To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

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AccutronMan
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To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by AccutronMan » Thu Feb 01, 2018 11:23 am

Hello, Bogleheads!

Decades ago, my grandfather invested in Vanguard Health Care Fund Admiral Shares (VGHAX) in a taxable account for me. Since this fund doesn’t exactly fit a “Lazy Portfolio” philosophy, I’ve been considering selling it for a while now.

My entire portfolio, which is largely comprised of total market index funds (the equity portion is 85% domestic and 15% international) is held in taxable accounts. I would like to boost my international allocation. However, if I sell VGHAX sooner rather than later, I expect to be bumped up to the 24% individual tax bracket.

I don’t need to sell VGHAX, but the fund has more than doubled in value during the time that I’ve held it. Plus, I’m wary of betting against the healthcare disruption Mr. Bezos, Mr. Buffett and Mr. Dimon are planning.

What do you think?

Thanks!

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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by bloom2708 » Thu Feb 01, 2018 2:00 pm

Everything in the healthcare fund is in the Total market fund. You just own more of those specific stocks.

You might consider selling some in 2018 and 2019 to spread out the cap gains tax hit.

I guess I wouldn't let nostalgia or past performance of a sector fund prevent me from getting to your optimal fund mix.

Adding Total International add ~6,700 stocks to the ~3,600 in the Total US stock index. 20 to 50% of your stock allocation are the typical ranges.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

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AccutronMan
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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by AccutronMan » Thu Feb 01, 2018 2:18 pm

Thank you very much!

DSInvestor
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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by DSInvestor » Thu Feb 01, 2018 3:12 pm

Vanguard Healthcare fund is not tax efficient and tends to make large distributions every year. If you have been reinvesting dividends all this time, your unrealized capital gain in this fund may be much lower than you think even though your fund position has doubled in value. Remember that dividend and capital gains distributions are taxable and if you reinvested these distributions, your cost basis is increased with each reinvestment.

Capital gain = sales proceeds - cost basis.

Vanguard.com has an area to show you cost basis of your holdings in taxable accounts.

If you find that you still have significant unrealized capital gains, you can reduce your holdings in this fund by redirecting the dividend and capital gains distributions to another fund. This allows you to reduce the holding without realizing any capital gains.
Last edited by DSInvestor on Thu Feb 01, 2018 3:15 pm, edited 1 time in total.
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AccutronMan
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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by AccutronMan » Thu Feb 01, 2018 3:15 pm

Thank you very much for the reply! I stopped reinvesting dividends and capital gains from this fund many years ago.

Chuck
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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by Chuck » Thu Feb 01, 2018 3:32 pm

This wouldn't happen to be because of the 3% decline yesterday, and some recent news, would it?

The fund is up 5% for just January.

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AccutronMan
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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by AccutronMan » Thu Feb 01, 2018 3:35 pm

Yes. And I know what you’re thinking. But I’ve been thinking of selling this fund for a while now.

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sperry8
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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by sperry8 » Thu Mar 15, 2018 9:27 am

I'm considering selling one of my funds as well (to take some profits off the table). My overall allocation has risen due to the bull market and now I have ~72% equities (which is too high). I prefer to have 70% but since we are later in the game, I thought I'd bring it down to ~65%.

I have VGHAX [Vanguard Health Care Fund Admiral] too and also VFIAX (S&P 500 Admiral). VFIAX has $100k more in unrealized cap gains than VGHAX does. I do not reinvest cap gains. I realize most would say to sell VGHAX over VFIAX... but I'd hate to lose all my remaining loss carryforwards which would happen if I sell VFIAX. I'd still have $100k if I sold VGHAX (which would get me through one to one and a half more years of cap gains). I also hate to sell a fund while it's down. VGHAX has not had a good 4 years... it's day likely comes back and I hate selling low. On the other hand it has done well 5/10/15 years alongside VFIAX which has also shined.

Any reccos on which to sell or would you stand pat? Or just sell 2% to get me back down to 70% (because going to 65% is more market timing on my part).

Also am I being penny wise and pound foolish trying to save my loss carryforward?
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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sperry8
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Re: To Sell VGHAX or Not to Sell VGHAX? [Vanguard Health Care Fund Admiral]

Post by sperry8 » Wed Sep 26, 2018 12:54 pm

I finally got around to doing some research on this fund. It appears to me it was the former manager (Ed Owens) who was amazing and where all the outperformance was. Once the new Manager Jean Hynes took over the fund hasn't beaten the Vanguard Health Care Index Fund (VHCIX). https://investor.vanguard.com/mutual-fu ... file/vhcix

So while I still want to be in Health Care - I shall going forward solely invest via the VG Index fund. I may even take some profits off the table by selling part of VGHAX... and then should I ever decide to put monies back to work in HC, the index fund it'll be.

Here's a link to Jean's performance vs the VG Health Care Index fund and a competitor fund (Hartford Healthcare) since she took over:
https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

Her performance gets even worse if you move out her "start" date just a year. I do that because I assume most of the stocks when she took over were still Ed Owens picks (the former manager).
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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Socrates28
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How come the Vanguard Healthcare Index is not listed

Post by Socrates28 » Thu Nov 08, 2018 4:02 pm

on their website?

Also, for many, it is not a choice in a 401(k) or 403(b)..........I do have 10% in my 403(b) and it has done very well this year and the 15 years I have had it

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