Losing Money with Index Funds

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alex_686
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Re: Losing Money with Index Funds

Post by alex_686 »

MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I already read some of the links here but I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids :confused
This is a natural issue with withdrawal strategies. Anything conservative enough to have a high percentage of meeting minimum required goals has a fair chance of overshooting. There are variable withdrawal strategies that get closer. Immediate annuities are another.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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CyclingDuo
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Re: Losing Money with Index Funds

Post by CyclingDuo »

MissOptimist wrote: Sat Sep 19, 2020 9:58 pmGreat simplified detailed info!
I will come back here with the sticky portfolio questions answered
Be a slow and steady Sarah, MissOptimist during your years of accumulation:

https://imgur.com/gallery/BlK4jzM

Then in your years of decumulation, you spend it in a fashion that is most appropriate for you:

https://www.forbes.com/sites/stephenche ... 58961724ed
"Save like a pessimist, invest like an optimist." - Morgan Housel
stimulacra
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Re: Losing Money with Index Funds

Post by stimulacra »

I've never lost money with index funds.

Every loss I've realized by selling occurred with individual stocks in a taxable account.

With a 3-fund portfolio, it would be pretty difficult to lose money… 
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HomerJ
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Re: Losing Money with Index Funds

Post by HomerJ »

MissOptimist wrote: Sat Sep 19, 2020 9:42 pm
I already read some of the links here but I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids :confused

Well, that's the problem isn't it? Same problem for all of us. You don't know if you're going to die at 80 or 90 (or 100).

So you don't spend all your money by 80, because what if you live to 90?

But if you then die at 80 anyway, yes there will a bunch of money left over.

Start a new thread if you want to talk about withdrawal strategies. Or do some searches on "4% rule" or VPW.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Kelrex
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Re: Losing Money with Index Funds

Post by Kelrex »

MissOptimist wrote: Sat Sep 19, 2020 9:42 pm
Kelrex wrote: Sat Sep 19, 2020 9:34 pm
MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
Yes, that is the point.

Whether you sell stocks or bonds has nothing to do with how much you enjoy your life, it's simply a strategy to manage your wealth in retirement.

If you save a lot, you will have a lot that you can afford to spend, whether it comes from your stocks or from your bonds.

I'm afraid you aren't going to be able to learn everything you need to know from our answers here though. You really do need to do some reading on your own in order to wrap your mind around it so that the answers here start making more sense.

Thankfully none of the recommended reading is very long or hard to understand. A lot of it is light, easy, and quite fun to read, so you will probably enjoy the process.
I already read some of the links here but I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids :confused
For most people it's actually quite simple. They plan to cash out what they planned to spend each and every year, like clockwork, regardless of whether or not the market is up or down. All of the FI calculators that people use here account for that kind of plan by default. So no, you don't have to time when you take your money out.

Some people do have plans where they intend to take out more during high years and less during bad years, and that's usually a plan designed to die with more money, so not what you need to worry about.

I think you might be putting the cart before the horse a bit though, unless you already have millions you haven't told us about.

Just by learning about investing, risk, volatility, asset allocation, and sequence of returns risk, over time, you will start having a better understanding of how you want to spend down your future wealth.

However, as I said in a previous post, this is one of the more complex aspects of wealth management, and you probably won't be able to finalize your approach on it until you know how much wealth you will actually retire with and what your circumstances will be at that time (or even what the tax laws will be).

You can't actually plan for it now, you don't have the power to control how your future plays out. So don't worry too much about it at this time. Just focus on learning what you need in order to understand it.

As I said before, personal finance is personal. There isn't a correct way to do anything, there's just a lot of options and a lot of decisions for you to make, so the better you understand them, the smarter decisions you will be able to make for your individual situation.

What you need to do now is figure out a rough savings goal and how you want to try and meet that goal. That will take some pretty solid understanding of your investing options and strategies. Eventually, a desired withdrawal strategy will seem more obvious and intuitive for you once you really start understanding how all of the market factors affect you personally.

But to put it simply, yes, there are strategies for spending down your money so that you don't die rich, so don't worry about that.
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Re: Losing Money with Index Funds

Post by LadyGeek »

The OP has requested portfolio assistance, which I've moved into a new thread. See: Portfolio help - Losing Money with Index Funds

(Thanks to the member who reported the post.)
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RudyS
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Re: Losing Money with Index Funds

Post by RudyS »

flaccidsteele wrote: Sat Sep 19, 2020 10:45 am
MissOptimist wrote: Sat Sep 19, 2020 10:11 am What if BEFORE 2008, they sell their shares or cash out, and after the economy recovers, they reinvest all that money again, will they be in a better situation??
Just like your example of a time “BEFORE 2008”, today, right now, we are in the period before the next massive crash... how do you know when to sell?

Are you selling now? Tomorrow? Next year? When? 🤷‍♂️
The BIG question is, how do you know when to get back in?
danaht
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Re: Losing Money with Index Funds

Post by danaht »

Depends on what type of index fund. I would avoid sector index funds - because an entire sector can be under major changes and a severe depression for as long as a decade (like the energy sector is going through now). If it's a general market index fund (that is also market cap weighted) like VOO - you will only lose money if you sell it for less than you bought it for. :D A general market index fund will eventually go up over time. (there are some rare exceptions like Japan's equity market after their bubble)
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Re: Losing Money with Index Funds

Post by RadAudit »

MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids
I really think you need a good, fee only, financial planner.

You've already done a good job in simplifying the planning process. No kids. Don't have to worry about college costs, kids boomer-ranging on you and coming back home until their life gets sorted out, the grandkids' college educations, etc.

Now all you have to figure out is how to avoid having millions when you die. Things to concern you may include rate of return for the next four or five decades of a portfolio with an AA that fits your need, willingness and ability to handle risk, probabilities of you and / or your spouse having long term care needs, how long are you going to live, etc.

If you get a handle on those types of things it ought to be a straight forward case of addition and subtraction to solve the problem of when to sell.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.
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Re: Losing Money with Index Funds

Post by Trader Joe »

MissOptimist wrote: Sat Sep 19, 2020 7:33 am I am curious, what was the biggest amount of money you ever lost with investing in index funds? And how did you get through it? :shock:
I have never lost any money investing in index funds. I never sell.
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Re: Losing Money with Index Funds

Post by FactualFran »

I lost about $160,000 with an account in the Vanguard Total Stock Market Fund. It happened between a high in February 2020 and a low in March 2020. The loss is the difference in the account balances on the two dates.

I got through it by staying the course. In August 2020 the account balance was above its high in February, adjusted for having taken in cash the distributions made after the low in March.
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wander
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Re: Losing Money with Index Funds

Post by wander »

Yes. I lost money to VGRLX when I purchased that fund. It is .25% at every purchase.
tibbitts
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Re: Losing Money with Index Funds

Post by tibbitts »

wander wrote: Sun Sep 20, 2020 5:37 pm Yes. I lost money to VGRLX when I purchased that fund. It is .25% at every purchase.
I haven't done the math but maybe it's possible you will earn that amount back, or maybe even the .25% on the back end. I'm sure someone else know and will comment.
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arcticpineapplecorp.
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Re: Losing Money with Index Funds

Post by arcticpineapplecorp. »

MissOptimist wrote: Sat Sep 19, 2020 12:35 pm
livesoft wrote: Sat Sep 19, 2020 12:23 pm
MissOptimist wrote: Sat Sep 19, 2020 12:11 pm So let's say they reinvested early March 2020, and let's say in 2024 the economy recovers, and they have a $3 million(maybe enough for retirement to them) will they be in a good situation if they decide to cash out ALL of their investments?? I guess I want to know what does everyone here think will be a "good" time to cash out if you can't do it during a downturn, you can't do it during the highs :confused
The executors of their estate may cash out ALL of their investments in order to divide it up and distribute it. Otherwise, there does not appear to 'be a "good" time to cash out' nor is it even necessary.
Never a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to?
you still don't know what future expenses will be do you? Like nursing home costs. Do you have long term care insurance for you and your husband? If you don't (even if you do, these policies don't cover in full) how much would you expect to pay for skilled care for you and your husband.

the goal isn't to spend every last penny by the time you die. there's no way to time things that perfectly contrary to what others say (viewtopic.php?t=82287)

if you don't use it all, you give it to those whom you want to inherit.

just because you don't have kids, doesn't mean you can't leave an estate to others and/or for charitable purposes.

bogleheads is a 501(c)(3) organization (shameless self promotion). You can always donate to them or other charities you fell close to. You don't have to have kids, maybe there are other relatives or friends or children of friends, and so on.

if you don't have a will that spells out where any remaining proceeds are to go upon death of you and husband, then I'd suggest you start there. But the lawyer won't tell you what to do, you'll need to be thinking who should get any left over.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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Tejfyy
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Re: Losing Money with Index Funds

Post by Tejfyy »

whereskyle wrote: Sat Sep 19, 2020 11:20 am
MissOptimist wrote: Sat Sep 19, 2020 10:55 am Ok so is it only recommended to sell when the economy is good? :confused When do you know if it is the RIGHT time to sell, let's say you have already accumulated a lot of money to meet your needs.
The 4% rule holds that when you retire, you can safely withdraw 4% from your portfolio every year regardless of market conditions, adjusting that amount for inflation every year. So, once you've accumulated "enough" that you can live off your 4% every year, you can theoretically make one sale in that amount every year regardless of where the market's at. Some people sell and withdraw every month.

There are many approaches to safe withdrawal rates. If you can live off less than 4%, it may be prudent to withdraw less.
I agree and would add that the resources on Variable Percentage Withdrawals clarify and simplify this topic, if the OP is asking about retirement. ihttps://www.bogleheads.org/wiki/Variabl ... _Worksheet
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Re: Losing Money with Index Funds

Post by qwertyjazz »

alex_686 wrote: Sat Sep 19, 2020 8:49 am
MissOptimist wrote: Sat Sep 19, 2020 8:20 am
whereskyle wrote: Sat Sep 19, 2020 8:15 am
MissOptimist wrote: Sat Sep 19, 2020 7:33 am I am curious, what was the biggest amount of money you ever lost with investing in index funds? And how did you get through it? :shock:
Don't sell at a loss and you'll never lose money 😉
When you say this, do you mean never sell during a recession?
This is a false statement based in a cognitive error. If the statement was true then nobody had lost any money investing in Pets.com or WeWork.

You mark your positions to the market. That is your gain or loss. Or at least how I do it as a professional in portfolio metrics.

On a more general note, there are a couple of ways to look at it. A popular was is to calculate ‘Value at Risk’, which is generally finding the standard deviation at 95%. Or could assume a 50% drop. Issues with both options. Sometimes it is just best to think through what could happen.
I have been struggling to understand this as an individual investor in index funds. A professional has different goals and different time lines. For example the question seems to be what is the risk of on average buying index funds over 40 years with a risk of having to sell them over that time period which is a function of human capital. Then selling them over a period of 25 years of retirement. On average with index funds (not individual stocks), what is the value at risk over a time frame? That is the closest I have come to a personal answer. All of this with a lot of hand waving and vague estimates given that the variables are poorly defined and the outcome goal of enough or good retirement is equally murky. Is there a better framework you can think of to answer whether index funds have lost money for a long term buy and hold individual? Likewise I cannot conceptualize index fund risk over this time frame as they are a relatively recent invention and have occurred during a relatively safe time in economic history. Any thoughts of how to consider the risk of whether index funds can lose? Or is just some rules of thumb of probably not or what else is there? Or am I overstating the difference of portfolio managers and individuals metrics?
Thank you
QJ
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alex_686
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Re: Losing Money with Index Funds

Post by alex_686 »

qwertyjazz wrote: Sun Sep 20, 2020 6:53 pm I have been struggling to understand this as an individual investor in index funds. A professional has different goals and different time lines. For example the question seems to be what is the risk of on average buying index funds over 40 years with a risk of having to sell them over that time period which is a function of human capital. Then selling them over a period of 25 years of retirement. On average with index funds (not individual stocks), what is the value at risk over a time frame? That is the closest I have come to a personal answer. All of this with a lot of hand waving and vague estimates given that the variables are poorly defined and the outcome goal of enough or good retirement is equally murky. Is there a better framework you can think of to answer whether index funds have lost money for a long term buy and hold individual? Likewise I cannot conceptualize index fund risk over this time frame as they are a relatively recent invention and have occurred during a relatively safe time in economic history. Any thoughts of how to consider the risk of whether index funds can lose? Or is just some rules of thumb of probably not or what else is there? Or am I overstating the difference of portfolio managers and individuals metrics?
Thank you
QJ
First, junk the idea of risk in “index funds. It is not a valid dimension. Index funds should mirror the market. Better to think about market risks.

Now, what are the market risks? VaR is short term. I think we can make reasonable assumptions about risks and returns for the next 10 years.

But over 65 years? Well, kind of. I have worked in pension and annuity accounting. But it is a conservative strategy that is based around long term bonds.

Equities are a different beast. Markets change and evolve. I think returns will be falling and volatility will be increasing. I think the answer is flexibility and ‘active management’. By active management I mean constantly adjusting your IPS goals and asset allocation. There are some levers one can pull. Bonds, US, DM, EM, REITs, value, low-beta, etc. Make your AA fit your goals, or make your goals fit your risk tolerance.

It is hard to beat the market but one can adjust to it.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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wander
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Re: Losing Money with Index Funds

Post by wander »

tibbitts wrote: Sun Sep 20, 2020 5:48 pm
wander wrote: Sun Sep 20, 2020 5:37 pm Yes. I lost money to VGRLX when I purchased that fund. It is .25% at every purchase.
I haven't done the math but maybe it's possible you will earn that amount back, or maybe even the .25% on the back end. I'm sure someone else know and will comment.
I will convert it to ETF before selling to avoid the .25% fee.
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Re: Losing Money with Index Funds

Post by tibbitts »

wander wrote: Sun Sep 20, 2020 7:38 pm
tibbitts wrote: Sun Sep 20, 2020 5:48 pm
wander wrote: Sun Sep 20, 2020 5:37 pm Yes. I lost money to VGRLX when I purchased that fund. It is .25% at every purchase.
I haven't done the math but maybe it's possible you will earn that amount back, or maybe even the .25% on the back end. I'm sure someone else know and will comment.
I will convert it to ETF before selling to avoid the .25% fee.
Have you confirmed that that will avoid the fee? I have no idea, but it seems to defeat the purpose. I had thought Vanguard would eliminate the fee by now, as with Total International (I think it used to have a purchase fee.) In any case you might earn back the .25% purchase fee.
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wander
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Re: Losing Money with Index Funds

Post by wander »

tibbitts wrote: Sun Sep 20, 2020 9:00 pm
wander wrote: Sun Sep 20, 2020 7:38 pm
tibbitts wrote: Sun Sep 20, 2020 5:48 pm
wander wrote: Sun Sep 20, 2020 5:37 pm Yes. I lost money to VGRLX when I purchased that fund. It is .25% at every purchase.
I haven't done the math but maybe it's possible you will earn that amount back, or maybe even the .25% on the back end. I'm sure someone else know and will comment.
I will convert it to ETF before selling to avoid the .25% fee.
Have you confirmed that that will avoid the fee? I have no idea, but it seems to defeat the purpose. I had thought Vanguard would eliminate the fee by now, as with Total International (I think it used to have a purchase fee.) In any case you might earn back the .25% purchase fee.
I don't. But someone did, according to this thread: avoid the fee
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Re: Losing Money with Index Funds

Post by coachd50 »

MissOptimist wrote: Sat Sep 19, 2020 8:50 pm
DSBH wrote: Sat Sep 19, 2020 6:51 pm
MissOptimist wrote: Sat Sep 19, 2020 1:13 pm So is there NEVER a good time to cash out?? What if you are 85 yrs old and you don't have any kids or anybody to give your inheritance to? My husband and I do NOT plan on having kids and we want to enjoy our money before we croak. :shock:
When is a good time to cash out? Well as I get older (say starting in my 50's), I realize that I may not have time to earn back any significant losses if I were in 100% stock, so bond is a way to "cash out" for me. It was implemented over a number of years.
Ok so when there is a downturn, you sell shares of your bonds? And when economy is up, you sell some of your stocks?? I am curious because the point of me saving and investing is so I can also take some of that money in the future AND enjoy life. :shock:
It might help other posters answer your questions if you explicitly state your goals. You seem to keep using "cash out" which tends to have a different connotation than a what most here view as a withdrawal during retirement.

You are buying financial assets with current income. You hope to see those assets produce a return through appreciation in value as well as dividends. At some point in the future you may desire to use those returns to purchase something you can not purchase through your regular income. That is when you will sell some of the financial assets and withdraw the corresponding cash.
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Re: Losing Money with Index Funds

Post by MJS »

MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I already read some of the links here but I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids :confused
Try out the Rich, Broke or Dead Tool. Change your health, annual withdrawl rate, take an $50000/yr for travel in your 60s, or modify the cost of dementia care after age 85.
https://engaging-data.com/will-money-la ... &mort=best
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

RadAudit wrote: Sun Sep 20, 2020 2:22 pm
MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids
I really think you need a good, fee only, financial planner.

You've already done a good job in simplifying the planning process. No kids. Don't have to worry about college costs, kids boomer-ranging on you and coming back home until their life gets sorted out, the grandkids' college educations,
Um....I don't know about the financial planner. According to the author of If You Can: How Millennials Can Get Rich Slowly, these financial planners and advisors main goal is just to transfer people's wealth to whoever they work for. And that they are not truly qualified and don't go through intense years of training like doctors and lawyers do. And that the financial services industry want to make people poor and stupid. :annoyed
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Re: Losing Money with Index Funds

Post by muffins14 »

You don't "need" a financial planner, but people are trying to help you understand some places where your language/vocabulary and planning show a lack of experience. A fee-only advisor can help you get on track with that.

For example, you keep saying "cash out" as though on day X you are going to sell all your investments and hold only cash? Best practice, as mentioned, is to sell some low percentage (3-6%) of your assets each year when you need them, while letting the other 94-97% remain invested so they can continue to grow. If "cashing out" means you sell everything to cash upon retirement, you are at risk of your intended consumption being too large for your available portfolio as inflation eats away at your purchasing power.
alex_686
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Re: Losing Money with Index Funds

Post by alex_686 »

MissOptimist wrote: Mon Sep 21, 2020 2:03 pm Um....I don't know about the financial planner. According to the author of If You Can: How Millennials Can Get Rich Slowly, these financial planners and advisors main goal is just to transfer people's wealth to whoever they work for. And that they are not truly qualified and don't go through intense years of training like doctors and lawyers do. And that the financial services industry want to make people poor and stupid. :annoyed
I don't want to underplay or overplay the complexity of investing. Sometimes people need help. Setting up a IPS is a example. Trying to figure out your goals, risk tolerance, and asset allocation can benefit from somebody who has experience, wisdom, and access to quality tools. A second opinion or a steady hand during market chaos. Good advice costs money. I am a modest proponent of advisors. Depends on the person, depends on the situation.

Different advisors get paid different ways, each way has it pros and cons. A "Fee Only" advisor charges a one time fee. Note this - there are other "fee only" that charge ongoing costs. This is a popular option on Bogleheads. The upfront fee tends to be high, but it is a one time item. So for many people it tends to be cheaper. The downside is that you don't have anybody to talk with on a ongoing situation - in particular a crisis. Most Bogleheads tend to be independent so that is ok. Fee only CFPs are a popular way to go.
https://www.letsmakeaplan.org/

At this point, considering you have so little in assets I would skip it - unless you have a specific complex topic. Tax, estate, etc. I am going to assume not.
viewtopic.php?f=1&t=325910&p=5505068#p5505068

Write up a IPS. Think about liquidity issues coming up in the next 5 years. Pick a asset allocation you are comfortable with. Pull the trigger. Wait for 5 years. Then revisit if you want to hire a financial advisor or not.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

But the author of If You Can: How Millennials Can Get Rich Slowly, he mentioned that if I just read a few of the books he had recommended, I will be more knowledgeable than a financial advisor. :shock: That's insane. :shock:
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Re: Losing Money with Index Funds

Post by KingRiggs »

MissOptimist wrote: Mon Sep 21, 2020 3:10 pm But the author of If You Can: How Millennials Can Get Rich Slowly, he mentioned that if I just read a few of the books he had recommended, I will be more knowledgeable than a financial advisor. :shock: That's insane. :shock:
Not insane at all. It's a learning curve, and you are already well on your way!

Keep it simple, and keep reading the Wiki and the Forums here. Concepts which seem confusing to you now will seem like basic facts in a few months.

Slow and steady... :sharebeer
Advice = noun | Advise = verb | | Roth, not ROTH
raiderjkwong
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Re: Losing Money with Index Funds

Post by raiderjkwong »

2000-2002, 2008-2009, I lost close to close to 50%. From 1999 to 2009, was the lost decade where the S&P gained close to 0%. During these times, my only my bond index funds lost nothing and actually gained.
alex_686
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Re: Losing Money with Index Funds

Post by alex_686 »

MissOptimist wrote: Mon Sep 21, 2020 3:10 pm But the author of If You Can: How Millennials Can Get Rich Slowly, he mentioned that if I just read a few of the books he had recommended, I will be more knowledgeable than a financial advisor. :shock: That's insane. :shock:
Bogleheads and William J. Bernstein have a axe to grind.

To be fair, many advisors are basically salespeople and have a low understanding of investment theory. Finding a good advisor is hard. Finding a good value advisor is even harder. Most good ones know how good they are and charge accordingly. As a professionally who has done analysis in this area it is next to impossible to hire a good that will provided one unless you have 1m in assets. The so called 'middle market' is a wastland.

I have yet to check out the roboadvisors.

CFPs actually is a decent certification and a market of excellence.

Back to Bernstein. He is in the glass half empty when it comes to advisors, I in the glass half full. Bernstein and Bogleheads are not going to give you a firm idea on the level of savings or the level of risk you need to take. It is a complex question and the world keeps on changing. Instead, we rely on rules of thumb. Bogleheads like to simplify things, and often oversimplify. I tend to resist this. However, there is the pragmatic issue of spending a couple of thousand of dollars for a plan that is only slightly better?

As I read your situation, probably not. You need to build up your assets under any circumstances and I think you are looking for a plain vanilla solution.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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SmileyFace
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Re: Losing Money with Index Funds

Post by SmileyFace »

Most I ever lost: $3000 (by design)
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familythriftmd
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Re: Losing Money with Index Funds

Post by familythriftmd »

DaftInvestor wrote: Mon Sep 21, 2020 3:57 pm Most I ever lost: $3000 (by design)
Tax lost harvesting, I presume? I still don't quite understand how someone would realize capital losses in order to get a tax break, unless you're saying that you went in and bought another fund right away that wasn't "substantially identical" in the eyes of the IRS, but was quite similar to you.
Thrift stores, outlets and market corrections have this in common: you're buying on sale.
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dratkinson
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Re: Losing Money with Index Funds

Post by dratkinson »

MissOptimist wrote: Mon Sep 21, 2020 3:10 pm But the author of If You Can: How Millennials Can Get Rich Slowly, he mentioned that if I just read a few of the books he had recommended, I will be more knowledgeable than a financial advisor. :shock: That's insane. :shock:
No, it's not. The issue comes down to "costs".

Google "Warren Buffett 10-year million dollar bet".

He bet 5 hedge fund operators that he could beat their results by investing in one low-cost market index fund. He was so far ahead in year 9 of the bet that all hedge funds conceded defeat.

How did he win? He invested in a low-cost S&P500 index fund. They didn't, and their increased costs ate into their profit.

It's not that financial helpers don't know their stuff, it's that they expect to be paid for their knowledge. So the issue becomes, "...are we further ahead after we pay their costs (loads, fees, taxes)?"


I believe I'm further ahead by investing in a low cost market index portfolio*... ala Buffett... with enough bonds to carry me through retirement. (Buffett's bet didn't have to worry about retirement.)

* The 3-fund portfolio is reported to be the 90% solution. Why? If you follow it for 10yrs, it is expected that you will do better than 90% of all FAs (financial advisors).


Ladygeek started a new topic for your family's portfolio review. If you will update your OP's missing information, we will use our collective knowledge to jump-start your own and suggest options appropriate for your (plural) sitiation.
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Kelrex
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Re: Losing Money with Index Funds

Post by Kelrex »

MissOptimist wrote: Mon Sep 21, 2020 3:10 pm But the author of If You Can: How Millennials Can Get Rich Slowly, he mentioned that if I just read a few of the books he had recommended, I will be more knowledgeable than a financial advisor. :shock: That's insane. :shock:
Uh...yeah.

Before being shocked, you may want to look into what education it takes to become a financial advisor.

I took the course and it took me about 4 days to complete. By the end of it, I knew very little about personal finance, I only knew what I needed to be able to sell mutual funds. Because that's what most FAs are, mutual fund sales people.

I had no interest in selling mutual funds, I wanted to learn about personal finance, so yeah, it was kind of a waste of 4 days and $300, except that it taught me to understand FAs better.

Now some FAs have extensive education and are truly high level professionals who give valuable advice, but I would say that the vast majority of FAs I've personally met are about the dumbest schmucks imaginable, and I would rather take financial advice from a magic 8 ball.
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Re: Losing Money with Index Funds

Post by Eagle33 »

OP you may find this Vanguard page of benefit to you in understanding risk.
The risk of different investment types
It gives explanation of how mixing stocks & bonds index mutual funds lowers risk. It has a chart of best and worst calendar-year returns from 1926 through 2014.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
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Re: Losing Money with Index Funds

Post by coachd50 »

MissOptimist wrote: Mon Sep 21, 2020 2:03 pm
RadAudit wrote: Sun Sep 20, 2020 2:22 pm
MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids
I really think you need a good, fee only, financial planner.

You've already done a good job in simplifying the planning process. No kids. Don't have to worry about college costs, kids boomer-ranging on you and coming back home until their life gets sorted out, the grandkids' college educations,
Um....I don't know about the financial planner. According to the author of If You Can: How Millennials Can Get Rich Slowly, these financial planners and advisors main goal is just to transfer people's wealth to whoever they work for. And that they are not truly qualified and don't go through intense years of training like doctors and lawyers do. And that the financial services industry want to make people poor and stupid. :annoyed
I agree that many dont need a financial advisor, and you may very well be one of them. But don’t conflate someone selling you high cost mutual funds with someone providing high quality personal finance advice.

You still haven’t really stated any goals, and based on your terminology and phrasing, you seem to be struggling to understand this aspect of personal finance
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

Kelrex wrote: Mon Sep 21, 2020 7:42 pm
MissOptimist wrote: Mon Sep 21, 2020 3:10 pm But the author of If You Can: How Millennials Can Get Rich Slowly, he mentioned that if I just read a few of the books he had recommended, I will be more knowledgeable than a financial advisor. :shock: That's insane. :shock:
Uh...yeah.

Before being shocked, you may want to look into what education it takes to become a financial advisor.

I took the course and it took me about 4 days to complete. By the end of it, I knew very little about personal finance, I only knew what I needed to be able to sell mutual funds. Because that's what most FAs are, mutual fund sales people.
Are you serious? :shock: So I would be paying my hard earned money to someone who only had 4 days of training and to sell mutual funds??? When I can just read books for a year and be more knowledgeable than a financial advisor. :happy
Kelrex
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Re: Losing Money with Index Funds

Post by Kelrex »

MissOptimist wrote: Tue Sep 22, 2020 4:48 am
Kelrex wrote: Mon Sep 21, 2020 7:42 pm
MissOptimist wrote: Mon Sep 21, 2020 3:10 pm But the author of If You Can: How Millennials Can Get Rich Slowly, he mentioned that if I just read a few of the books he had recommended, I will be more knowledgeable than a financial advisor. :shock: That's insane. :shock:
Uh...yeah.

Before being shocked, you may want to look into what education it takes to become a financial advisor.

I took the course and it took me about 4 days to complete. By the end of it, I knew very little about personal finance, I only knew what I needed to be able to sell mutual funds. Because that's what most FAs are, mutual fund sales people.
Are you serious? :shock: So I would be paying my hard earned money to someone who only had 4 days of training and to sell mutual funds??? When I can just read books for a year and be more knowledgeable than a financial advisor. :happy
No, you may really benefit from the advice of a highly educated, experienced, professional who has the advantage of years of working in the financial industry and is known for providing in depth, customized advice and recommending appropriate investment strategies for you.

I am advising you NOT to buy mutual funds from an idiot who doesn't know much other than how to sell mutual funds.

And yes, they can both be called "financial advisors".

Again, I come back to the recommendation that you read enough until you have the knowledge to be able to ask the right kind of questions that will help you get the right kind of help you need.

Even with an absolute expert financial advisor, they can only advise you to the degree that you truly understand what you want, and you can't even responsibly know what you want until you really understand your own financial situation.

So in the end, you still have to read.
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Re: Losing Money with Index Funds

Post by dbr »

Coming to grips with a beast that by nature produces variable results and yet enriches a person over time most of the time is probably the most difficult single thing for a new investor, and many old investors, to manage. The only process I am aware of to do this is to read, listen, understand, and experience how things happen. Then one must harden the heck up and adapt to realities. One also needs to prepare the mind with some of the thought processes that are needed, most specifically a statistical mindset, to know how to frame the uncertainty and variability that shrouds underlying benefits. None of this is hugely different from what happens in all other ventures in life except that the results tend to be more starkly visible at every moment than are the other uncertainties.
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MissOptimist
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Re: Losing Money with Index Funds

Post by MissOptimist »

coachd50 wrote: Mon Sep 21, 2020 11:05 pm
MissOptimist wrote: Mon Sep 21, 2020 2:03 pm
RadAudit wrote: Sun Sep 20, 2020 2:22 pm
MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids
I really think you need a good, fee only, financial planner.

You've already done a good job in simplifying the planning process. No kids. Don't have to worry about college costs, kids boomer-ranging on you and coming back home until their life gets sorted out, the grandkids' college educations,
Um....I don't know about the financial planner. According to the author of If You Can: How Millennials Can Get Rich Slowly, these financial planners and advisors main goal is just to transfer people's wealth to whoever they work for. And that they are not truly qualified and don't go through intense years of training like doctors and lawyers do. And that the financial services industry want to make people poor and stupid. :annoyed
I agree that many dont need a financial advisor, and you may very well be one of them. But don’t conflate someone selling you high cost mutual funds with someone providing high quality personal finance advice.

You still haven’t really stated any goals, and based on your terminology and phrasing, you seem to be struggling to understand this aspect of personal finance
My Dream Goal: To retire from my teaching job in 5 years, and just strictly dedicate my time working on my side business. :sharebeer In 5 years, I would like to have 500k of investments that are producing passive income. Maybe best that I invest in Vanguard Dividend Appreciation index fund? And just more dividend type of funds?
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Re: Losing Money with Index Funds

Post by KingRiggs »

It's fairly apparent from your responses that you are either not reading the suggested readings, or are not grasping their concepts.

PLEASE do yourself a favor, SLOW DOWN, and READ the Wiki and other suggested books. Just as you expect your students to "do their homework", you need to build your knowledge base to move forward.

I'm really not trying to denigrate you - but your ideas are all over the place.
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dbr
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Re: Losing Money with Index Funds

Post by dbr »

MissOptimist wrote: Tue Sep 22, 2020 2:05 pm
My Dream Goal: To retire from my teaching job in 5 years, and just strictly dedicate my time working on my side business. :sharebeer In 5 years, I would like to have 500k of investments that are producing passive income. Maybe best that I invest in Vanguard Dividend Appreciation index fund? And just more dividend type of funds?
Passive income from investments comes from withdrawing money whether from dividends and interest or from selling shares. Funds selecting for the dividend paying properties of the stocks they hold cannot be demonstrated to support withdrawals better than anything else, taken all in all.
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Re: Losing Money with Index Funds

Post by grobertj »

I hold 3 years spending in Vanguard's Short Term Bond Fund (BSV). If my portfolio is down, I withdraw from BSV. Otherwise, I withdraw from my portfolio. In effect, I use the BSV amount as a Cash Reserve.
The only constant is CHANGE!!
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Re: Losing Money with Index Funds

Post by dogagility »

MissOptimist wrote: Tue Sep 22, 2020 2:05 pm My Dream Goal: To retire from my teaching job in 5 years, and just strictly dedicate my time working on my side business. :sharebeer In 5 years, I would like to have 500k of investments that are producing passive income.
To reach this goal by investing in broad index funds, you would need to invest about $7500/month.
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Kelrex
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Re: Losing Money with Index Funds

Post by Kelrex »

KingRiggs wrote: Tue Sep 22, 2020 3:27 pm It's fairly apparent from your responses that you are either not reading the suggested readings, or are not grasping their concepts.

PLEASE do yourself a favor, SLOW DOWN, and READ the Wiki and other suggested books. Just as you expect your students to "do their homework", you need to build your knowledge base to move forward.

I'm really not trying to denigrate you - but your ideas are all over the place.
Agreed.

You are putting the cart WAY before the horse.
You cannot learn what you need to learn by asking these types of questions, you need to establish a baseline of knowledge before anyone can answer your questions in any kind of truly helpful way.

I promise, a lot of this will become very obvious to you once you grasp the core concepts.
coachd50
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Re: Losing Money with Index Funds

Post by coachd50 »

MissOptimist wrote: Tue Sep 22, 2020 2:05 pm
coachd50 wrote: Mon Sep 21, 2020 11:05 pm
MissOptimist wrote: Mon Sep 21, 2020 2:03 pm
RadAudit wrote: Sun Sep 20, 2020 2:22 pm
MissOptimist wrote: Sat Sep 19, 2020 9:42 pm I haven't found any direct info on the right time when to sell or cash out. I just don't want to die at 80 or 90 and just hoarded millions of $$$ , where is that going to go when i don't have kids
I really think you need a good, fee only, financial planner.

You've already done a good job in simplifying the planning process. No kids. Don't have to worry about college costs, kids boomer-ranging on you and coming back home until their life gets sorted out, the grandkids' college educations,
Um....I don't know about the financial planner. According to the author of If You Can: How Millennials Can Get Rich Slowly, these financial planners and advisors main goal is just to transfer people's wealth to whoever they work for. And that they are not truly qualified and don't go through intense years of training like doctors and lawyers do. And that the financial services industry want to make people poor and stupid. :annoyed
I agree that many dont need a financial advisor, and you may very well be one of them. But don’t conflate someone selling you high cost mutual funds with someone providing high quality personal finance advice.

You still haven’t really stated any goals, and based on your terminology and phrasing, you seem to be struggling to understand this aspect of personal finance
My Dream Goal: To retire from my teaching job in 5 years, and just strictly dedicate my time working on my side business. :sharebeer In 5 years, I would like to have 500k of investments that are producing passive income. Maybe best that I invest in Vanguard Dividend Appreciation index fund? And just more dividend type of funds?
As someone mentioned, if you are starting from $0, and assuming about a 6% yearly return you will need to be investing around $7,500 each month. That seems like a pretty high figure for a teacher (being a teacher in the deep south myself). Is that a reasonable figure for your budget?

Also, are you looking for that $500,000 figure to provide support during your retirement? How long do you plan to be retired ( in other words, how old will you be when you retire and how long will you have to make your retirement funds last)?

Keep in mind that having a financial plan is NOT the same as having an investment plan. Putting your money in low cost index funds and just leaving them there until such time as you need to draw down the balances to live off of is simple. The details of your entire personal financial plan are much more nuanced.
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Re: Losing Money with Index Funds

Post by sycamore »

familythriftmd wrote: Mon Sep 21, 2020 4:26 pm
DaftInvestor wrote: Mon Sep 21, 2020 3:57 pm Most I ever lost: $3000 (by design)
Tax lost harvesting, I presume? I still don't quite understand how someone would realize capital losses in order to get a tax break, unless you're saying that you went in and bought another fund right away that wasn't "substantially identical" in the eyes of the IRS, but was quite similar to you.
Off topic but... here's an easy way to realize capital losses in order to get a tax break: 1) buy a stock fund, 2) wait 'til it drops by $3000+, 3) sell it. Voila.

Now if one does buy a substantially identical stock fund, then yes the loss is transferred to the replacement shares. But there are plenty of non-substantially identical stock funds to buy instead.

familythriftmd, does that help understanding how it works? It's not clear what part you don't understand.
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Re: Losing Money with Index Funds

Post by familythriftmd »

sycamore wrote: Wed Sep 23, 2020 7:14 am Off topic but... here's an easy way to realize capital losses in order to get a tax break: 1) buy a stock fund, 2) wait 'til it drops by $3000+, 3) sell it. Voila.

Now if one does buy a substantially identical stock fund, then yes the loss is transferred to the replacement shares. But there are plenty of non-substantially identical stock funds to buy instead.

familythriftmd, does that help understanding how it works? It's not clear what part you don't understand.
I don't get it why you'd want to lose money just to get a tax break. Therefore, it seems like the only thing that makes sense would be to immediately buy something that is about the same so that you are not realizing capital losses just for the tax game standpoint.

Edit: Sorry if too tangential, it just seemed like a good time to ask the question since the topic is about losing money with index funds.
Thrift stores, outlets and market corrections have this in common: you're buying on sale.
sycamore
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Re: Losing Money with Index Funds

Post by sycamore »

familythriftmd wrote: Wed Sep 23, 2020 10:53 am
sycamore wrote: Wed Sep 23, 2020 7:14 am Off topic but... here's an easy way to realize capital losses in order to get a tax break: 1) buy a stock fund, 2) wait 'til it drops by $3000+, 3) sell it. Voila.

Now if one does buy a substantially identical stock fund, then yes the loss is transferred to the replacement shares. But there are plenty of non-substantially identical stock funds to buy instead.

familythriftmd, does that help understanding how it works? It's not clear what part you don't understand.
I don't get it why you'd want to lose money just to get a tax break. Therefore, it seems like the only thing that makes sense would be to immediately buy something that is about the same so that you are not realizing capital losses just for the tax game standpoint.

Edit: Sorry if too tangential, it just seemed like a good time to ask the question since the topic is about losing money with index funds.
Not too tangential IMO. When talking about tax loss harvesting, the general idea (espoused at least on BH) is to purposely avoid buying a substantially similar fund, for example sell Total Stock Market Index and buy Large Cap Index. This way there's no wash sale and you maintain your stock exposure that you had before. But you're right that if there is in fact a wash sale, then it's not worth it.

Also, the loss (and tax benefit) that one takes now will come back later: buying a different stock fund at a lower basis means that when one sells that new lot later (presumably for a capital gain), one has to pay capital gains tax. The key point is avoiding income tax on $3000 now is a better deal than paying capital gains tax later because for many/most people income taxes are higher than capital gains taxes.
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Re: Losing Money with Index Funds

Post by SmileyFace »

sycamore wrote: Wed Sep 23, 2020 12:20 pm
familythriftmd wrote: Wed Sep 23, 2020 10:53 am
sycamore wrote: Wed Sep 23, 2020 7:14 am Off topic but... here's an easy way to realize capital losses in order to get a tax break: 1) buy a stock fund, 2) wait 'til it drops by $3000+, 3) sell it. Voila.

Now if one does buy a substantially identical stock fund, then yes the loss is transferred to the replacement shares. But there are plenty of non-substantially identical stock funds to buy instead.

familythriftmd, does that help understanding how it works? It's not clear what part you don't understand.
I don't get it why you'd want to lose money just to get a tax break. Therefore, it seems like the only thing that makes sense would be to immediately buy something that is about the same so that you are not realizing capital losses just for the tax game standpoint.

Edit: Sorry if too tangential, it just seemed like a good time to ask the question since the topic is about losing money with index funds.
Not too tangential IMO. When talking about tax loss harvesting, the general idea (espoused at least on BH) is to purposely avoid buying a substantially similar fund, for example sell Total Stock Market Index and buy Large Cap Index. This way there's no wash sale and you maintain your stock exposure that you had before. But you're right that if there is in fact a wash sale, then it's not worth it.

Also, the loss (and tax benefit) that one takes now will come back later: buying a different stock fund at a lower basis means that when one sells that new lot later (presumably for a capital gain), one has to pay capital gains tax. The key point is avoiding income tax on $3000 now is a better deal than paying capital gains tax later because for many/most people income taxes are higher than capital gains taxes.
And it's possible when you do this swap (and get to save taxes on the $3000 loss) - the new "lower priced" alternative you acquired that may have been purchased at about the same discount as your loss may not be sold until you are retired so you tax burden is significantly lowered (or perhaps even 0) - or perhaps the holding is passed on upon your demise - no tax due to stepped-up basis.

The real question is what determines what "substantial identical is" - I've seen people on other threads here state that two "Total US Stock Index Funds/ETFs" were not substantially identical (e.g. - think VTI and ITOT; or FXROX and VTSAX) since they track different indices. I am not sure enough about that to take a risk.
mrtwstr
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Re: Losing Money with Index Funds

Post by mrtwstr »

Earlier today I sold VXUS to harvest a loss and bought IXUS. First time I've tried tax loss harvesting since I switched over to a Bogle type portfolio a few weeks ago. Prime example of how you can harvest and get back in to the market in a very similar position but different enough for tax purposes.
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