Best Taxable Account Funds to Invest In

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
rshocka
Posts: 10
Joined: Thu Oct 24, 2019 12:54 pm

Best Taxable Account Funds to Invest In

Post by rshocka » Fri Feb 14, 2020 12:22 pm

Good morning all,

What would be your top selections of funds for investing in taxable accounts? (Emergency is maxed, Roth IRAs are maxed via backdoor, 401k is maxed and HSA is maxed). I currently have a Vanguard fund open already, so I'd be most inclined to use something in that family.

I'm trying to be mindful of tax implications to help minimize that impact. I'm 38. Lots of work to continue to unwind some Ameriprise accounts madness (full details below from a previous post if that helps give more context). :| Looking to start by going ahead and grabbing the cash ($170k) out of the cash value in the Ameriprise and get that going in my other Vanguard account ASAP.



Emergency funds: Yes

Debt: $95k remaining principal on mortgage @ 4.75% (Zillow/market estimate of ~$500k)

Tax Filing Status: Married Filing Jointly,

Tax Rate: 32% Federal, 5% State (Alabama)

State of Residence: Alabama

Age:37, 2 children (under 5)

Desired Asset allocation: 80% stocks / 10% bonds
Desired International allocation: 10% of stocks
Very open to feedback on AA

Portfolio current size is ~ $1.9 M.


Current retirement assets

Taxable
7% cash (for investing – do not include emergency funds)

1.52% ISHARES S&P MID CAP 400 VALUEETF (IJJ) 0.25
3.85% SPDR SERIES TRUST S&P DIVIDEND ETF (SDY) 0.35
5.80% ISHARES EDGE MSCI MIN VOLATILITY ETF (USMV) 0.15
2.42% SELECT SECTOR TR REAL ESTATE SPDR ETF (XLRE) 0.13

Current Capital Gains on Directly Above Section : +$43,285.85 [+20.35%]

0.99% CAPITAL WORLD GROWTH & INCOME CL F1 (CWGFX) 0.82
9.48% EATON VANCE ATLANTA CAP SMID CAP CL C (ECASX) 1.9
2.71% COLUMBIA EMERGING MARKETS CL C (EEMCX) 2.29
12.44% FIDELITY ADVISOR GROWTH OPPTYS CL C (FACGX) 1.8
2.20% FIDELITY ADVISOR GROWTH OPPTYS CL I (FAGCX) 0.78
0.59% NUVEEN LTD TERM MUN BOND CL C2 (FLTCX) 0.98
2.01% INVESCO DIVERSIFIED DIVIDEND CL (CLCEVX) 1.56
5.57% LORD ABBETT ULTRA SHORT BOND CL A (LUBAX) 0.42
1.43% MFS MID CAP VALUE CL C (MVCCX) 1.83
6.62% INVESCO OPPENHEIMER INTL GROWTH CL C(OIGCX) 1.85
3.87% COLUMBIA STRATEGIC MUN INCOME CL C (RTCEX) 1.56
0.84% WESTERN ASSET SHORT DURATION MUN INCOME CL C (SHDLX) 0.9

Current Capital Gains on Directly Above Section: +$199,998.04 [+28.02%] - can break it out by fund but largest CG in ECASX and FACGX

His American Funds work 401k
No current company match

1.52% American Funds Europacific Growth R2E REEBX 1.3
0.64% American Funds New World R2E RNEBX 1.44
1.04% Federated Kaufmann Small Cap Fund R FKKSX 1.37
1.34% T. Rowe Price Blue Chip Gr R RRBGX 1.23
1.33% American Funds Washington Mutual R2E RWEBX 1.07
0.73% American Funds Corporate Bond Fund R2E RCBGX 1.26
0.69% PIMCO Income R PONRX 1.7
0.76% Lord Abbett High Yield R2 LHYQX 1.3


His Roth IRA

2.98% VANGUARD GROWTH ETF VUG 0.04

1.07% EATON VANCE ATLANTA CAP SMID CAP CL C ECASX 1.9
0.24% FRANKLIN INCOME CL C FCISX 1.12
0.38% FRANKLIN INCOME CL A1 FKINX 0.62
0.32% INVESCO OPPENHEIMER INTL DIVERSIFIED CL C OIDCX 2.02
0.44% FRANKLIN MUTUAL GLOBAL DISCOVERY CL A TEDIX 1.23
0.12% FRANKLIN MUTUAL GLOBAL DISCOVERY CL C TEDSX 1.98


Her Roth IRA

0.66% VANGUARD INTERMEDIATE TERM CORP BOND ETF VCIT 0.07
2.60% VANGUARD TOTAL STOCK MARKET ETF VTI 0.03
0.52% VANGUARD TOTAL INTL STOCK INDEX FUND ETF VXUS 0.09


Her 401k
She Hasn’t worked there for almost 5 years

0.61% Vanguard U.S. Growth Fund Admiral™ Shares VWUAX 0.28
0.61% Vanguard Mid-Cap Index Fund Admiral Shares VIMAX 0.05
0.62% Vanguard 500 Index Fund Admiral Shares VFIAX 0.04
0.61% Vanguard Mid-Cap Value Index Fund Admiral Shares VMVAX 0.07
0.59% Vanguard Developed Markets Index Fund Admiral Shares VTMGX 0.07


Her TSP
0.33% L2050 (0.04)


Contributions

New annual Contributions
$19k his 401k (no standard or expected employer match. In 10 years, company matched 100% one year, but depends on company’s yearly success)
$6,000 his IRA/Roth IRA
$6,000 her IRA/Roth IRA
$90k taxable (for retirement, not short term goals)



Available funds

Funds available in his 401(k)
I don’t see a lot of great options here within the current offerings. Pushing company to get ETFs/Index funds in here as well.

INVESTMENT OPTION / TICKER / GROSS/NET
American Funds US Govt Money Market R2E RBEXX 1.15 / 1.15
Amer Funds Moderate G/I Portfolio R2E RBBEX 1.23 / 1.23
American Funds Europacific Growth R2E REEBX 1.30 / 1.30
American Funds 2010 Trgt Date Retire R2E RBEAX 1.13 / 1.13
American Funds Corporate Bond Fund R2ERCBGX 1.30 / 1.26
American Funds 2015 Trgt Date Retire R2E RBEJX 1.13 / 1.13
American Funds 2020 Trgt Date Retire R2E RBEHX 1.14 / 1.14
American Funds 2025 Trgt Date Retire R2E RBEDX 1.16 / 1.16
American Funds 2030 Trgt Date Retire R2E RBEEX 1.18 / 1.18
American Funds 2035 Trgt Date Retire R2E RBEFX 1.19 / 1.19
American Funds Global Growth Port R2E REBGX 1.26 / 1.26
American Funds 2040 Trgt Date Retire R2E RBEKX 1.20 / 1.20
American Funds 2045 Trgt Date Retire R2E RBHHX 1.20 / 1.20
Amer Funds Conserv G/I Portfolio R2E RNBEX 1.16 / 1.16
American Funds 2050 Trgt Date Retire R2E RBHEX 1.21 / 1.21
American Funds 2055 Trgt Date Retire R2E RBEMX 1.21 / 1.21
American Funds 2060 Target Date Ret R2E RBENX 1.24 / 1.24
American Funds Gr and Inc Port R2E RBEGX 1.15 / 1.15
American Funds Inflation Linked Bd R2E RILGX 1.19 / 1.19
American Funds Invmt Co of Amer R2E RIBEX 1.09 / 1.09
American Funds New Perspective R2E RPEBX 1.25 / 1.25
American Funds Washington Mutual R2E RWEBX 1.07 / 1.07
American Funds Mortgage R2E RMBEX 1.21 / 1.12
American Funds New World R2E RNEBX 1.44 / 1.44
AllianzGI NFJ Mid-Cap Value R PRNRX 1.46 / 1.24
Columbia Overseas Value R COVUX 1.54 / 1.47
Federated Max-Cap Index R FMXKX 1.18 / 1.11
Federated Kaufmann Small Cap Fund R FKKSX 1.72 / 1.37
PIMCO Income R PONRX 1.70 / 1.70
Lord Abbett High Yield R2 LHYQX 1.30 / 1.30
MFS International Growth R2 MGRQX 1.35 / 1.35
T. Rowe Price Blue Chip Gr R RRBGX 1.23 / 1.23

magicrat
Posts: 869
Joined: Sat Nov 29, 2014 7:04 pm

Re: Best Taxable Account Funds to Invest In

Post by magicrat » Fri Feb 14, 2020 12:23 pm

rshocka wrote:
Fri Feb 14, 2020 12:22 pm

What would be your top selections of funds for investing in taxable accounts?
VTSAX
VTIAX

core4portfolio
Posts: 456
Joined: Thu Dec 26, 2013 2:12 pm

Re: Best Taxable Account Funds to Invest In

Post by core4portfolio » Fri Feb 14, 2020 12:36 pm

VUG - Vanguard growth ETF --> First choice
VTI - Second choice
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner

User avatar
BL
Posts: 9332
Joined: Sun Mar 01, 2009 2:28 pm

Re: Best Taxable Account Funds to Invest In

Post by BL » Fri Feb 14, 2020 12:55 pm

See her Roth, maybe with Muni bonds instead of other bonds.

sycamore
Posts: 324
Joined: Tue May 08, 2018 12:06 pm

Re: Best Taxable Account Funds to Invest In

Post by sycamore » Fri Feb 14, 2020 1:19 pm

rshocka wrote:
Fri Feb 14, 2020 12:22 pm
Good morning all,

What would be your top selections of funds for investing in taxable accounts?
...
Desired Asset allocation: 80% stocks / 10% bonds
Desired International allocation: 10% of stocks
Very open to feedback on AA
I see 80% in stocks, and 10% in bonds. Where's the other 10%?

At your age of 37, 80% stocks is reasonable, assuming you understand and are comfortable with the potential for seeing your portfolio drop by roughly 40%, say if the stock market drops by 50%. Given your portfolio size of 1.9M, I'd personally go for closer to 60/40, primarily because I'm at an age where I'm more concerned with not losing what I've got than with increasing it.
rshocka wrote:
Fri Feb 14, 2020 12:22 pm
Current retirement assets

Taxable
7% cash (for investing – do not include emergency funds)

1.52% ISHARES S&P MID CAP 400 VALUEETF (IJJ) 0.25
3.85% SPDR SERIES TRUST S&P DIVIDEND ETF (SDY) 0.35
5.80% ISHARES EDGE MSCI MIN VOLATILITY ETF (USMV) 0.15
2.42% SELECT SECTOR TR REAL ESTATE SPDR ETF (XLRE) 0.13

Current Capital Gains on Directly Above Section : +$43,285.85 [+20.35%]

0.99% CAPITAL WORLD GROWTH & INCOME CL F1 (CWGFX) 0.82
9.48% EATON VANCE ATLANTA CAP SMID CAP CL C (ECASX) 1.9
2.71% COLUMBIA EMERGING MARKETS CL C (EEMCX) 2.29
12.44% FIDELITY ADVISOR GROWTH OPPTYS CL C (FACGX) 1.8
2.20% FIDELITY ADVISOR GROWTH OPPTYS CL I (FAGCX) 0.78
0.59% NUVEEN LTD TERM MUN BOND CL C2 (FLTCX) 0.98
2.01% INVESCO DIVERSIFIED DIVIDEND CL (CLCEVX) 1.56
5.57% LORD ABBETT ULTRA SHORT BOND CL A (LUBAX) 0.42
1.43% MFS MID CAP VALUE CL C (MVCCX) 1.83
6.62% INVESCO OPPENHEIMER INTL GROWTH CL C(OIGCX) 1.85
3.87% COLUMBIA STRATEGIC MUN INCOME CL C (RTCEX) 1.56
0.84% WESTERN ASSET SHORT DURATION MUN INCOME CL C (SHDLX) 0.9

Current Capital Gains on Directly Above Section: +$199,998.04 [+28.02%] - can break it out by fund but largest CG in ECASX and FACGX
...
Sticking to just the taxable portion of your portfolio...

Glad to hear you're going to unwind some of the Ameriprise madness!

Like others, I suggest Vanguard Total Stock fund and Total International Stock to meet your stock AA. ETFs or mutual funds is up to you.

Of the four low-cost positions (IJJ, SDY, USMV, XLRE), I'd say IJJ and USMV are all potential keepers, assuming you're okay with those "tilts".

jpelder
Posts: 723
Joined: Mon Jan 26, 2015 3:56 pm
Location: Concord, NC

Re: Best Taxable Account Funds to Invest In

Post by jpelder » Fri Feb 14, 2020 1:44 pm

Oof, those 401k options are awful.

The best options are the Investment Company of America (large-cap US stocks, with a few internationals) and a bond fund. Not sure exactly what bond fund to recommend. None look good. You don't want inflation-protected or high yield (junk) bonds, and the Pimco income fund is too expensive. Maybe use the 2010 target date fund and adjust everything else accordingly.

A Total Stock Market Index Fund (US and/or international) is the best option for a taxable account. You don't want any bonds in there at your tax bracket. This means your whole bond allocation should be in the 401k. Maybe put some of the TSP in the G fund and move her old 401k into a Vanguard Bond Index, too. If you have to put Bonds in Taxable, then use tax-exempt bonds.

Good luck getting your 401k options improved. These ones look like highway robbery

User avatar
grabiner
Advisory Board
Posts: 26112
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Best Taxable Account Funds to Invest In

Post by grabiner » Fri Feb 14, 2020 8:55 pm

rshocka wrote:
Fri Feb 14, 2020 12:22 pm
Debt: $95k remaining principal on mortgage @ 4.75% (Zillow/market estimate of ~$500k)
I would pay that off in preference to any new taxable investments. Unless you donate a lot to charity. you take the standard deduction, so that is a tax-free return of 4.75%, or 4.51% if you deduct it against your Alabama tax. Even if you do itemize deductions, the after-tax return is a risk-free 2.99%, which is better than you can do for that risk level; municipal bonds yield only 1.67% (Vanguard Long-Term Tax-Exempt).

Normally, I would recommend refinancing if you don't pay it off immediately, but this mortgage is small enough that the cost of refinancing probably isn't worth it. Don't sell taxable stock for a capital gain (except XLRE, which is likely to be tax-inefficient), but use new taxable money, and dividends on your taxable stocks, to make extra mortgage payments.

Another benefit of paying off the mortgage is that you can get by with a smaller emergency fund.
Wiki David Grabiner

User avatar
BolderBoy
Posts: 4725
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Best Taxable Account Funds to Invest In

Post by BolderBoy » Fri Feb 14, 2020 11:22 pm

magicrat wrote:
Fri Feb 14, 2020 12:23 pm
rshocka wrote:
Fri Feb 14, 2020 12:22 pm

What would be your top selections of funds for investing in taxable accounts?
VTSAX
VTIAX
I agree with these. And add VWIUX if you need a bond fund.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

Topic Author
rshocka
Posts: 10
Joined: Thu Oct 24, 2019 12:54 pm

Re: Best Taxable Account Funds to Invest In

Post by rshocka » Sat Feb 15, 2020 4:35 pm

Thanks Grabiner! Let me know if you have any additional thoughts here.
grabiner wrote:
Fri Feb 14, 2020 8:55 pm
rshocka wrote:
Fri Feb 14, 2020 12:22 pm
Debt: $95k remaining principal on mortgage @ 4.75% (Zillow/market estimate of ~$500k)
I would pay that off in preference to any new taxable investments.
** Thanks for the input and idea here. Hadn't given that a lot of strong consideration given the current market returns of significantly more than 4.75% (ie is it better to be borrowing on that and having a higher return in the market; however, that gets complicated b/c 1) who knows what future returns will be (2) there's enough cash just sitting in a non earning fund that this return would definitely be better than any money market fund returns or high yield savings.

Unless you donate a lot to charity. you take the standard deduction, so that is a tax-free return of 4.75%, or 4.51% if you deduct it against your Alabama tax. Even if you do itemize deductions, the after-tax return is a risk-free 2.99%, which is better than you can do for that risk level; municipal bonds yield only 1.67% (Vanguard Long-Term Tax-Exempt).
** I do currently itemize...donate around $43,000 per year to charity **

Normally, I would recommend refinancing if you don't pay it off immediately, but this mortgage is small enough that the cost of refinancing probably isn't worth it. Don't sell taxable stock for a capital gain (except XLRE, which is likely to be tax-inefficient), but use new taxable money, and dividends on your taxable stocks, to make extra mortgage payments.
** Onne thought I had this year was to donate mutual funds to our church. Thought being I could take the full amount deduction and avoid the capital gains on that. I'm trying to unplug some money out of those Ameriprise brokerage accounts on some bad funds (like OIGCX). If there's enough in capital gains to just donate the capital gains off, that seems like a good approach for the church to get the full 100% value, I could avoid the capital gains taxes on money that I would still otherwise be giving?

Another benefit of paying off the mortgage is that you can get by with a smaller emergency fund.

User avatar
grabiner
Advisory Board
Posts: 26112
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Best Taxable Account Funds to Invest In

Post by grabiner » Sun Feb 16, 2020 11:25 am

rshocka wrote:
Sat Feb 15, 2020 4:35 pm
Thanks Grabiner! Let me know if you have any additional thoughts here.
grabiner wrote:
Fri Feb 14, 2020 8:55 pm
rshocka wrote:
Fri Feb 14, 2020 12:22 pm
Debt: $95k remaining principal on mortgage @ 4.75% (Zillow/market estimate of ~$500k)
I would pay that off in preference to any new taxable investments.
Thanks for the input and idea here. Hadn't given that a lot of strong consideration given the current market returns of significantly more than 4.75% (ie is it better to be borrowing on that and having a higher return in the market; however, that gets complicated b/c 1) who knows what future returns will be (2) there's enough cash just sitting in a non earning fund that this return would definitely be better than any money market fund returns or high yield savings.
If you want to get higher expected return with a higher risk, you can buy stocks and keep the mortgage, or you can sell bonds to buy stocks, and still pay off the mortgage. You are now comparing two scenarios with the same stock market risk, having either both bonds and a mortgage or neither. And given your mortgage rate, holding less in bonds and no mortgage is a better deal. (You do give up some liquidity, but your portfolio is large enough that this isn't worth it.)
One thought I had this year was to donate mutual funds to our church. Thought being I could take the full amount deduction and avoid the capital gains on that. I'm trying to unplug some money out of those Ameriprise brokerage accounts on some bad funds (like OIGCX). If there's enough in capital gains to just donate the capital gains off, that seems like a good approach for the church to get the full 100% value, I could avoid the capital gains taxes on money that I would still otherwise be giving?
This is a good strategy. If you are going to make a large donation to charity, donate any taxable mutual fund with a large capital gain that you don't want to keep. And even beyond that, it is better to donate taxable funds that you do want to keep, as this allows you to reset the basis. For example, if you have $10K in cash, and $10K in stock with a $5K basis, you can donate the mutual fund, and then use the $10K in cash to buy more stock. You will now have a $10K basis rather than a $5K basis in your mutual fund, so you will reduce your capital gain by $5K when you sell the stock.

I do the same with my charitable donations. I have a mutual fund which I would prefer not to hold, but which has huge capital gains, so I don't want to sell it. I make my large charitable donations from this fund, and then adjust my asset allocation accordingly with new investments.
Wiki David Grabiner

Post Reply