Can Someone Confirm (TLH)?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
MariaT
Posts: 170
Joined: Mon Feb 19, 2007 9:34 pm

Can Someone Confirm (TLH)?

Post by MariaT » Sat Nov 01, 2008 5:29 pm

I plan to TLH next week. I have accumulated $11K in total losses with VTSMX, VPCCX & VFWIX in my taxable account. Here's my plan:

Exchange VTSMX to VLACX (large cap)
Exchange VPCCX to VTSMX (will this create a wash sale?)
Exchange VFWIX to VGTSX (total intl)

Exchange back to original funds after 30 days (letter) or 60 (online).

Would appreciate your comment before I execute next week to make sure I am not missing anything.

Thank you.

All the best,
Maria

User avatar
PiperWarrior
Posts: 4068
Joined: Fri Dec 21, 2007 4:55 am
Location: right on course

Re: Can Someone Confirm (TLH)?

Post by PiperWarrior » Sat Nov 01, 2008 5:56 pm

For readers' interest, here are fund names.

Vanguard Total Stock Mkt Idx (VTSMX) (0.15%)
Vanguard PRIMECAP Core (VPCCX) (0.55%)
Vanguard Large Cap Index (VLACX) (0.20%)
Vanguard FTSE All-World ex-US Index Inv (VFWIX) (0.40%)
Vanguard Total Intl Stock Index (VGTSX) (0.27%)
MariaT wrote:Exchange VTSMX to VLACX (large cap)
Exchange VPCCX to VTSMX (will this create a wash sale?)
Yes. You might want to put the proceeds from both VTSMX and VPCCX into VLACX or something.

guest42
Posts: 487
Joined: Sat Aug 09, 2008 11:33 am

Re: Can Someone Confirm (TLH)?

Post by guest42 » Sat Nov 01, 2008 6:04 pm

MariaT wrote:Exchange VFWIX to VGTSX (total intl)
I have done this one in reverse, assuming the substantially different is the inclusion (or exclusion) of Canada.

None of the exchanges (one fund for another) I have made, do I have any reason to reverse. They are slicing and dicing differently (actually more broadly, less concentrated), but asset class wise, they are the same) though my percentage allocated is being rebalanced at this time.

Linda-room42

DSInvestor
Posts: 11035
Joined: Sat Oct 04, 2008 11:42 am

Post by DSInvestor » Sat Nov 01, 2008 6:20 pm

Watch out for redemption fees:

VPCCX charges 1% redemption on shares held < 1yr
VFWIX charges 2% redemption on shares held < 2months
VGTSX charges 2% redemption on shares held < 2 months (when you switch back to VFWIX)

Here's a post where someone exchanged VFWIX to VINEX and was charged $500 redemption for exiting VFWIX a little too early.

http://www.bogleheads.org/forum/viewtop ... 14&start=0

If you logon to your vanguard account and enter one of your fund positions for VPCCX or VFWIX, you will see a link on the right side of the page for "calculate estimated redemption fee". If you've made purchases or reinvested dividends recently, you may be charged redemption fee.

Topic Author
MariaT
Posts: 170
Joined: Mon Feb 19, 2007 9:34 pm

Post by MariaT » Sat Nov 01, 2008 7:00 pm

My apologies for using the fund's ticker instead of its full name. My fingers were too fast for my brain.

I'll exchange Vanguard Primecap Core (VPCCX) to Vanguard Large Cap Index (VLACX) to avoid the wash sale rule.

In terms of redemption fees, I've held VPCCX for over 2 years and stopped contributions over a year ago so I should be OK. My only caveat is if I exhange out of VPCCX then I have to come up with $10K minimum to come back in.

Vanguard FTSE World...(VFWIX) is another story though not so bad. I opened this fund 7 months ago and contribute $200.00 per month. With the 2% redemption fee for purchases in September and October, it won't break the bank.

Dividends for all 3 funds are reinvested by the way.

Thanks again for comments.

All the best,
Maria

tibbitts
Posts: 9372
Joined: Tue Feb 27, 2007 6:50 pm

reinvested dividends

Post by tibbitts » Sat Nov 01, 2008 7:16 pm

I think reinvesting complicates things, particularly for people doing TLH around year end. You can wind up accidentally buying shares without thinking about it (in the form of reinvestment), which I presume counts for TLH restrictions. Of course you can't avoid selling shares (even if you don't reinvest.)

I'd guess the biggest problem would if you have the same fund in both deferred and taxable, itt'd be easy to be buying shares in the deferred account without paying any attention.

Paul

DSInvestor
Posts: 11035
Joined: Sat Oct 04, 2008 11:42 am

Post by DSInvestor » Sat Nov 01, 2008 7:54 pm

Be careful when you switch back to VFWIX. If you sell or exchange out of VGTSX too soon (under 2 months), you'll pay 2% redemption fee on the whole acct balance ($200 per 10K).

I suggest you turn off reinvestment. You don't want a reinvestment in DEC to trigger a wash sale. If VGTSX declines in the next two months, your switch back from VGTSX to FTSE may be another TLH.

Topic Author
MariaT
Posts: 170
Joined: Mon Feb 19, 2007 9:34 pm

Post by MariaT » Sat Nov 01, 2008 7:58 pm

This will be my first time to TLH and had before not reinvest dividends but swept to my money market acct. I decided to changed the format to reinvesting dividends again because of its simplicity and I figured if I need to rebalance, I will just use new money. However, I do see the point with TLH and reinvesting dividends creating complications. Perhaps moving forward when I switch back to original funds, I will sweep all future dividends to the money market fund.

DSInvestor, thank you for reminding me about the redemption fee on Vanguard Total Internation Index (VGTSX) - I totally forgot about it. I made out a note to not exchange back until after 61 days.

All the best,
Maria

DSInvestor
Posts: 11035
Joined: Sat Oct 04, 2008 11:42 am

Post by DSInvestor » Sat Nov 01, 2008 8:09 pm

Maria,

Taylor Larimore had some thoughts on whether to reinvest dividends in taxable accounts.
Taylor Larimore wrote:
Should I reinvest my dividends in Total Stock Market and FTSE in my taxable account or no?


In my opinion, "no." Here's why:

1. Every distribution gets its own tax basis which can double or triple record keeping and tax-reporting of reinvested distributions.

2. If you reinvest in an overperforming fund, you will pay an unnecessary capital-gain tax on the reinvested distributions when rebalancing.

3. By automatically having distributions go into a money market fund, money is available for rebalancing into underperforming funds.

4. If distributions go into an emergency (money market) fund, the fund is automatically replenished. Money market funds have no capital gains or losses.

5. When withdrawing from profitable funds, a portion of reinvested distributions is immediately taxed again.

If the decrease of "expected" return by not reinvesting distributions is your concern, the decrease can be compensated by slightly increasing your stock allocation.

Best wishes.
Taylor
For full thread see http://www.bogleheads.org/forum/posting ... e&p=308203

Topic Author
MariaT
Posts: 170
Joined: Mon Feb 19, 2007 9:34 pm

Post by MariaT » Sun Nov 09, 2008 6:50 am

After reading thru past TLH threads, I have another follow up question and would like to resurrect this thread. I held off doing TLH the past week because I was so busy at work and I'm glad I did because I have additional questions.

In my Vanguard All World Except...(VFWIX) in taxable, I do an automatic investment of $100 each on the 5th and 24th of every month. In order for me to TLH without triggering a wash sale, do I then leave the shares I purchased October 24th & November 4th in VFWIX and exchange the rest into Vanguard Total Int'l Index (VGTSX)? Or do I just wait for Dec 5th to do my TLH for simplicity sake?

Also, there were some discussions too about exchanging in and out of taxable and tax-deferred accounts triggering wash sale if buying similar funds within the 30 day period. We have Fidelity Diversified Intl (FDIVX) in my husband's 401k as part of our portfolio. Part of my plan was to exchange out of his bond and into FDIVX as part of rebalancing. The taxable account is a joint account. If I execute my TLH (VFWIX) in taxable can I also purchase FDIVX at the same time? Will this be considered a wash sale? Since it's a different institution, I figured the wash sale might not apply but I'm not so certain.

Thanks again.

With warm regards,
Maria

kaneohe
Posts: 5955
Joined: Mon Sep 22, 2008 12:38 pm

Post by kaneohe » Sun Nov 09, 2008 10:37 am

"In my Vanguard All World Except...(VFWIX) in taxable, I do an automatic investment of $100 each on the 5th and 24th of every month. In order for me to TLH without triggering a wash sale, do I then leave the shares I purchased October 24th & November 4th in VFWIX and exchange the rest into Vanguard Total Int'l Index (VGTSX)? Or do I just wait for Dec 5th to do my TLH for simplicity sake? "


To avoid the wash, no purchases within +/- 30 days of the TLH sale.......you had some conflicting info....
said auto invest on 5th and 24th, but later said 24th and 4th....if you are going to cut it close, need to be careful which it is.........assume 4th and 24th is correct......then Dec 5th would be ok to do TLH except if you had auto invested on Dec 4th. Looks like you need to turn off or redirect the auto invest into another fund for the TLH (maybe you said that somewhere previously).

edit: removed original comment on 2nd question.

Is the Fidelity fund actively managed? If it is and the VG is an index, then it should be ok since they are not substantially identical. Checked the Fidelity prospectus....didn't see the word index used.

Post Reply