Help: Moving Stocks to Index Fund

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siankisr
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Joined: Sat Sep 08, 2018 6:32 pm

Help: Moving Stocks to Index Fund

Post by siankisr » Sun Oct 14, 2018 9:52 pm

I need some advice regarding moving my money from Stocks to Vanguard Total Stock Market Fund.

I feel, I would have fared much better had I invested in an index fund (like total stock market) instead of timing the individual stocks. Realizing the mistake, I would like to correct this soon.

Some details about me and my portfolio.

Age: 41.
Married with 2 kids age 7 and 2.

My current Portfolio is:

Stocks: 221K (60K unrealized gains)

AA: 4.8K
ARNC: 9K
FB: 10K
BP: 40K
C: 9K
EEM: 3.2K
GE: 17K
IFN: 13.6 K
MSFT: 17K
MT: 34K
NDLS: 4.5K
NTR: 26K
PFE: 22K

Traditional IRA:
Vanguard LifeStrategy Growth Fund: 9.5K

Rollover
Vanguard Target Retirement 2045 Fund: 6K
Total Stock Market Index : 119K

Roth IRA
LifeStrategy Growth Fund: 114K
Total Stock Market: 37k

Others:
Vanguard LifeStrategy Growth Fund: 231K
Vanguard Global Capital Cycles Fund: 10K
Vanguard Total Stock Market Index : 42K

What could be a better strategy to sell the stocks and buy the total stock market fund gradually without taking a tax hit? Any other advice is also welcome. Has anyone taken advice from the Vanguard specialists?

Thanks for your time.

HEDGEFUNDIE
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Re: Help: Moving Stocks to Index Fund

Post by HEDGEFUNDIE » Sun Oct 14, 2018 10:33 pm

Do any of your stocks have unrealized losses? If you can match enough unrealized gains with unrealized losses to sell, you won't have to pay any tax at all.

For the rest, sell only those lots that are 12+ months old to take advantage of long term capital gains tax rate.

siankisr
Posts: 4
Joined: Sat Sep 08, 2018 6:32 pm

Re: Help: Moving Stocks to Index Fund

Post by siankisr » Mon Oct 15, 2018 7:38 am

Thanks HEDGEFUNDIE.

All the stocks are long. There are 15% stocks which have a loss. Is it advisable to just sell all and buy the index fund (and pay taxes)? Or should I move around slowly. Not sure what advantages it would give me?

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CyclingDuo
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Re: Help: Moving Stocks to Index Fund

Post by CyclingDuo » Mon Oct 15, 2018 7:51 am

siankisr wrote:
Mon Oct 15, 2018 7:38 am
Thanks HEDGEFUNDIE.

All the stocks are long. There are 15% stocks which have a loss. Is it advisable to just sell all and buy the index fund (and pay taxes)? Or should I move around slowly. Not sure what advantages it would give me?
Have you calculated your actual returns from cost basis to today including the dividends? You might find that the returns possibly are not that far off from the Total Stock Market.

As suggested, you could tax loss harvest. You could also reinvest all of the dividends into the Total Stock Market Fund and spread out the sale of the individual stocks over more than one tax year to mitigate the capital gains in any given year.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Duckie
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Re: Help: Moving Stocks to Index Fund

Post by Duckie » Mon Oct 15, 2018 5:03 pm

siankisr wrote:All the stocks are long. There are 15% stocks which have a loss. Is it advisable to just sell all and buy the index fund (and pay taxes)?
$60K gains is about $9K in taxes at 15% or $12K at 20%. Depending on your tax bracket and available income I'd either sell it all at once or spread it over two tax years.

HJG0989
Posts: 157
Joined: Sat Oct 13, 2007 2:18 pm

Re: Help: Moving Stocks to Index Fund

Post by HJG0989 » Mon Oct 15, 2018 10:51 pm

I am in the same situation except I have over a million in capital gains. I keep hoping for a market crash...

siankisr
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Joined: Sat Sep 08, 2018 6:32 pm

Re: Help: Moving Stocks to Index Fund

Post by siankisr » Tue Oct 16, 2018 8:38 pm

Thanks for all the replies.

I sold some lost positions to the tune of 15K last year and I was only allowed to deduct 3k loss in the taxes filed. If I sell my positions now, can I deduct 12k loss (from last year) from the profits of this year?

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arcticpineapplecorp.
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Re: Help: Moving Stocks to Index Fund

Post by arcticpineapplecorp. » Tue Oct 16, 2018 8:46 pm

siankisr wrote:
Tue Oct 16, 2018 8:38 pm
Thanks for all the replies.

I sold some lost positions to the tune of 15K last year and I was only allowed to deduct 3k loss in the taxes filed. If I sell my positions now, can I deduct 12k loss (from last year) from the profits of this year?
yes you can carry over losses from prior years you didn't use to offset other gains from prior years or reduce taxable income. Since you only used $3000 of a $15,000 loss, you can carry over $12,000 in additional losses which can be used to offset gains from sale this year.

Since you're close to the end of the year it does make sense to stretch the tax hit over two years (do some this year before the end, and the rest next year at the beginning).

read more here: https://www.bogleheads.org/wiki/Tax_loss_harvesting
The capital loss is valuable in several ways. Before you pay any capital gains taxes each year, you use your capital losses to offset any capital gains, and pay taxes only if you have more gains than losses. If you have more losses than gains, you can apply up to $3,000 of your remaining capital losses against your regular income. And whatever capital losses are still left over (in this case, $1,000, which is the $4,000 in losses minus the $3,000 deduction), can be carried forward indefinitely into future years. Each year, you get to first apply the carried forward losses against capital gains, and then use any remainder (up to $3,000) to reduce your ordinary income.
source: https://www.bogleheads.org/wiki/Tax_loss_harvesting
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

siankisr
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Joined: Sat Sep 08, 2018 6:32 pm

Re: Help: Moving Stocks to Index Fund

Post by siankisr » Tue Oct 16, 2018 9:21 pm

Thank you

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BL
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Re: Help: Moving Stocks to Index Fund

Post by BL » Wed Oct 17, 2018 1:37 am

I suggest you at least sell enough with gains that you are able to off-set with the 12k carried over from last year and all the losses you can take this year. If you do have CGs, you must use any C.Losses to off-set until they are used up. Then any losses left over can go toward reducing ordinary income, up to 3k, and the rest carried over to the next year.

You might want to look at each stock and its gain or loss, and decide which to sell first. Possibly those over 5% of portfolio because of risk, those with losses or minimal gains to be able to sell off more, etc.

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