Schwab-specific TLH question - SCHF/SCHE

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
icarus18
Posts: 6
Joined: Thu Apr 23, 2015 9:44 pm

Schwab-specific TLH question - SCHF/SCHE

Post by icarus18 » Mon Oct 15, 2018 7:33 am

Hi all,
First, a thank you from a long time lurker who has learned alot around here.

Second, a question re: TLH.
I hold my account at Schwab and use a simple approximation of a three fund portfolio - however, since Schwab doesnt have an ETF for total intl, I use a corresponding makeup of SCHF (Dev intl), SCHE (Emerg intl), and SCHC (small cap intl).
I'm looking to take advantage of TLH for the first time and I am researching the best thing to switch into. Ideally I'd love a schwab product as there is no commission - an 8 dollar commission isnt the end of the world, obviously.

The easiest thing to do would probably be to move into the corresponding Vanguard ETFs (i'd like to keep Emerg/Dev separate since Emerging has gotten killed and I havent rebalanced). I suppose I could also move into the corresponding Schwab mutual funds - while they track the same index, I'd postulate they are materially different securities since one is an ETF and one is a mutual fund (any thoughts there?).

Looking for any assistance from others who use Schwab.
Thanks in advance!

icarus18
Posts: 6
Joined: Thu Apr 23, 2015 9:44 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by icarus18 » Mon Oct 15, 2018 9:10 am

Also, as a followup point I forgot to mention

I add/accumulate each month. Ideally, I'd just swap back from whatever alternative I use for TLH in 31 days, unless theres a better strategy.
Still sorting out the best way to do this.

retiredjg
Posts: 34193
Joined: Thu Jan 10, 2008 12:56 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by retiredjg » Mon Oct 15, 2018 9:13 am

icarus18 wrote:
Mon Oct 15, 2018 7:33 am
I suppose I could also move into the corresponding Schwab mutual funds - while they track the same index, I'd postulate they are materially different securities since one is an ETF and one is a mutual fund (any thoughts there?).
Following the same index at the same company.....not sure I'd go there.

Do they have a fundamental index that would work? I'm not saying that is a good suggestion - I would not use it myself - but some would.

If you really want to TLH, find something you are willing to stick with and pay the commission. However, if you are adding to these positions, that's not going to work very well for you.

aristotelian
Posts: 4797
Joined: Wed Jan 11, 2017 8:05 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by aristotelian » Mon Oct 15, 2018 9:15 am

Yes, Vanguard ETF's all work as they follow different indices. I believe you should be on solid ground with comparable iShares and SPDR ETF's as well. The problem with Schwab is that you will have to pay trading fees to harvest into and out of non-Schwab funds. I did chat with a Schwab rep and mentioned Vanguard's free ETF trading and was able to get 30 free trades, so I was able to do SCHC-->VSS and SCHE-->VWO commission free.

In the past I have harvested between SCHF and SCHC. The downside there is it could throw off your allocation somewhat. I have also used FNDF but it has a higher expense ratio that could again over time eat up your tax benefit.

icarus18
Posts: 6
Joined: Thu Apr 23, 2015 9:44 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by icarus18 » Mon Oct 15, 2018 9:24 am

aristotelian wrote:
Mon Oct 15, 2018 9:15 am
Yes, Vanguard ETF's all work as they follow different indices. I believe you should be on solid ground with comparable iShares and SPDR ETF's as well. The problem with Schwab is that you will have to pay trading fees to harvest into and out of non-Schwab funds. I did chat with a Schwab rep and mentioned Vanguard's free ETF trading and was able to get 30 free trades, so I was able to do SCHC-->VSS and SCHE-->VWO commission free.

In the past I have harvested between SCHF and SCHC. The downside there is it could throw off your allocation somewhat. I have also used FNDF but it has a higher expense ratio that could again over time eat up your tax benefit.
Interesting. Perhaps I will try to get some free trades out of them.
The tax benefit at this time is quite large and i won't be using it to offset capital gains but instead normal income tax, and I have a few other (student loan management-related) reasons to want to lower my AGI, so offsetting my normal income by 3 grand has a nice benefit for me.

icarus18
Posts: 6
Joined: Thu Apr 23, 2015 9:44 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by icarus18 » Mon Oct 15, 2018 9:26 am

retiredjg wrote:
Mon Oct 15, 2018 9:13 am
icarus18 wrote:
Mon Oct 15, 2018 7:33 am

If you really want to TLH, find something you are willing to stick with and pay the commission. However, if you are adding to these positions, that's not going to work very well for you.
Just to double check - if I were to eat the commission (or somehow get a few free trades) and move those positions to VWO/etc, if I don't buy any new shares for 31 days, I can then just go back to accumulating new positions (ie with future accumulation) in the old securities (SCHE/SCHF)? Once the 30 days are over, its not a wash sale and theres no downside to doing that, correct?
We get paid every 30 days, so this isn't actually that much of a difficulty for me.

retiredjg
Posts: 34193
Joined: Thu Jan 10, 2008 12:56 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by retiredjg » Mon Oct 15, 2018 9:32 am

Yes you could but what are you going to do the next time you want to TLH?

I'm not saying it can't be done. If you are very careful with purchases and reinvestment of dividends, wash sales could probably be avoided if you want to TLH again, but the easiest way is to be completely in 1 TLH partner or the other TLH partner, not some of both.

icarus18
Posts: 6
Joined: Thu Apr 23, 2015 9:44 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by icarus18 » Mon Oct 15, 2018 9:37 am

retiredjg wrote:
Mon Oct 15, 2018 9:32 am
Yes you could but what are you going to do the next time you want to TLH?

I'm not saying it can't be done. If you are very careful with purchases and reinvestment of dividends, wash sales could probably be avoided if you want to TLH again, but the easiest way is to be completely in 1 TLH partner or the other TLH partner, not some of both.
ah. yes. i hadnt thought that all the way out.
hrm

Edit:
So Schwab gave me some free trades.
My current plan is to TLH fully into VWO and VEA from SCHE and SCHF, respectively.
I would then subsequently need to determine how to accumulate moving forward as you point out.
If the ex-US markets are still down I could just sell out and move back to the Schwab accounts, and continue on my merry way with some additional TLH, great. But if they're up, I am not sure what I would do. I could just keep those positions, accumulate commission free with SCHE/SCHF, and find a third partner to TLH with if needed in the future. This obviously would be a bit of a pain. Open to alternative suggestions.

aristotelian
Posts: 4797
Joined: Wed Jan 11, 2017 8:05 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by aristotelian » Mon Oct 15, 2018 9:59 am

icarus18 wrote:
Mon Oct 15, 2018 9:37 am
Edit:
So Schwab gave me some free trades.
My current plan is to TLH fully into VWO and VEA from SCHE and SCHF, respectively.
I would then subsequently need to determine how to accumulate moving forward as you point out.
If the ex-US markets are still down I could just sell out and move back to the Schwab accounts, and continue on my merry way with some additional TLH, great. But if they're up, I am not sure what I would do. I could just keep those positions, accumulate commission free with SCHE/SCHF, and find a third partner to TLH with if needed in the future. This obviously would be a bit of a pain. Open to alternative suggestions.
I like this plan. I would suggest turning off dividend reinvesting so you never have to worry about dividends creating problems. I don't see why you would need additional partners. As long as your Vanguard positions have been sitting, there should be no problem with adding to them in the future, and then you have a simipler portfolio, as well as fewer trades if you ever decide to liquidate.

icarus18
Posts: 6
Joined: Thu Apr 23, 2015 9:44 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by icarus18 » Mon Oct 15, 2018 10:05 am

aristotelian wrote:
Mon Oct 15, 2018 9:59 am
icarus18 wrote:
Mon Oct 15, 2018 9:37 am
Edit:
So Schwab gave me some free trades.
My current plan is to TLH fully into VWO and VEA from SCHE and SCHF, respectively.
I would then subsequently need to determine how to accumulate moving forward as you point out.
If the ex-US markets are still down I could just sell out and move back to the Schwab accounts, and continue on my merry way with some additional TLH, great. But if they're up, I am not sure what I would do. I could just keep those positions, accumulate commission free with SCHE/SCHF, and find a third partner to TLH with if needed in the future. This obviously would be a bit of a pain. Open to alternative suggestions.
I like this plan. I would suggest turning off dividend reinvesting so you never have to worry about dividends creating problems. I don't see why you would need additional partners. As long as your Vanguard positions have been sitting, there should be no problem with adding to them in the future, and then you have a simipler portfolio, as well as fewer trades if you ever decide to liquidate.
Great point. I can turn off the dividend reinvesting on the vanguard partners. continue to accumulate as normal with the schwab partners, commission free. If another TLH opportunity occurs, I sell the schwab and buy the vanguard. brilliant.
thanks for the insights!

User avatar
Doc
Posts: 8677
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: Schwab-specific TLH question - SCHF/SCHE

Post by Doc » Mon Oct 15, 2018 2:36 pm

icarus18 wrote:
Mon Oct 15, 2018 7:33 am
The easiest thing to do would probably be to move into the corresponding Vanguard ETFs (i'd like to keep Emerg/Dev separate since Emerging has gotten killed and I havent rebalanced).
This is what I do but I buy the replacement funds in a Vanguard IRA and reverse the positions after 30 days. But I don't want EM so I can't do it the "easy" way.
icarus18 wrote:
Mon Oct 15, 2018 7:33 am
I suppose I could also move into the corresponding Schwab mutual funds - while they track the same index, I'd postulate they are materially different securities since one is an ETF and one is a mutual fund (any thoughts there?).
I would not do that. While there is no IRS guidance and Schwab should only report wash sales between funds with the same cusip you do not have the same rules. Do you want to be the one that the IRS decided to use as guidance for the future? :(
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

NancyABQ
Posts: 228
Joined: Thu Aug 18, 2016 3:37 pm

Re: Schwab-specific TLH question - SCHF/SCHE

Post by NancyABQ » Mon Oct 15, 2018 5:32 pm

I'm at Schwab. I have SCHF in taxable and have been using IXUS (iShares Core MSCI Total International Stock) as a TLH partner, but I did some TLH this morning and couldn't use SCHF/IXUS as the partners due to recent activity within the last 30 days. So I took a quick look and just grabbed some VEU (Vanguard FTSE All-World ex-US Index).

I do also have some SCHE (emerging markets) and SCHC (int'l small cap), but it is in my Roth so it's not involved here. I realize VEU is not really the same as SCHF/IXUS (total non-US vs just developed markets), but I am not too fussy about getting those things exactly right. I figure it's down in the noise.

In my case I have some free trades on my taxable account, so no fees for buying IXUS or VEU. At some point those free trades will run out, but that's one of the reasons I use ETF's rather than mutual funds -- if I do pay trading fees they will be like $5-6 I think (vs. $45 or something for mutual funds)? Not a big deal in the long run. Well worth the opportunity to TLH conveniently.

Post Reply