9 Reasons Not to Tax Loss Harvest (WCI)

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retiredjg
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9 Reasons Not to Tax Loss Harvest (WCI)

Post by retiredjg » Mon Mar 23, 2020 10:01 am

https://www.whitecoatinvestor.com/9-rea ... s-harvest/

Haven't had a change to digest this yet, but looks like a good read.
Last edited by retiredjg on Mon Mar 23, 2020 10:03 am, edited 1 time in total.

Leesbro63
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Re: 9 Reasons Not to Tax Loss Harvest

Post by Leesbro63 » Mon Mar 23, 2020 10:02 am

THIS: # 9 You Might Get Burned by Volatility
One of the biggest problems with tax loss harvesting is that it is most useful in the biggest of bear markets. Unfortunately, that is also when markets are most volatile. If you are not careful, or simply not lucky, that volatility can burn you. Let me give you an example of when this occurred recently to me.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by BogleMe » Mon Mar 23, 2020 10:13 am

Yeah I was thinking about these risks the other day when I tried to set limit orders and couldn't get them to execute because the market got away from me quickly. Then when I did get some execution I was in such a hurry to buy the alternative I nearly bought the same etf again. This is another advantage of funds over etf's - more seamless harvesting.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Wiggums » Mon Mar 23, 2020 10:15 am

retiredjg wrote:
Mon Mar 23, 2020 10:01 am
https://www.whitecoatinvestor.com/9-rea ... s-harvest/

Haven't had a change to digest this yet, but looks like a good read.
Thanks for sharing this link.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Leesbro63 » Mon Mar 23, 2020 10:17 am

If I had a really large loss to harvest, I might attempt it. But I remember from 2008, there's an awful lot that can go wrong. My inner voice is hearing Jack Bogle saying "Don't just do something....STAND THERE!"

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Re: 9 Reasons Not to Tax Loss Harvest

Post by livesoft » Mon Mar 23, 2020 10:22 am

Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
You might benefit from Volatility, too. Since one can use limit orders and can also BUY before one sells at a loss, I think that one avoid getting burned and can benefit most of the time.
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Re: 9 Reasons Not to Tax Loss Harvest

Post by iceport » Mon Mar 23, 2020 10:22 am

Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
One of the biggest problems with tax loss harvesting is that it is most useful in the biggest of bear markets. Unfortunately, that is also when markets are most volatile. If you are not careful, or simply not lucky, that volatility can burn you. Let me give you an example of when this occurred recently to me.
The passage reads more like a problem with the use of ETFs than a problem with TLH. :|
Unfortunately, ETFs trade in real-time, not at market close (4 pm Eastern) like traditional mutual funds. So in order to make this swap, I had to buy the ETF while the market was open and put in an order to sell the mutual fund at market close. So I waited until the end of the day. It was a very volatile day like many of those in a bear market. 15 minutes before market close I bought the ETF. The market was down 9.5% on the day at the time. Unfortunately, in those last 15 minutes of the trading session, the market dropped another 1%+. So I bought high and sold low.
A great way to avoid this is to use traditional mutual funds in your taxable account. That way you can put in your exchange order and at 4 pm, one fund is sold and one fund is bought. No potential for loss (or gain) on the transaction.
(And I wholeheartedly agree. I've made this point about ETFs often; maybe the White Coat Investor's comments will be more persuasive.)
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Re: 9 Reasons Not to Tax Loss Harvest

Post by Leesbro63 » Mon Mar 23, 2020 10:28 am

livesoft wrote:
Mon Mar 23, 2020 10:22 am
Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
You might benefit from Volatility, too. Since one can use limit orders and can also BUY before one sells at a loss, I think that one avoid getting burned and can benefit most of the time.
You might. But instead of being an "investor", trading one security for something almost the same, you become a speculator.

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Re: 9 Reasons Not to Tax Loss Harvest

Post by JD13 » Mon Mar 23, 2020 10:29 am

Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
One of the biggest problems with tax loss harvesting is that it is most useful in the biggest of bear markets. Unfortunately, that is also when markets are most volatile. If you are not careful, or simply not lucky, that volatility can burn you. Let me give you an example of when this occurred recently to me.
Is he saying he lost about 25k in that transaction?

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Re: 9 Reasons Not to Tax Loss Harvest

Post by iceport » Mon Mar 23, 2020 10:33 am

JD13 wrote:
Mon Mar 23, 2020 10:29 am
Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
One of the biggest problems with tax loss harvesting is that it is most useful in the biggest of bear markets. Unfortunately, that is also when markets are most volatile. If you are not careful, or simply not lucky, that volatility can burn you. Let me give you an example of when this occurred recently to me.
Is he saying he lost about 25k in that transaction?
Yes.

It's funny, there must have been six threads going at once last week asking how one can simply do an "exchange" to TLH with ETFs, instead of having to sell and buy in separate transactions.
"Discipline matters more than allocation.” ─William Bernstein

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Re: 9 Reasons Not to Tax Loss Harvest

Post by livesoft » Mon Mar 23, 2020 10:34 am

Leesbro63 wrote:
Mon Mar 23, 2020 10:28 am
You might. But instead of being an "investor", trading one security for something almost the same, you become a speculator.
Not a problem for me at all.
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Re: 9 Reasons Not to Tax Loss Harvest

Post by Leesbro63 » Mon Mar 23, 2020 10:36 am

livesoft wrote:
Mon Mar 23, 2020 10:34 am
Leesbro63 wrote:
Mon Mar 23, 2020 10:28 am
You might. But instead of being an "investor", trading one security for something almost the same, you become a speculator.
Not a problem for me at all.
Ok, but that's not what most of us are. There are lots of ways to speculate besides being an tax lost harvester. Most TLHers are long term investors who do not want to speculate.

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Re: 9 Reasons Not to Tax Loss Harvest

Post by JD13 » Mon Mar 23, 2020 10:37 am

iceport wrote:
Mon Mar 23, 2020 10:33 am
JD13 wrote:
Mon Mar 23, 2020 10:29 am
Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
One of the biggest problems with tax loss harvesting is that it is most useful in the biggest of bear markets. Unfortunately, that is also when markets are most volatile. If you are not careful, or simply not lucky, that volatility can burn you. Let me give you an example of when this occurred recently to me.
Is he saying he lost about 25k in that transaction?
Yes.

It's funny, there must have been six threads going at once last week asking how one can simply do an "exchange" to TLH with ETFs, instead of having to sell and buy in separate transactions.
Hmm, atleast fidelity does not have the exchange feature for ETFs.

Yea, seems like TLH for ETFs is extremely complex and maybe worth while if people know what they are doing. I wish I knew this before, i.e all the problems with ETFs. I would have simply gone with Fidelity funds

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by siamond » Mon Mar 23, 2020 10:39 am

Like many things, TLH is a good thing in moderation and can become a bad thing if you abuse it. I think this is the essence of WCI's article. Or it should be, at least.

I wish the author had been more balanced though, listing reasons to not TLH vs. reasons to actually proceed...

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Re: 9 Reasons Not to Tax Loss Harvest

Post by livesoft » Mon Mar 23, 2020 10:43 am

Leesbro63 wrote:
Mon Mar 23, 2020 10:36 am
Ok, but that's not what most of us are. There are lots of ways to speculate besides being an tax lost harvester. Most TLHers are long term investors who do not want to speculate.
I think it is fair to post that most people are not Bogleheads and we really don't know about "Most TLHers." I would think that advisors might do more tax-loss harvesting for clients than all the folks who TLH for themselves.
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Re: 9 Reasons Not to Tax Loss Harvest

Post by Leesbro63 » Mon Mar 23, 2020 10:44 am

livesoft wrote:
Mon Mar 23, 2020 10:43 am
Leesbro63 wrote:
Mon Mar 23, 2020 10:36 am
Ok, but that's not what most of us are. There are lots of ways to speculate besides being an tax lost harvester. Most TLHers are long term investors who do not want to speculate.
I think it is fair to post that most people are not Bogleheads and we really don't know about "Most TLHers." I would think that advisors might do more tax-loss harvesting for clients than all the folks who TLH for themselves.
I think most people reading this are Bogleheads.

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Re: 9 Reasons Not to Tax Loss Harvest

Post by iceport » Mon Mar 23, 2020 10:48 am

JD13 wrote:
Mon Mar 23, 2020 10:37 am
Hmm, atleast fidelity does not have the exchange feature for ETFs.

Yea, seems like TLH for ETFs is extremely complex and maybe worth while if people know what they are doing. I wish I knew this before, i.e all the problems with ETFs. I would have simply gone with Fidelity funds
Oh, I don't think exchanging ETFs is possible anywhere.

Not many folks like to stick their neck out and speak out against the ETF bandwagon, but there are definitely advantages with the use of mutual funds. If it's not for lower expense ratios or access to desired funds at third party brokerages, I see no reason to use ETFs over mutual funds.
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by White Coat Investor » Mon Mar 23, 2020 11:14 am

Except for traditional Vanguard funds with an ETF share class, ETFs are significantly more tax efficient and thus a good holding in taxable. I don't think they can be exchanged though like mutual funds are at 4 pm each day. I'd love to know if there is a way to do so.
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by retiredjg » Mon Mar 23, 2020 11:36 am

siamond wrote:
Mon Mar 23, 2020 10:39 am
I wish the author had been more balanced though, listing reasons to not TLH vs. reasons to actually proceed...
It's a blog. I think it is safe to say this author has other blog entries that suggest or even show how to tax loss harvest.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by siamond » Mon Mar 23, 2020 11:45 am

retiredjg wrote:
Mon Mar 23, 2020 11:36 am
siamond wrote:
Mon Mar 23, 2020 10:39 am
I wish the author had been more balanced though, listing reasons to not TLH vs. reasons to actually proceed...
It's a blog. I think it is safe to say this author has other blog entries that suggest or even show how to tax loss harvest.
Fair enough. I am just extra sensitive to one-sided posts/blogs/articles nowadays, which could inadvertently trigger some people to overreact. I mean, it really doesn't take much for people for overreact in such troubled times, one way or another. Oh yeah, me too... :shock:

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by iceport » Mon Mar 23, 2020 12:15 pm

White Coat Investor wrote:
Mon Mar 23, 2020 11:14 am
Except for traditional Vanguard funds with an ETF share class, ETFs are significantly more tax efficient and thus a good holding in taxable.
Maybe so, but I doubt the difference is enough to compensate me for the aggravation of ETFs, let alone overcome a $25k ding. (Though in fairness, I'll never get dinged that bad; I'm just not that wealthy. BTW, I sincerely congratulate you on your success! It's great to see good people get ahead.)
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Mr.Wu » Mon Mar 23, 2020 12:22 pm

Also some states don't recognize net capital loss and / or capital loss carryover. So the benefits could be very little once you factor in state tax:

For example, when selling at loss, tax saving could be 24% (federal only, state doesn't allow net capital loss); when sell the fund bought from TLH in long term, the tax paid could be 15%(federal long term tax rate) + 6% (state) = 21%. The net saving is only 3% in this example.

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Re: 9 Reasons Not to Tax Loss Harvest

Post by Makaveli » Mon Mar 23, 2020 12:26 pm

livesoft wrote:
Mon Mar 23, 2020 10:22 am
Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
You might benefit from Volatility, too. Since one can use limit orders and can also BUY before one sells at a loss, I think that one avoid getting burned and can benefit most of the time.
Recent example, I TLH $50k of losses on a $200k position and then zipped off to a lunch workout. Returned two hours later and the market was up 5.0%. I waited (timed, tsk tsk) the market and the following day was down 9%. I quickly learned the need to "sell to buy" or use limit orders to not miss a beat during these times.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by northstar22 » Mon Mar 23, 2020 1:26 pm

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Call_Me_Op » Mon Mar 23, 2020 1:28 pm

Did a tax swap today using ETFs. It was exciting to say the least. It worked out, but the limit order on the buy side resulted in about 10 different buys. I placed the buy order a few minutes after execution of the sell order. Both were limit orders. I would never use market orders with ETFs.
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Momus » Mon Mar 23, 2020 1:50 pm

# 2 The 60 Day Dividend Rule
I guess I will wait until 6/1 to TLH - 60 days after 3/30 vanguards funds paying dividends.

Or is it 5/1? 60 days total before and after dividend gets paid so I am guessing it's 5/1 when it's safe for me to TLH.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by goingup » Mon Mar 23, 2020 2:05 pm

I see a lot of new investors try to navigate TLHing. I think they start to concentrate on the wrong things. They think about selling rather than buying. They watch their portfolio balances too closely. They sell and go to the sidelines rather than buy a similar fund. They stop automatic dividend reinvesting. They end up with too many funds and lose simplicity. Tinker, tinker, tinker. They might be better served by just doing nothing.

Tax loss harvesting is only a tax tool. Yes, savvy investors can make lemonade out of lemons, but not everybody truly needs lemonade. :D

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by GiannaLuna » Mon Mar 23, 2020 4:33 pm

So I read the article and I must be missing something, specifically this quote:

I’ve done it several times since the start of this bear market and booked hundreds of thousands of dollars in tax losses.

With the $3K cap/year - how long do you expect to live? LOL

Even if you think you have 70 more years left on this mortal coil, all you need to do is book $100K worth of losses.

or can you donate them somehow? (scratching my head)

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by kingsnake » Mon Mar 23, 2020 4:50 pm

Meh,

I TLH'd today. Sold 100% of my Vanguard FTSE All-World ex US Index Fund and exchanged it into Vanguard Total International Stock Index Fund. :beer

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by grabiner » Mon Mar 23, 2020 4:52 pm

GiannaLuna wrote:
Mon Mar 23, 2020 4:33 pm
So I read the article and I must be missing something, specifically this quote:

I’ve done it several times since the start of this bear market and booked hundreds of thousands of dollars in tax losses.

With the $3K cap/year - how long do you expect to live? LOL

Even if you think you have 70 more years left on this mortal coil, all you need to do is book $100K worth of losses.

or can you donate them somehow? (scratching my head)
You can't donate the losses, but you will eventually have gains. When you retire, your stock portfolio will fund your retirement, so you will sell some of it for capital gains. You might also have a capital gain if you sell a home ($250K single/$500K married is exempt from tax, but if you have huge capital losses, you are likely to live in an expensive home). You might also need to sell stock for other reasons; I sold stock for a gain in 2013 to make a home down payment, and 2016 to buy a car.
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by grabiner » Mon Mar 23, 2020 4:59 pm

Concerning #4, "Short-term loss may be ruled long-term", WCI claims that Vanguard doesn't keep track of this. Can anyone confirm? I did do this in 2012 and Vanguard didn't keep track, but that was with non-covered shares (ETF bought in September 2011, long-term gain distributed in December, sold in January), so Vanguard had no obligation to keep track of the transaction.

In any case, this is usually just an accounting entry. It doesn't matter whether your capital losses are short-term or long-term unless you have a year with both short-term and long-term gains and your gains in that year exceed your losses.
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by retiredjg » Mon Mar 23, 2020 5:00 pm

GiannaLuna wrote:
Mon Mar 23, 2020 4:33 pm
So I read the article and I must be missing something, specifically this quote:

I’ve done it several times since the start of this bear market and booked hundreds of thousands of dollars in tax losses.

With the $3K cap/year - how long do you expect to live? LOL

Even if you think you have 70 more years left on this mortal coil, all you need to do is book $100K worth of losses.

or can you donate them somehow? (scratching my head)
You must have read in a hurry. There are several small businesses that will eventually be sold (capital gains that can be offset). And large charitable donations.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Pinotage » Mon Mar 23, 2020 5:47 pm

kingsnake wrote:
Mon Mar 23, 2020 4:50 pm
Meh,

I TLH'd today. Sold 100% of my Vanguard FTSE All-World ex US Index Fund and exchanged it into Vanguard Total International Stock Index Fund. :beer

The Dude and I must be on the same wavelength. Same exact exchange here.

Let’s hope VTIAX really ties the room together :sharebeer

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by aj76er » Mon Mar 23, 2020 7:01 pm

For those of us with workplace ESPP programs, having a bunch of TLH carryovers can be incredibly valuable when selling off the ESPP shares later on that were bought at a discount.
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by saintsfan342000 » Mon Mar 23, 2020 7:08 pm

kingsnake wrote:
Mon Mar 23, 2020 4:50 pm
Meh,

I TLH'd today. Sold 100% of my Vanguard FTSE All-World ex US Index Fund and exchanged it into Vanguard Total International Stock Index Fund. :beer
Funny, I went 100% the other direction.

Nice post again from WCI. Didn’t know about a lot of those caveats.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by SouthernFIRE » Mon Mar 23, 2020 7:12 pm

Call_Me_Op wrote:
Mon Mar 23, 2020 1:28 pm
Did a tax swap today using ETFs. It was exciting to say the least. It worked out, but the limit order on the buy side resulted in about 10 different buys. I placed the buy order a few minutes after execution of the sell order. Both were limit orders. I would never use market orders with ETFs.
What if the market doesn’t hit your limit price?

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by tfb » Mon Mar 23, 2020 7:54 pm

White Coat Investor wrote:
Mon Mar 23, 2020 11:14 am
I don't think they can be exchanged though like mutual funds are at 4 pm each day. I'd love to know if there is a way to do so.
Not exactly at 4 pm but here's an idea from indexfundfan:

viewtopic.php?f=10&t=308429

At Fidelity, the one-triggers-the-other order type is under Trade -> Conditional.

If you have enough cash in the account, you can also specify "on the open" or "on the close" for your orders. If Vanguard doesn't support these order types explicitly, you can place the orders before the market opens to make them execute at the open price.

viewtopic.php?t=276914
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Re: 9 Reasons Not to Tax Loss Harvest

Post by jjface » Mon Mar 23, 2020 8:00 pm

Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
One of the biggest problems with tax loss harvesting is that it is most useful in the biggest of bear markets. Unfortunately, that is also when markets are most volatile. If you are not careful, or simply not lucky, that volatility can burn you. Let me give you an example of when this occurred recently to me.
Main issue was switching between a mutual fund and etf. inherently difficult to time right due to the differences. With mutual to mutual you are good. And with etfs you can possibly make a gain as livesoft mentioned or execute extremely close together to avoid any sudden swings. Not perfect but you probably won't lose anywhere near $25k even if it tines out badly.
Last edited by jjface on Mon Mar 23, 2020 8:04 pm, edited 2 times in total.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by international001 » Mon Mar 23, 2020 8:02 pm

If you risk loosing $25k, you may as well do 10 sell-buy pairs (with 1/10 of the shares each) , and diversify your loss/gain

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by jjface » Mon Mar 23, 2020 8:04 pm

international001 wrote:
Mon Mar 23, 2020 8:02 pm
If you risk loosing $25k, you may as well do 10 sell-buy pairs (with 1/10 of the shares each) , and diversify your loss/gain
nice thought but with etf to mf you'd have to do it over 10 days else you'd just get burned the same.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by JonnyDVM » Mon Mar 23, 2020 8:07 pm

The biggest problem I’m having with TLH is I’m running out of funds. There’s only so many low ER funds that are sort of similar, but different enough to qualify. Also it’s getting bit difficult to keep track of what I’ve sold to harvest. I was a little overzealous and was harvesting like a maniac. I could have waited until now and made a nice clean harvest across the entire field.
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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by 9-5 Suited » Mon Mar 23, 2020 8:17 pm

I try not to get too hung up on things that make a small difference on my overall life. I TLH up to $6K per year which covers that year and one future year of carry forward. I don’t really care enough to make six figure transactions just to offset gains far in the future. If I’m leaving some type of opportunity on the table, so it goes.

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Re: 9 Reasons Not to Tax Loss Harvest

Post by jjface » Mon Mar 23, 2020 8:21 pm

JD13 wrote:
Mon Mar 23, 2020 10:37 am
iceport wrote:
Mon Mar 23, 2020 10:33 am
JD13 wrote:
Mon Mar 23, 2020 10:29 am
Leesbro63 wrote:
Mon Mar 23, 2020 10:02 am
THIS: # 9 You Might Get Burned by Volatility
One of the biggest problems with tax loss harvesting is that it is most useful in the biggest of bear markets. Unfortunately, that is also when markets are most volatile. If you are not careful, or simply not lucky, that volatility can burn you. Let me give you an example of when this occurred recently to me.
Is he saying he lost about 25k in that transaction?
Yes.

It's funny, there must have been six threads going at once last week asking how one can simply do an "exchange" to TLH with ETFs, instead of having to sell and buy in separate transactions.
Hmm, atleast fidelity does not have the exchange feature for ETFs.

Yea, seems like TLH for ETFs is extremely complex and maybe worth while if people know what they are doing. I wish I knew this before, i.e all the problems with ETFs. I would have simply gone with Fidelity funds
It does?!!! I've been spending far too long tactically planning my buys and sells. Is it in app only or via the website? I couldn't see it online.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Robert The Bruce » Mon Mar 23, 2020 8:27 pm

GiannaLuna wrote:
Mon Mar 23, 2020 4:33 pm
So I read the article and I must be missing something, specifically this quote:
I’ve done it several times since the start of this bear market and booked hundreds of thousands of dollars in tax losses.
With the $3K cap/year - how long do you expect to live? LOL
Even if you think you have 70 more years left on this mortal coil, all you need to do is book $100K worth of losses.
or can you donate them somehow? (scratching my head)
I don’t think anyone has responded to this so I will offer - you can use your banked losses to offset ALL capital gains on your current taxes. For example, my FiL tax lost harvested in 2008 and built quite a bank. Last year he rebalanced out of some ETFs for significant profit (well in excess of $3,000) but is not paying any tax because he offset that gain with what was left of that bank.

Hope that helps. Robert B
The stone age didn't end for lack of stone.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by Marie10 » Mon Mar 23, 2020 11:03 pm

kingsnake wrote:
Mon Mar 23, 2020 4:50 pm
Meh,

I TLH'd today. Sold 100% of my Vanguard FTSE All-World ex US Index Fund and exchanged it into Vanguard Total International Stock Index Fund. :beer

I'm thinking about doing this tomorrow (well, the opposite) - first time TLHing. I have about $240k in losses (ooof). Is there any reason not to just do the whole thing? Are there downsides i'm not considering?

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by White Coat Investor » Tue Mar 24, 2020 12:26 am

tfb wrote:
Mon Mar 23, 2020 7:54 pm
White Coat Investor wrote:
Mon Mar 23, 2020 11:14 am
I don't think they can be exchanged though like mutual funds are at 4 pm each day. I'd love to know if there is a way to do so.
Not exactly at 4 pm but here's an idea from indexfundfan:

viewtopic.php?f=10&t=308429

At Fidelity, the one-triggers-the-other order type is under Trade -> Conditional.

If you have enough cash in the account, you can also specify "on the open" or "on the close" for your orders. If Vanguard doesn't support these order types explicitly, you can place the orders before the market opens to make them execute at the open price.

viewtopic.php?t=276914
Oooh, that's good stuff.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by White Coat Investor » Tue Mar 24, 2020 12:27 am

JonnyDVM wrote:
Mon Mar 23, 2020 8:07 pm
The biggest problem I’m having with TLH is I’m running out of funds. There’s only so many low ER funds that are sort of similar, but different enough to qualify. Also it’s getting bit difficult to keep track of what I’ve sold to harvest. I was a little overzealous and was harvesting like a maniac. I could have waited until now and made a nice clean harvest across the entire field.
I did that in Dec 2018 and the opportunity went away before I was really able to harvest as much as I wanted. Crystal ball so cloudy...
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by #Cruncher » Tue Mar 24, 2020 10:05 am

From White Coat Investor's 9 Reasons NOT to Tax-Loss Harvest referenced in the original post:
# 9 You Might Get Burned by Volatility
… I decided the easiest thing to do would be to exchange from the 500 Index Fund to the iShares Total Stock Market ETF. Unfortunately, ETFs trade in real-time, not at market close (4 pm Eastern) like traditional mutual funds. So in order to make this swap, I had to buy the ETF while the market was open and put in an order to sell the mutual fund at market close. So I waited until the end of the day. It was a very volatile day like many of those in a bear market. 15 minutes before market close I bought the ETF. The market was down 9.5% on the day at the time. Unfortunately, in those last 15 minutes of the trading session, the market dropped another 1%+. So I bought high and sold low. (underlines added)
I just had an even worse experience when selling a mutual fund and buying an ETF.
  • About 3:40 PM yesterday I put in an order to sell the mutual fund, knowing the trade would take place after the close.
  • I immediately tried to put in an order to buy a somewhat smaller dollar amount of the ETF. But, because I didn't have enough cash in my account (and didn't have a margin account), the order was refused. I'd half hoped the computer would allow the trade since it could have known enough money would likely be coming from the mutual fund sale. But I understand why the computer couldn't make that assumption.
  • This morning at about 9:40 AM I was finally able to buy the ETF. Unfortunately, the price had risen 7% overnight.
  • The difference in purchase cost between 3:40 PM yesterday and 9:40 AM today exceeds the tax savings I'll get from the loss!
Oh, well. As a Boglehead I realize the price could just as easily have fallen 7% overnight in which case I'd be feeling lucky and happy instead of unlucky and sad. :wink:

Edit. Oops! I just realized that WCI and I were both selling a mutual fund and buying an ETF to replace it. The difference was that he was able to buy the ETF just before the market closed, a few minutes before the mutual fund's sale price was determined. (Apparently because he had enough cash in his account, had a margin account, or dealt with a more liberal brokerage.) But I had to wait overnight to do the 2nd half of the "exchange".
Last edited by #Cruncher on Tue Mar 24, 2020 12:23 pm, edited 1 time in total.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by diy60 » Tue Mar 24, 2020 10:33 am

#Cruncher wrote:
Tue Mar 24, 2020 10:05 am
I'd half hoped the computer would allow the trade since it could have known enough money would likely be coming from the mutual fund sale. But I understand why the computer couldn't make that assumption.
If at Fidelity, you can call the trading desk and they will allow you to purchase using 90% value of the selling mutual fund and place an automatic buy order for the next day for the remaining 10%. I did this frequently a few years ago when unwinding an AUM mess I had in my taxable. But my preferred approach is now to use ETF to ETF (sell and buys), or MF to MF (exchanges). Mixing is a timing problem in volatile markets.

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Re: 9 Reasons Not to Tax Loss Harvest (WCI)

Post by international001 » Thu Mar 26, 2020 10:45 am

jjface wrote:
Mon Mar 23, 2020 8:04 pm
international001 wrote:
Mon Mar 23, 2020 8:02 pm
If you risk loosing $25k, you may as well do 10 sell-buy pairs (with 1/10 of the shares each) , and diversify your loss/gain
nice thought but with etf to mf you'd have to do it over 10 days else you'd just get burned the same.
That's fine with me. I'm not a market timer.

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