Help me simplify my portfolio for my taxable brokerage account

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bironology
Posts: 121
Joined: Sun Nov 08, 2015 6:18 pm

Help me simplify my portfolio for my taxable brokerage account

Post by bironology » Sat Dec 01, 2018 6:49 am

Help me simplify my portfolio for my taxable brokerage account.

The AA I desire for *this particular account* is

US Large: 55%
US Small/Mid: 30%
International: 15%

My current holdings are:

Code: Select all

CASH								10%
AAPL	Apple, Inc.						3%
MSFT	Microsoft						4%
	
SCHE	Schwab Emerging Markets Equity ETF			6%
SCHF	Schwab International Equity ETF				8%
	
SCHV	Schwab US Large Cap Value ETF				8%
SCHM	Schwab Mid Cap ETF					3%
SCHA	Schwab Small Cap ETF					19%
SWPPX	Schwab® S&P 500 Index Fund				26%
SWTSX	Schwab Total Stock Market Index Fund®			11%
The AAPL and MSFT holdings are from years ago before I learned the ways of Bogle. Time to let them go, though they've done well. The cash holding is is new funds and ready to be put to work - I don't commonly hold cash.

I've been using surplus income throughout this year to buy several lots of SCHV, SCHM, and SCHE.

Now that I see this holding summary growing in length and complexity, I'm looking to consolidate back to the simplest possible portfolio, but do so without triggering lots of cap gains.

I'm thinking I could sell off my SCHV, SCHM, and SCHE lots (about 8 in total), all of which are <1 year old, and currently have a total net loss of about $114. Yeah, amazingly they've gone absolutely nowhere - almost exactly nowhere.

Anyway, the loss/gain isn't my concern, I'm only pointing out that I can get out of SCHV, SCHM and SCHE without triggering gains, and back into... what? that's the question.

Proposal: sell off SCHV and SCHM and buy into SWPPX. sell SCHE and buy into SCHF.

Thoughts?

typical.investor
Posts: 403
Joined: Mon Jun 11, 2018 3:17 am

Re: Help me simplify my portfolio for my taxable brokerage account

Post by typical.investor » Sat Dec 01, 2018 7:01 am

Personally, I’d keep SCHE as it’s holdings are entirely different than SCHF.

I’d also move SCHV and SCHM to SWTSX. You could then slightly reduce SCHA if desired. This is as I think it’s better to hold more Total market as small stocks moving up or bigger stocks moving down won’t be moving into or out of SCHA. Small point though.

Aaah, and actually SCHB would be better. Or even SCHX (which forms Total market with its pair SCHA). Schwab Mutual Funds issue yearly capital gains which get taxed while the ETF won’t. You’ll only get taxed on dividends and when you sell. Index funds are pretty tax efficient so it’s not a huge deal. You should be able to see the effect in you 1099B.

bironology
Posts: 121
Joined: Sun Nov 08, 2015 6:18 pm

Re: Help me simplify my portfolio for my taxable brokerage account

Post by bironology » Mon Dec 03, 2018 5:48 pm

Thanks typical.investor.
typical.investor wrote:
Sat Dec 01, 2018 7:01 am
Personally, I’d keep SCHE as it’s holdings are entirely different than SCHF.
Noted.
typical.investor wrote:
Sat Dec 01, 2018 7:01 am
I’d also move SCHV and SCHM to SWTSX. You could then slightly reduce SCHA if desired. This is as I think it’s better to
hold more Total market as small stocks moving up or bigger stocks moving down won’t be moving into or out of SCHA. Small point though.

Aaah, and actually SCHB would be better. Or even SCHX (which forms Total market with its pair SCHA). Schwab Mutual Funds issue yearly capital gains which get taxed while the ETF won’t. You’ll only get taxed on dividends and when you sell. Index funds are pretty tax efficient so it’s not a huge deal. You should be able to see the effect in you 1099B.
Ah, I hadn't thought about the mutual fund vs. EFT dividends. Good to know. Selling SWTSX at this point will trigger gains, but adding SCHX adds complication to the portfolio so I'm inclined to keep on with SWTSX, plowing the SCHV and SCHM holdings into there. I'll also hang tight with the SWPPX for now since it's sizable holding will trigger lots of gains.

typical.investor
Posts: 403
Joined: Mon Jun 11, 2018 3:17 am

Re: Help me simplify my portfolio for my taxable brokerage account

Post by typical.investor » Tue Dec 04, 2018 2:53 am

bironology wrote:
Mon Dec 03, 2018 5:48 pm
Ah, I hadn't thought about the mutual fund vs. EFT dividends. Good to know. Selling SWTSX at this point will trigger gains, but adding SCHX adds complication to the portfolio so I'm inclined to keep on with SWTSX, plowing the SCHV and SCHM holdings into there. I'll also hang tight with the SWPPX for now since it's sizable holding will trigger lots of gains.
Just to be sure to be clear. The dividends are the same for ETFs and SWTSX/SWPPX. It's that mutual funds (except for those with a dual ETF mutual fund share class and thus get the ETF tax benefit) often have an additional yearly capital gains distribution. Sometimes more and sometimes less.

By the way, if you would like to see what a market cap weighted portfolio using Schwab's ETFs is look here.

https://docs.google.com/spreadsheets/d/ ... sp=sharing

You can enter your desired US/International Stock/bond allocations and it will show what to hold. Or you can use it to rebalance.

In any case, you'll see that SCHF, SCHC (small cap) and SCHE combined comprise total international. SCHC and SCHE are smaller slices so many people combine them for simplicity (as they are similar in being both more volatile and less correlated with the US).

You'll notice your own SCHF /SCHE split is a little heavy to emerging markets. I think that's fine though because your total international allocation is low and SCHF (international large/mid developed), as mentioned, behaves more like US stocks do.

bironology
Posts: 121
Joined: Sun Nov 08, 2015 6:18 pm

Re: Help me simplify my portfolio for my taxable brokerage account

Post by bironology » Thu Dec 06, 2018 6:13 am

Thanks t.i,

very helpful. Got it. It's the capital gains distributions that are different.

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