Tax Loss Harvesting Question

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orenishi
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Tax Loss Harvesting Question

Post by orenishi » Thu Mar 12, 2020 6:29 pm

I have losses in FSKAX (Total Market Index Fund) and VT (Vanguard Total World Stock). I'd like to take advantage of tax loss harvesting and want to make sure that I would not be performing a wash sale. I plan to sell both aforementioned funds, and then buy FXAIX (S&P 500 Fund) and FSPSX (International Fund) at 70/30, respectively. Shouldn't be any issues, correct?

Also, if I put in an order to sell all of FSKAX tonight, will that amount deposit to my settlement fund tomorrow morning and be ready to invest tomorrow? Or will the sale not go through until tomorrows close and the funds not available until Monday? Sorry in advance for the horrible question - I typically set it and forget it until this event.

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indexfundfan
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Re: Tax Loss Harvesting Question

Post by indexfundfan » Thu Mar 12, 2020 7:17 pm

A TLH between ETF and mutual fund is more tricky, because ETF trades settle on day T+2 while mutual funds typically settle on day T+1.

So when you sell VT, the funds are generally not available for you to purchase a mutual fund in a non-margin account. Some places may allow such a purchase; it all depends on the broker.
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iceport
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Re: Tax Loss Harvesting Question

Post by iceport » Thu Mar 12, 2020 7:23 pm

orenishi wrote:
Thu Mar 12, 2020 6:29 pm
I have losses in FSKAX (Total Market Index Fund) and VT (Vanguard Total World Stock). I'd like to take advantage of tax loss harvesting and want to make sure that I would not be performing a wash sale. I plan to sell both aforementioned funds, and then buy FXAIX (S&P 500 Fund) and FSPSX (International Fund) at 70/30, respectively. Shouldn't be any issues, correct?

Also, if I put in an order to sell all of FSKAX tonight, will that amount deposit to my settlement fund tomorrow morning and be ready to invest tomorrow? Or will the sale not go through until tomorrows close and the funds not available until Monday? Sorry in advance for the horrible question - I typically set it and forget it until this event.
Looks fine from the standpoint of wash sales. None of the funds you are trading are substantially identical. That also assumes there are no other substantially identical purchases in any other accounts you own within the last 30 days.

With mutual funds, trading orders are executed only at the next close of business. As of right now, that's 4:00 PM ET tomorrow afternoon. Depending on your broker, is it at all possible for you to do a direct fund-to-fund exchange for FSKAX --> FSAIX? That's by far the easiest and most effective way to TLH using substitute funds.

I would assume if you sell VT, your broker would allow you to use the proceeds immediately for the purchase of FSPSX, b ut you need to confirm that with your broker. If allowed, you could sell VT near the end of the day, to minimize the time out of market.
"Discipline matters more than allocation.” ─William Bernstein

Topic Author
orenishi
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Re: Tax Loss Harvesting Question

Post by orenishi » Thu Mar 12, 2020 8:59 pm

Thank you both. I just realized that I bought VTSAX today. Would this preclude me from being able to sell FSKAX and receive the tax loss write off? The returns for each fund are similar. Additionally, looking at the top ten holdings of each, they seem to be very similar. However, Proctor & Gamble is included in the top ten holdings for VTSAX but it is not for FSKAX. Also, the composition seems just slightly different - Financials make up 19% of VTSAX and only 13% of FSKAX. Is this enough to deem them different?

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BolderBoy
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Re: Tax Loss Harvesting Question

Post by BolderBoy » Thu Mar 12, 2020 9:08 pm

orenishi wrote:
Thu Mar 12, 2020 8:59 pm
Is this enough to deem them different?
Yes.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

clammyhands
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Re: Tax Loss Harvesting Question

Post by clammyhands » Sun Mar 22, 2020 5:41 pm

Hello all,

Instead of starting a new topic, I'd thought I'd piggyback this one. I also have VT that I'm looking to sell for tax loss harvesting purposes. What's a good ETF that would avoid the wash rule? I was thinking ITOT + IXUS, but I would prefer just a 1 for 1 substitution if any ETFs like VT exist.

TIA!

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