Best way to sell multiple funds

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jazzzz2016
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Best way to sell multiple funds

Post by jazzzz2016 » Thu Sep 05, 2019 11:11 pm

Hi all,

I'm getting out of Vanguard advising service and want to invest into the simple 3-fund in my taxable account. I'm learning to sell multiple funds for the very first time. I called Vanguard customer service and was told they can do all the selling/buying over the phone at once for me as long as I tell them the amount. Is that true? Could someone please share the step by step method?

Thank you in advance!!

Silk McCue
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Re: Best way to sell multiple funds

Post by Silk McCue » Fri Sep 06, 2019 7:37 am

Welcome to Bogleheads!

Selling your funds in a Taxable account is going to have tax consequences and may not be the best move for you. There will likely be long term and short term capital gains. I wouldn’t do anything until you understand the tax implications. Since this was setup by Vanguard PAS it may be perfectly reasonable as is.

Please post the details of the existing investments including funds, amounts and how long they have been held.

Cheers

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mhc
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Re: Best way to sell multiple funds

Post by mhc » Fri Sep 06, 2019 9:49 am

I agree with Silk.

Yes, you could do it over the phone. Although, I recommend that you learn how to do it yourself through the website. It is really easy. If you have difficulty with the website, Vanguard should be able to talk you through it.

The general method for going from 1 fund to another is called an "exchange". You select exchange from the accounts and balances tab. Then all your accounts and funds come up. Select the one you want to get rid of and the % or $ amount. Hit the next button, and a list of funds will come up. If the one you want is there select it. If not add it to the list. Then submit. Once submitted and confirmed, it is a done deal.

I did an exchange this week and it took less than a minute. Once you get use to it, it really is easy.

livesoft
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Re: Best way to sell multiple funds

Post by livesoft » Fri Sep 06, 2019 10:33 am

jazzzz2016 wrote:
Thu Sep 05, 2019 11:11 pm
Hi all,

I'm getting out of Vanguard advising service and want to invest into the simple 3-fund in my taxable account. I'm learning to sell multiple funds for the very first time. I called Vanguard customer service and was told they can do all the selling/buying over the phone at once for me as long as I tell them the amount. Is that true? Could someone please share the step by step method?

Thank you in advance!!
First, this is disturbing to me because Vanguard should have you in funds that are a simple 3-fund portfolio in your taxable account in the first place. That is, you should NOT have to sell multiple funds. At least you should probably keep some of the funds. But you did not give enough information to help on that.

Second, I cannot think of any good reason that one might need to try to sell in one transaction or even one day. There is unlikely to be any good reason not to EXCHANGE (an easy way of sell and buy in the same order) one day and then do another one the next day after you see how it works.

So may I suggest that you at least consider posting in the "Asking Portfolio Questions" format for better advice?
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aristotelian
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Re: Best way to sell multiple funds

Post by aristotelian » Fri Sep 06, 2019 1:11 pm

Is the account an IRA? Be careful you don't trigger a taxable transaction for no reason.

Topic Author
jazzzz2016
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Joined: Thu Sep 05, 2019 5:05 pm

Re: Best way to sell multiple funds

Post by jazzzz2016 » Mon Sep 09, 2019 12:16 am

Hi all,

Thank you so much for the suggestions and comments so far. I had different funds from work and merill lynch transferred to Vanguard advising services around 2 years ago. Each time when I asked them to make my portfolio into the simple funds, they always recommended against it because of "potential tax implications". Recently I decided to switch out and invest on my own thanks to reading some books and from this forum!

A bit more about me:
34 years told. Married and have a small portfolio. No debt. Desired AA: 30 bond/70 stocks
The funds that I've decided to sell/exchange are all held for 2 years and have a total capital gains of less than $4k in the taxable account (knowing there's no tax consequences in selling/exchanging in my retirement accounts). I think the benefits of switching to a simple portfolio outweigh the small tax consequences at this stage of our investing.

Current retirement assets with actual %

Taxable
Vanguard 500 Index Fund Adm 6.1%
Vanguard Extended Mkt Index Adm 4.5%
Vanguard Growth Index Fund Adm 0.9%
Vanguard Growth ETF 1.8%
Vanguard Value ETF 2.1%
Vanguard Total Int Stock Mkt Idx Adm 18.6%
Vanguard Tot Stock Ix Admiral 17%
IRA
Vanguard Total Bond Mkt Index Adm 9.4%
Vanguard Tot Intl Bond Ix Admiral 4.0%
Vanguard Tot Intl Stock Ix Admiral 0.7%
Solo 401k
Vanguard 500 Index Fund Adm 2.5%
Vanguard Target Retirement 2045 32.2%

New assets with target %

Taxable
Vanguard Total Int Stock Mkt Idx Adm (VTIAX) 20%
Vanguard Tot Stock Ix Admiral (VTSAX) 30%
IRA
Vanguard 500 Index Fund Adm (VFIAX) 10%
iShare Gold Trust (IAU) 5%
Solo 401k
Vanguard 500 Index Fund Adm 10%
Vanguard Total Bond Mkt Index Adm 25%

Questions
1. What would be the best way to sell multiple funds?
2. Is my new AA is good for tax loss harvesting in future in needed?
3. I'm pretty new at this. Any feedback is greatly appreciated!

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BL
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Re: Best way to sell multiple funds

Post by BL » Mon Sep 09, 2019 12:47 am

May I suggest you add the unrealized gains to the Taxable funds you have?

At a glance the 3 smallest ones might be sold just to simplify, assuming the CGs are not so much. Or you could just wait until/unless the fund drops to near 0 CGs.
The Extended does seem to do a small/mid cap tilt since it is so large. If you set the basis method to Specific Id, you might find some specific lots with smaller gains to exchange to S&P 500 fund. Set all of taxable to Spec. Id.

If you do tax loss harvesting, you might use that 500 one to exchange with total stock market fund.

What's with the Gold? That doesn't look like simplifying at all, and it is certainly not in the 3-fund portfolio.

ivk5
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Re: Best way to sell multiple funds

Post by ivk5 » Mon Sep 09, 2019 3:59 am

AA looks fine. I’d rip off the bandaid all at once and take the tax hit.

If you wait or spread it out across two or more tax years, aside from prolonging the risk of complexity/tracking error against your target AA you also risk suboptimizing the tax liability. Two reasons: first, on average there is a positive expected return over time. Second, if you TLH in a future year, there is positive tax arbitrage if you don’t have offsetting gains, since you’ll benefit at ordinary income tax rate (up to $3k income offset per year) rather than LTCG rate which may be lower for you. In other words, counterintuitively, you’ll effectively TGH in the year before you start TLHing, since you want to reallocate anyway. Of course if TLH opportunity presents itself later this year, take it.

livesoft
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Re: Best way to sell multiple funds

Post by livesoft » Mon Sep 09, 2019 6:36 am

30 bond/70 stocks
I don't think your proposed new set of stocks matches this AA. Also your new proposed set of holdings is not a simple 3-fund portfolio.
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Topic Author
jazzzz2016
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Re: Best way to sell multiple funds

Post by jazzzz2016 » Mon Sep 09, 2019 11:08 pm

BL wrote:
Mon Sep 09, 2019 12:47 am
May I suggest you add the unrealized gains to the Taxable funds you have?

At a glance the 3 smallest ones might be sold just to simplify, assuming the CGs are not so much. Or you could just wait until/unless the fund drops to near 0 CGs.
The Extended does seem to do a small/mid cap tilt since it is so large. If you set the basis method to Specific Id, you might find some specific lots with smaller gains to exchange to S&P 500 fund. Set all of taxable to Spec. Id.

If you do tax loss harvesting, you might use that 500 one to exchange with total stock market fund.

What's with the Gold? That doesn't look like simplifying at all, and it is certainly not in the 3-fund portfolio.
Thank you for your comments!

I read somewhere that gold can be a stabilizing force for stock/bond..

I actually only found two options available for the cost basis methods: average cost and FIFO. What is Specific Id and how do I find that option?

If I understood correctly, tax loss harvesting only applies to funds that have a loss. In my case in since all my funds have capital gains instead of loss in the past 2 years, I don't have to worry about TLH at this time when I sell the funds right?

Topic Author
jazzzz2016
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Joined: Thu Sep 05, 2019 5:05 pm

Re: Best way to sell multiple funds

Post by jazzzz2016 » Mon Sep 09, 2019 11:13 pm

ivk5 wrote:
Mon Sep 09, 2019 3:59 am
AA looks fine. I’d rip off the bandaid all at once and take the tax hit.

If you wait or spread it out across two or more tax years, aside from prolonging the risk of complexity/tracking error against your target AA you also risk suboptimizing the tax liability. Two reasons: first, on average there is a positive expected return over time. Second, if you TLH in a future year, there is positive tax arbitrage if you don’t have offsetting gains, since you’ll benefit at ordinary income tax rate (up to $3k income offset per year) rather than LTCG rate which may be lower for you. In other words, counterintuitively, you’ll effectively TGH in the year before you start TLHing, since you want to reallocate anyway. Of course if TLH opportunity presents itself later this year, take it.
Thank you for the comments! I am very new at these investing jargons. What are LTCG rate and TGH? Could you please clarify yours reasons again if you don't mind?

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BL
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Re: Best way to sell multiple funds

Post by BL » Tue Sep 10, 2019 1:55 am

jazzzz2016 wrote:
Mon Sep 09, 2019 11:08 pm
BL wrote:
Mon Sep 09, 2019 12:47 am
May I suggest you add the unrealized gains to the Taxable funds you have?

At a glance the 3 smallest ones might be sold just to simplify, assuming the CGs are not so much. Or you could just wait until/unless the fund drops to near 0 CGs.
The Extended does seem to do a small/mid cap tilt since it is so large. If you set the basis method to Specific Id, you might find some specific lots with smaller gains to exchange to S&P 500 fund. Set all of taxable to Spec. Id.

If you do tax loss harvesting, you might use that 500 one to exchange with total stock market fund.

What's with the Gold? That doesn't look like simplifying at all, and it is certainly not in the 3-fund portfolio.
Thank you for your comments!

I read somewhere that gold can be a stabilizing force for stock/bond..

I actually only found two options available for the cost basis methods: average cost and FIFO. What is Specific Id and how do I find that option?

If I understood correctly, tax loss harvesting only applies to funds that have a loss. In my case in since all my funds have capital gains instead of loss in the past 2 years, I don't have to worry about TLH at this time when I sell the funds right?
I went into my account at Vanguard and selected cost basis while looking at the taxable account (in our case it is a joint account). Above the listing I got, there is a link to "view/change the cost basis method". It had the 2 you mentioned + Specific Id as the choices.

Specific Id lets you sell the lots you choose based on purchase price of that specific purchase, rather than using the same price for everything. This helps in selecting losses if you choose to tax loss harvest. Every purchase, including every time you invest the dividends, is a separate decision. Since prices can vary a lot at different times, this gives you more control. If you sell everything in a fund, the total is the same no matter which method you use.

I recommend you set up the basic portfolio and not buy things like gold until later, which gives you time to really study whether it makes sense. I think the majority here do not use it. They are more likely to tilt toward small cap or emerging markets, but again I urge you not to add any more until later should you decide after study that you are sold on it.

You are right about tax loss if you are selling all of a fund. I wouldn't change the basis method if you plan to sell the entire fund.

ivk5
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Re: Best way to sell multiple funds

Post by ivk5 » Tue Sep 10, 2019 4:20 am

jazzzz2016 wrote:
Mon Sep 09, 2019 11:13 pm
Thank you for the comments! I am very new at these investing jargons. What are LTCG rate and TGH? Could you please clarify yours reasons again if you don't mind?
Welcome! There’s a glossary in the wiki to help with common abbreviations. LTCG = long term capital gains. TGH = tax gain harvest(ing).
ivk5 wrote:
Mon Sep 09, 2019 3:59 am
first, on average there is a positive expected return over time.
In other words: on average you can expect the tax cost of realigning to your target portfolio will increase the longer you delay, because your unrealized gains in current positions will increase. The hole is likely to get deeper.
ivk5 wrote:
Mon Sep 09, 2019 3:59 am
Second, if you TLH in a future year, there is positive tax arbitrage if you don’t have offsetting gains, since you’ll benefit at ordinary income tax rate (up to $3k income offset per year) rather than LTCG rate which may be lower for you. In other words, counterintuitively, you’ll effectively TGH in the year before you start TLHing, since you want to reallocate anyway. Of course if TLH opportunity presents itself later this year, take it.
Sorry for the inelegant articulation. From your portfolio construction I assumed you are familiar with Tax Loss Harvesting and planning to do so. If not, you can ignore this point.

The point I was making is, depending on your specific tax circumstances (which you haven't shared), it’s likely your marginal tax rate on long term capital gains is lower than your marginal tax rate on ordinary income. If you put off taking your gains into a future year you may increase the likelihood that you’ll inadvertently set off the gains from reallocating against losses from TLHing. All things being equal, you might be a bit better off paying LTCG tax now at your (maybe) lower rate, and letting your future losses offset ordinary income at your (maybe) higher rate.

Lots of assumptions here. Probably would have been a better point to just say, simplify now and get it over with, so you have a sound and straightforward foundation for future saving/investing.

Topic Author
jazzzz2016
Posts: 9
Joined: Thu Sep 05, 2019 5:05 pm

Re: Best way to sell multiple funds

Post by jazzzz2016 » Tue Sep 10, 2019 7:16 pm

ivk5 wrote:
Tue Sep 10, 2019 4:20 am
jazzzz2016 wrote:
Mon Sep 09, 2019 11:13 pm
Thank you for the comments! I am very new at these investing jargons. What are LTCG rate and TGH? Could you please clarify yours reasons again if you don't mind?
Welcome! There’s a glossary in the wiki to help with common abbreviations. LTCG = long term capital gains. TGH = tax gain harvest(ing).
ivk5 wrote:
Mon Sep 09, 2019 3:59 am
first, on average there is a positive expected return over time.
In other words: on average you can expect the tax cost of realigning to your target portfolio will increase the longer you delay, because your unrealized gains in current positions will increase. The hole is likely to get deeper.
ivk5 wrote:
Mon Sep 09, 2019 3:59 am
Second, if you TLH in a future year, there is positive tax arbitrage if you don’t have offsetting gains, since you’ll benefit at ordinary income tax rate (up to $3k income offset per year) rather than LTCG rate which may be lower for you. In other words, counterintuitively, you’ll effectively TGH in the year before you start TLHing, since you want to reallocate anyway. Of course if TLH opportunity presents itself later this year, take it.
Sorry for the inelegant articulation. From your portfolio construction I assumed you are familiar with Tax Loss Harvesting and planning to do so. If not, you can ignore this point.

The point I was making is, depending on your specific tax circumstances (which you haven't shared), it’s likely your marginal tax rate on long term capital gains is lower than your marginal tax rate on ordinary income. If you put off taking your gains into a future year you may increase the likelihood that you’ll inadvertently set off the gains from reallocating against losses from TLHing. All things being equal, you might be a bit better off paying LTCG tax now at your (maybe) lower rate, and letting your future losses offset ordinary income at your (maybe) higher rate.

Lots of assumptions here. Probably would have been a better point to just say, simplify now and get it over with, so you have a sound and straightforward foundation for future saving/investing.
Thank you for the clarification!

Topic Author
jazzzz2016
Posts: 9
Joined: Thu Sep 05, 2019 5:05 pm

Re: Best way to sell multiple funds

Post by jazzzz2016 » Tue Sep 10, 2019 7:17 pm

BL wrote:
Tue Sep 10, 2019 1:55 am
jazzzz2016 wrote:
Mon Sep 09, 2019 11:08 pm
BL wrote:
Mon Sep 09, 2019 12:47 am
May I suggest you add the unrealized gains to the Taxable funds you have?

At a glance the 3 smallest ones might be sold just to simplify, assuming the CGs are not so much. Or you could just wait until/unless the fund drops to near 0 CGs.
The Extended does seem to do a small/mid cap tilt since it is so large. If you set the basis method to Specific Id, you might find some specific lots with smaller gains to exchange to S&P 500 fund. Set all of taxable to Spec. Id.

If you do tax loss harvesting, you might use that 500 one to exchange with total stock market fund.

What's with the Gold? That doesn't look like simplifying at all, and it is certainly not in the 3-fund portfolio.
Thank you for your comments!

I read somewhere that gold can be a stabilizing force for stock/bond..

I actually only found two options available for the cost basis methods: average cost and FIFO. What is Specific Id and how do I find that option?

If I understood correctly, tax loss harvesting only applies to funds that have a loss. In my case in since all my funds have capital gains instead of loss in the past 2 years, I don't have to worry about TLH at this time when I sell the funds right?
I went into my account at Vanguard and selected cost basis while looking at the taxable account (in our case it is a joint account). Above the listing I got, there is a link to "view/change the cost basis method". It had the 2 you mentioned + Specific Id as the choices.

Specific Id lets you sell the lots you choose based on purchase price of that specific purchase, rather than using the same price for everything. This helps in selecting losses if you choose to tax loss harvest. Every purchase, including every time you invest the dividends, is a separate decision. Since prices can vary a lot at different times, this gives you more control. If you sell everything in a fund, the total is the same no matter which method you use.

I recommend you set up the basic portfolio and not buy things like gold until later, which gives you time to really study whether it makes sense. I think the majority here do not use it. They are more likely to tilt toward small cap or emerging markets, but again I urge you not to add any more until later should you decide after study that you are sold on it.

You are right about tax loss if you are selling all of a fund. I wouldn't change the basis method if you plan to sell the entire fund.
Thank you for the clarification!

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