Vanguard Energy Fund (VGENX) in Taxable or Tax Deferred?

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jms969
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Vanguard Energy Fund (VGENX) in Taxable or Tax Deferred?

Post by jms969 » Mon Nov 17, 2008 3:31 pm

What are your thoughts on where to to put the Vanguard Energy Fund (VGENX), in Taxable or Tax Deferred accounts?

Thanks,

JMS
I want to die peacefully in my sleep like my grandfather, not screaming like the passengers in his car.

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PiperWarrior
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Post by PiperWarrior » Tue Nov 18, 2008 8:25 am

jms969 wrote:What are your thoughts on where to to put the Vanguard Energy Fund (VGENX), in Taxable or Tax Deferred accounts?
Tax efficiency is a relative measure, so the best location of VGENX in your portfolio depends on the rest of your portfolio.

Another factor is whether you need current income. If you need income, some capital gain distributions aren't really bad as long as you don't get a lot of short-term ones. After all, you probably need to realize capital gains on your own anyway. Even then, some people seem to prefer passive/index funds in a taxable account so that he/she can precisely control how much capital gains to realize.

If you must have an energy sector fund in your taxable account, you might consider Energy Index Fund or ETFs in the asset class. Note that Vanguard Energy Index is different from VGENX in that the index fund doesn't include international stocks.

Topic Author
jms969
Posts: 156
Joined: Tue Feb 20, 2007 5:56 pm
Location: South Central Wisconsin

Post by jms969 » Thu Nov 20, 2008 11:31 am

Thanks for your input, very good info. I am really looking for a very simple thought on the energy fund (I do not invest using ETFs) as to taxable or tax deferred. I fully realize that it is portfolio and situation depndent. I am just wanting thoughts on relative tax efficiency.

JMS
I want to die peacefully in my sleep like my grandfather, not screaming like the passengers in his car.

fundseekor
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Post by fundseekor » Fri Nov 21, 2008 2:42 am

Given the current market, I would put the energy fund outside of your Tax Deferred accounts for the following reason:

1) Its annual turnover rate is only 22% and much better than average of over 100%, so it might not generate that much tax for you. You can see an inside review of this fund on Fund Mojo

2) Given the bad market condition, if your timing is wrong, you can sell and take the tax loss if it is outside of your tax deferred account vs inside

But overall, it depends on your confidence on whether it will go up next year :)

Topic Author
jms969
Posts: 156
Joined: Tue Feb 20, 2007 5:56 pm
Location: South Central Wisconsin

Post by jms969 » Fri Nov 21, 2008 10:51 am

My asset allocation includes a percentage of both the the Energy and precious metals funds.

The precious metals fund will go in my tax deferred account and I have room to put the energy fund in either account.

I don't presently hold either of these funds (because of valuation). Valuation is now making them attractive and I will be acquiring both (I understand that basing fund purchases on valuation is not the boglehead way, but I would consider myself only about 50% boglehead anyway).

I have a bit more analysis to do but will check back in with my decision...
I want to die peacefully in my sleep like my grandfather, not screaming like the passengers in his car.

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