with some being country and industry specific. The problem is the tax liability on the unrealized gains of about 90K. I retired this year and thus will be in a lower tax bracket so that federal tax if I sell these funds would be 15% (19K). I have no losses to offset the gains.
I have not been much of a hands on investor up to this point. Should I suck it up and learn about these individual stocks and bonds, maybe sell bit by bit as I determine what might be worth holding onto, or just bite the bullet and sell them all and reinvest in a broad index based fund(s), ( something easier to understand and follow)? Thanks!
Should I sell Ishares and invest in index funds?
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Re: Should I sell Ishares and invest in index funds?
From a taxation perspective, the optimal way would be to sell everything with losses now and sell the ones with gains once they become long-term gains. Depending on how much you have in long-term gains, you may want to spread the gains out over multiple years to take advantage of the 0% Long-Term Capital gains rate.
However:
In the end, what I'm getting at is that I personally would sell now and move into my new desired portfolio, as good portfolio management generally trumps good tax management.
However:
In the real world random factors will overwhelm the tax aspects. That is, you could have the best stocks in the world and they will be up 50% this year while the indexes will be up 10%. Or they could go down 50% while the indexes are up 10%. Mostly likely, your holdings will underperform the market somewhat because the median underperforms the average in the stock market.since I really don't know much about these stocks and bonds
In the end, what I'm getting at is that I personally would sell now and move into my new desired portfolio, as good portfolio management generally trumps good tax management.
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Re: Should I sell Ishares and invest in index funds?
Why do you use the word Ishares (really: iShares) in your post and title if your problem is about individual stocks and bonds? I am confused reading your OP. Please clarify.
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Re: Should I sell Ishares and invest in index funds?
You can also sell "some" shares to keep to 0% LTCG bracket, if your income allows that.
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Re: Should I sell Ishares and invest in index funds?
iShares is the family name of aeries of ETFs (exchange traded funds).They are (usually) a kind of index fund, but they have short ticker symbols that do not end in X. They are not single companies. They are funds of hundreds or thousands of stocks, that are bought and sold in a different way from mutual funds.
Many of them are quite comparable to Vanguard index funds. Connoisseurs can argue, but basically iShares IXUS is very similar to the Vanguard index fund, VGTSX; they both track an index the includes the the total market ex-US. If you have IXUS you don't need VGTSX. If you have iShares ITOT, you don't need Vanguard Total Stock Market index fund, VTSMX.
A guide to similar funds is here:
https://www.bogleheads.org/wiki/Blackrock_iShares
If what you have is really Blackrock iShares ETF, then, if you have reasonable portfolio, even though I personally am a Vanguard fan, there's very little reason to change. You may want to revise your portfolio, but not just to exchange iShares ETFs for Vanguard funds.
On the other hand, if you own individual stocks in individual companies like GE or Apple, then you do need to take the time to understand what you have now, and, yes, quite possibly move to index funds.
Many of them are quite comparable to Vanguard index funds. Connoisseurs can argue, but basically iShares IXUS is very similar to the Vanguard index fund, VGTSX; they both track an index the includes the the total market ex-US. If you have IXUS you don't need VGTSX. If you have iShares ITOT, you don't need Vanguard Total Stock Market index fund, VTSMX.
A guide to similar funds is here:
https://www.bogleheads.org/wiki/Blackrock_iShares
If what you have is really Blackrock iShares ETF, then, if you have reasonable portfolio, even though I personally am a Vanguard fan, there's very little reason to change. You may want to revise your portfolio, but not just to exchange iShares ETFs for Vanguard funds.
On the other hand, if you own individual stocks in individual companies like GE or Apple, then you do need to take the time to understand what you have now, and, yes, quite possibly move to index funds.
Last edited by nisiprius on Wed Jan 17, 2018 6:40 pm, edited 1 time in total.
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Re: Should I sell Ishares and invest in index funds?
In general, i think many iShares ETFs are index funds, so it would not make sense to sell something like ITOT and buy a Vanguard total stock market index fund.
Thus, figure out what you really got and perhaps reveal your holdings here for more help.
Thus, figure out what you really got and perhaps reveal your holdings here for more help.