Fidelity Tax Managed US Equity Index

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bogleforlife2020
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Fidelity Tax Managed US Equity Index

Post by bogleforlife2020 »

I am currently looking for a recommendation of whether to invest $1M into the Fidelity Tax Managed US Equity Index or an ITOT fund in a taxable account. My concern is that if I sell out of ITOT now and transition to the Fidelity tax managed account I would encounter significant cap gains but my broker is telling me it makes sense since I have about another 10 years before retirement. Any help you can provide would be greatly appreciated.
GreendaleCC
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Re: Fidelity Tax Managed US Equity Index

Post by GreendaleCC »

Do you mean the Fidelity Tax-Managed US Equity Index Strategy “separately managed account” that has a 0.20-0.65% advisory fee? Or is it something else?
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1789
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Re: Fidelity Tax Managed US Equity Index

Post by 1789 »

I think OP is talking about the managed Fidelity account.

viewtopic.php?f=10&t=317589

I dont think this is worth the expense and since it is a separate account than other accounts in the portfolio, im skeptical about the efficiency of using this type of strategy. I support buying ITOT or VTI.
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MikeG62
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Re: Fidelity Tax Managed US Equity Index

Post by MikeG62 »

I'd stay away from their separately managed accounts. I was pitched on this a couple of months ago by my Fidelity Private Client advisor. I passed on it. The big issue for me (aside from the annual fees) is even if the strategy does well, you will be handcuffed into this fee-based structure forever - unless you are willing to pay the taxes to close it out and reinvest the proceeds (or move the positions to a brokerage account and manage them yourself - no thanks). At least with a broad-based ultra low fee index fund, this is something you don't mind holding indefinitely.
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tj
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Re: Fidelity Tax Managed US Equity Index

Post by tj »

Nobody knows what the tiers are for the different fees. If one was at the 0.2% level, it could make sense, but certainly not if you have to realize a ton of capital gains to switch strategies.
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whodidntante
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Re: Fidelity Tax Managed US Equity Index

Post by whodidntante »

ITOT is pretty tax efficient. Just stay put.
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noraz123
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Re: Fidelity Tax Managed US Equity Index

Post by noraz123 »

First, I strongly recommend that you don't sell your current ITOT. No need to pay cap gains now.

If you do want to go the tax managed route, I'd recommend you only put new funds there.

With that said, I would skip the tax managed account and stick with ITOT and other low costs funds.
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bogleforlife2020
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Re: Fidelity Tax Managed US Equity Index

Post by bogleforlife2020 »

Thanks all - great input and that's the one - Fidelity Tax-Managed US Equity Index Strategy. Their pitch was that when it doubles in 10 years you won't have any cap gains to pay and it's essentially the same return as ITOT.
tj
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Re: Fidelity Tax Managed US Equity Index

Post by tj »

bogleforlife2020 wrote: Sat Nov 21, 2020 1:07 pm Thanks all - great input and that's the one - Fidelity Tax-Managed US Equity Index Strategy. Their pitch was that when it doubles in 10 years you won't have any cap gains to pay and it's essentially the same return as ITOT.
I don't see how it's possible to have growth that doubles your money and "not have any cap gains to pay".
livesoft
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Re: Fidelity Tax Managed US Equity Index

Post by livesoft »

FWIW, we invest in total market index funds such as VTI, VV, VLCAX, VEU, and VEA in our taxable accounts and do not pay capital gains taxes when we sell and realize capital gains on them. So depending on one's personal circumstances, I think ITOT would have the same results.
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missedit
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Re: Fidelity Tax Managed US Equity Index

Post by missedit »

I have this SMA in my brokerage for the last 6 months or so - for me the 0.5% charge is a small blip / noise in overall performance. I have been keeping a watch account involving ITOT and VIG since the time I started investing in this (roughly 6 months ago) and the performance difference between SMA and ITOT is within 1%. But the SMA has roughly 13K in capital losses - that I can use to offset gains at the end of year. I do understand if I eventually decide to liquidate and close it, there will be a big tax to pay but I don't plan to do this any time in near future - in fact I plan on adding to it.
livesoft
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Re: Fidelity Tax Managed US Equity Index

Post by livesoft »

missedit wrote: Sat Nov 21, 2020 2:36 pm I have this SMA in my brokerage for the last 6 months or so - for me the 0.5% charge is a small blip / noise in overall performance. I have been keeping a watch account involving ITOT and VIG since the time I started investing in this (roughly 6 months ago) and the performance difference between SMA and ITOT is within 1%. But the SMA has roughly 13K in capital losses - that I can use to offset gains at the end of year. I do understand if I eventually decide to liquidate and close it, there will be a big tax to pay but I don't plan to do this any time in near future - in fact I plan on adding to it.
Do you think that you (or someone else) could have tax-loss harvested ITOT or VIG along the way during the same time period to create the same $13K in capital losses?
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missedit
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Re: Fidelity Tax Managed US Equity Index

Post by missedit »

livesoft wrote: Sat Nov 21, 2020 2:50 pm Do you think that you (or someone else) could have tax-loss harvested ITOT or VIG along the way during the same time period to create the same $13K in capital losses?
I do not have time / inclination to do this level of market timing to do tax loss harvesting. Hence I am quite comfortable with the small fee I pay so the professionals at Fidelity can do this much better.
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anon_investor
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Re: Fidelity Tax Managed US Equity Index

Post by anon_investor »

livesoft wrote: Sat Nov 21, 2020 2:50 pm
missedit wrote: Sat Nov 21, 2020 2:36 pm I have this SMA in my brokerage for the last 6 months or so - for me the 0.5% charge is a small blip / noise in overall performance. I have been keeping a watch account involving ITOT and VIG since the time I started investing in this (roughly 6 months ago) and the performance difference between SMA and ITOT is within 1%. But the SMA has roughly 13K in capital losses - that I can use to offset gains at the end of year. I do understand if I eventually decide to liquidate and close it, there will be a big tax to pay but I don't plan to do this any time in near future - in fact I plan on adding to it.
Do you think that you (or someone else) could have tax-loss harvested ITOT or VIG along the way during the same time period to create the same $13K in capital losses?
+1. I tax loss harvested a nice 5 figure amount this year from my VTSAX and VFIAX holdings. It only took me a couple of minutes total and I pay nothing on top of the funds' 0.04% expense ratios.
tj
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Re: Fidelity Tax Managed US Equity Index

Post by tj »

missedit wrote: Sat Nov 21, 2020 2:36 pm I have this SMA in my brokerage for the last 6 months or so - for me the 0.5% charge is a small blip / noise in overall performance. I have been keeping a watch account involving ITOT and VIG since the time I started investing in this (roughly 6 months ago) and the performance difference between SMA and ITOT is within 1%. But the SMA has roughly 13K in capital losses - that I can use to offset gains at the end of year. I do understand if I eventually decide to liquidate and close it, there will be a big tax to pay but I don't plan to do this any time in near future - in fact I plan on adding to it.
As a current customer, do you know the tiers for the different fees? The 0.2% -0.65% is a rather wide range, but they provide no information on the tiers.
missedit
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Re: Fidelity Tax Managed US Equity Index

Post by missedit »

tj wrote: Sat Nov 21, 2020 3:25 pm As a current customer, do you know the tiers for the different fees? The 0.2% -0.65% is a rather wide range, but they provide no information on the tiers.
don't know. they didn't give the full schedule - only told me what I would pay for my investment. I think you will have to invest a whole bunch of monies to get it down to 0.2%
yougotitdude
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Re: Fidelity Tax Managed US Equity Index

Post by yougotitdude »

bogleforlife2020 wrote: Fri Nov 20, 2020 10:02 pm I am currently looking for a recommendation of whether to invest $1M into the Fidelity Tax Managed US Equity Index or an ITOT fund in a taxable account. My concern is that if I sell out of ITOT now and transition to the Fidelity tax managed account I would encounter significant cap gains but my broker is telling me it makes sense since I have about another 10 years before retirement. Any help you can provide would be greatly appreciated.
The Fidelity rep is paid significantly more for one of those options. If you guessed it's the one they're telling you to do rather than the one you're currently doing, you're right. ;)
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