Rebalancing/modifying a portfolio

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ativelr89
Posts: 3
Joined: Mon Sep 24, 2018 11:03 am

Rebalancing/modifying a portfolio

Post by ativelr89 » Mon Sep 24, 2018 11:33 am

Greetings everyone,

My current portfolio is:

60% Vanguard Total Stock Mkt Idx Adm (VTSAX)
40% Vanguard Total Intl Stock Lx Admiral (VTIAX)

I have this portfolio for the last 4 years and now I just want to lower my international exposure to 20%. That means, transferring the 20% from VTIAX to VTSAX.

I have the Tot intl Stock (VTIAX) under taxable account and I just wondering when would be the best time to do this change--to wait until the end of the tax year--December or just make the change now?

Thank you.

ExitStageLeft
Posts: 913
Joined: Sat Jan 20, 2018 4:02 pm

Re: Rebalancing/modifying a portfolio

Post by ExitStageLeft » Mon Sep 24, 2018 12:36 pm

ativelr89 wrote:
Mon Sep 24, 2018 11:33 am
Greetings everyone,

My current portfolio is:

60% Vanguard Total Stock Mkt Idx Adm (VTSAX)
40% Vanguard Total Intl Stock Lx Admiral (VTIAX)

I have this portfolio for the last 4 years and now I just want to lower my international exposure to 20%. That means, transferring the 20% from VTIAX to VTSAX.

I have the Tot intl Stock (VTIAX) under taxable account and I just wondering when would be the best time to do this change--to wait until the end of the tax year--December or just make the change now?

Thank you.
For a sale in a taxable account the best time is when your taxes will be lowest. It looks like VTIAX posts dividends every quarter and may have just had a distribution last week. https://investor.vanguard.com/mutual-fu ... ions/vtiax

I would want to sell the fund before the next distribution, which looks to be right around the winter solstice. The price is down YTD so you may even be able to harvest a loss.

rkhusky
Posts: 5547
Joined: Thu Aug 18, 2011 8:09 pm

Re: Rebalancing/modifying a portfolio

Post by rkhusky » Mon Sep 24, 2018 1:16 pm

Have you been rebalancing regularly over the last 4 years? If so, you should have been selling Total Stock and buying Total Int'l. If not, you are likely not at 60/40 anymore. What is the current actual asset allocation?

pkcrafter
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Location: CA
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Re: Rebalancing/modifying a portfolio

Post by pkcrafter » Mon Sep 24, 2018 2:15 pm

ativelr89 wrote:
Mon Sep 24, 2018 11:33 am
Greetings everyone,

My current portfolio is:

60% Vanguard Total Stock Mkt Idx Adm (VTSAX)
40% Vanguard Total Intl Stock Lx Admiral (VTIAX)

I have this portfolio for the last 4 years and now I just want to lower my international exposure to 20%. That means, transferring the 20% from VTIAX to VTSAX.

I have the Tot intl Stock (VTIAX) under taxable account and I just wondering when would be the best time to do this change--to wait until the end of the tax year--December or just make the change now?

Thank you.
Another option might be to just stop adding to international and add everything to total stock market (TSM) until you reach 80/20. You didn't say what kind of account TSM is in, but you should consider all retirement funds/accounts as one portfolio. If you do get to 20%, be sure to maintain it there.

FYI, what you are considering is not rebalancing, it is a portfolio/asset allocation (AA) change. Rebalancing is just getting back to chosen target AA.

Also, you didn't mention any bonds, and if you are 100% stock, you shouldn't be.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

ativelr89
Posts: 3
Joined: Mon Sep 24, 2018 11:03 am

Re: Rebalancing/modifying a portfolio

Post by ativelr89 » Mon Sep 24, 2018 5:32 pm

Thank you! My retirement fund/IRA is also a total stock market (TSM) and my portfolio now is 100% stock. The 60% total stock market (TSM) is the combined fund in both taxable and retirement accounts. For the last 4 yrs, I have been adding fund to these funds to maintain the 60% Total Stock and 40% Total International stock allocation. Maybe, instead of transferring the 20% from Total International Stock to Total Stock Market, I will add Total Bond Market to my portfolio and invest the 20% in this fund. As of today, I have $28,450 under Total International Stock and my tax bracket is 22%. Is there any way to estimate how much I can lose by selling the 20%?

Thank you!

ExitStageLeft
Posts: 913
Joined: Sat Jan 20, 2018 4:02 pm

Re: Rebalancing/modifying a portfolio

Post by ExitStageLeft » Tue Sep 25, 2018 10:13 am

That puts you in the 15% range for capital gains taxes. How much gain you have will determine how much tax you pay. If you hold it less than a year then your capital gains are short term and taxed at your regular income tax rate.

Your brokerage should be able to provide you with information on how much you paid for each lot of shares. The difference between the purchase price (the basis) and the selling price is your capital gain. The basis can change in certain circumstances but that probably does not apply in your case.

If the sell price is lower than the basis then you will have a loss. Losses can be claimed for tax purposes. If you are looking at a loss then you should read the wiki on Tax Loss Harvesting.

ativelr89
Posts: 3
Joined: Mon Sep 24, 2018 11:03 am

Re: Rebalancing/modifying a portfolio

Post by ativelr89 » Tue Sep 25, 2018 2:22 pm

Thank you! I really appreciate it.

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