What fund(s) are in your taxable account?

[Toons]

Do these balanced funds in taxable generate a lot of taxes?

Some taxes on the quarterly dividends. It's not onerous. Almost half of the quarterly dividends last year were counted as classified.
I started investing in the balanced fund before I learned about the the tax consequences of having bonds in taxable. I've been investing so long in that fund, it would not make sense tax-wise to sell off and buy something else w/o bonds.

Ditto here
And one's tax rate has an impact.
You can't always let the tax tail
Wag the dog

[Toons]

Do these balanced funds in taxable generate a lot of taxes?

Some taxes on the quarterly dividends. It's not onerous. Almost half of the quarterly dividends last year were counted as classified.
I started investing in the balanced fund before I learned about the the tax consequences of having bonds in taxable. I've been investing so long in that fund, it would not make sense tax-wise to sell off and buy something else w/o bonds.

Ditto here
And one's tax rate has an impact.
You can't always let the tax tail
Wag the dog

[Bama12]

Schwab-Brokerage-(Play money)
Schwab US Dividend-SCHD
Apple-AAPL
Pfizer-PFE

Vanguard-Brokerage-(very raining day money or just help retire early money, no real plans)
Vanguard Federal M.M-VMFXX-50%
Vanguard Total Stock Market-VTI-50%

Vanguard-Roth IRA-(retirement)
Vanguard Wellesley Income-VWINX-50%
Vanguard Real Estate-VNQ-25%
Vanguard Dividend Appreciation-VIG-25%

Vanguard-401K-401k and Roth 401k-(retirement)
Vanguard Total Stock Market-VTSAX-30%
Vanguard 500 Index-VFIAX-10%
Vanguard Value Index-VVIAX-10%
Vanguard Small Cap Index-VSMAX-10%
Vanguard Small Value-VSIAX -10%
Vanguard Developed-VTMGX-10%
Vanguard Emerging-VEMAX-10%
Vanguard Total Bond-VBTLX-10%

[BionicBillWalsh]

Some taxes on the quarterly dividends. It's not onerous. Almost half of the quarterly dividends last year were counted as classified

Ssssshhhh! You are not allowed to talk about those dividends.

[texanghost]

Total US Stock, Total International Stock, and Total Bond.

I considered tax exempt bonds but the taxes aren't worth the default risk to me. Bonds are for safety.

I also don't bother with tax efficient fund placement yet. The taxable account will likely eventually eclipse our retirement accounts, so we'd need some bonds in there anyway in mid to late retirement. I hope I don't regret it, but it seems like bond yield at ~0.8% after taxes is not that much different from 1% before taxes.

We're planning on cashing out low interest bonds to pay off a mortgage when the bond balance exceeds the mortgage balance, so I suppose we'll reconsider fund placement at that time since taxable will be 100% stocks then.

[zie]

^^^ except the unqualified dividends take a piece of that goodness away

Dividends are taxed regardless of where they came from, VTSAX dividends are also taxed at the same rate. The IRS wants their 1099 money, regardless of where it came from.

Or are you implying because VXUS(ex-US TSM) pays higher dividends(around 3%/yr vs VTSAX's 2%/yr), so that 1% extra offsets the FTC? That seems plausible, except even if you hold VXUS in your ROTH IRA, you still have to pay the foreign tax, regardless of where you hold it. VXUS pays the foreign taxes long before it ever hits your account.

Based on my understanding the FTC is a straight subtraction from taxes owed, so if you owed $100 to the IRS, paid $100 in foreign taxes, you can lower your own tax bill $100 to the IRS paying zero to the IRS.

This is all correct. The foreign tax withheld is lost if you hold international stock in a tax-advantaged account. In a taxable account, you get back the foreign tax, but you pay more US tax because of the higher dividend yield and more non-qualified dividends. The net effect tends to make it close to break-even, depending on your tax situation.

If the net effect is break even, that seems like a better deal than VTSAX/VTI, where it seems 1/2 are qualified and 1/2 aren't, with no FTC. This is different than what dude2 said that VTSAX/VTI is usually 100% qualified.

I'm obviously new to taxable investing, so have zero direct experience, but if grabiner and GerryL and Toons are correct, then VXUS in taxable makes more sense than VTSAX/VTI.

[Index24]

Total International Stock Index Fund

[anon_investor]

VTSAX and VIGAX.

There is no love for large growth in this forum. So hard to believe. Most tax efficient fund out there. Better than VTSAX and way better than any small value fund.

I think the growth tilt scares many BH away. Do you tilt to value in your tax advantaged accounts? I have not needed to TLH VIGAX yet (pretty good run aye?). What is your TLH strategy? Mine would be to convert to VUG, then TLH so another low cost growth index ETF.


I do hold some VIGAX in my taxable. Because of its tax efficiency I plan to continue adding to it. But I plan to still keep VTSAX as my core holding in my taxable.

[grabiner]

This is all correct. The foreign tax withheld is lost if you hold international stock in a tax-advantaged account. In a taxable account, you get back the foreign tax, but you pay more US tax because of the higher dividend yield and more non-qualified dividends. The net effect tends to make it close to break-even, depending on your tax situation.

If the net effect is break even, that seems like a better deal than VTSAX/VTI, where it seems 1/2 are qualified and 1/2 aren't, with no FTC. This is different than what dude2 said that VTSAX/VTI is usually 100% qualified.

I'm obviously new to taxable investing, so have zero direct experience, but if grabiner and GerryL and Toons are correct, then VXUS in taxable makes more sense than VTSAX/VTI.

Qualified dividend income for Vanguard funds in 2019

And for previous years: Qualified dividend income for Vanguard funds in 2018 (replace 2018 by another year in the URL to get the values for that year)

Total Stock Market has had about 94% qualified dividend in recent years, and much of the non-qualified portion is Qualified Business Income (from REITs) which is only 80% taxable. Total International has had about 70% qualified dividends, and a higher overall yield.

You need to work out the numbers for your own tax situation. If you are in the 12% tax bracket, you pay no tax on qualified dividends, and the foreign tax credit on the international index exceeds the tax on its non-qualified dividends, so it has negative tax cost. If you are in a high tax bracket, you pay high tax on the non-qualified dividends in the international index, which is likely to give the international fund a higher tax cost. If you are in a high-tax state, you pay more state tax on the higher dividend yield of the international fund; thus, unless your state offers a foreign tax credit (only a few states do this), you should prefer the US fund in your taxable account.

[zie]

This is all correct. The foreign tax withheld is lost if you hold international stock in a tax-advantaged account. In a taxable account, you get back the foreign tax, but you pay more US tax because of the higher dividend yield and more non-qualified dividends. The net effect tends to make it close to break-even, depending on your tax situation.

If the net effect is break even, that seems like a better deal than VTSAX/VTI, where it seems 1/2 are qualified and 1/2 aren't, with no FTC. This is different than what dude2 said that VTSAX/VTI is usually 100% qualified.

I'm obviously new to taxable investing, so have zero direct experience, but if grabiner and GerryL and Toons are correct, then VXUS in taxable makes more sense than VTSAX/VTI.

Qualified dividend income for Vanguard funds in 2019

And for previous years: Qualified dividend income for Vanguard funds in 2018 (replace 2018 by another year in the URL to get the values for that year)

Total Stock Market has had about 94% qualified dividend in recent years, and much of the non-qualified portion is Qualified Business Income (from REITs) which is only 80% taxable. Total International has had about 70% qualified dividends, and a higher overall yield.

You need to work out the numbers for your own tax situation. If you are in the 12% tax bracket, you pay no tax on qualified dividends, and the foreign tax credit on the international index exceeds the tax on its non-qualified dividends, so it has negative tax cost. If you are in a high tax bracket, you pay high tax on the non-qualified dividends in the international index, which is likely to give the international fund a higher tax cost. If you are in a high-tax state, you pay more state tax on the higher dividend yield of the international fund; thus, unless your state offers a foreign tax credit (only a few states do this), you should prefer the US fund in your taxable account.

Awesome!! For my personal situation, I'm in a no income tax state, so I'll double check, but it seems like it makes sense for me personally to take advantage of VXUS and the FTC in Taxable.

But I think you managed to answer this side-thread very definitively, so thank you!

[abuss368]

100% FXAIX (Fidelity 500 index fund expense ratio 0.015) in all of my accounts.

If you hold the same fund in all account how do you rebalance? I guess you can’t and don’t have any need to as you are holding enough in cash. Simplicity.

[Ferdinand2014]

100% FXAIX (Fidelity 500 index fund expense ratio 0.015) in all of my accounts.

If you hold the same fund in all account how do you rebalance? I guess you can’t and don’t have any need to as you are holding enough in cash. Simplicity.

Correct. The party comes later. I have never sold a share, although my original purchases were in different share classes which have all morphed into FXAIX. My DW owns VTSAX (recent change with improvements to her 403b plan) as her only holding.

[davebeers]

100% Wellesley, and taking dividends and capital gains as income. In the 12% bracket

[pascalwager]

At Vanguard:

VTSAX (Total US)
VTIAX (Total Intl)
VAIPX (Inflation Protected Securities)

Tax efficiency for the stock funds and insufficient space in Rollover IRA for all of my VAIPX.

At Schwab:

DFA and Vanguard size/value/EM MFs and ETFs. Fairly tax efficient because of the ETFs with no capital gains.

[FlyHighAnalyzeThis]

This is my split

VTSAX - 48%
VTIAX - 23%
VTBLX - 30%

[aj76er]

VTI and VXUS

Also hold some AAPL and cash (about 6 months of expenses), but I consider these holdings to be outside my core portfolio.

All international stocks (VXUS) are in taxable and all bonds (total U.S. bond market) are in tax deferred. U.S. stocks fill the rest of taxable/Roth/401k/HSA (in a mix of VTI & S&P).

[JoMoney]

What fund or funds are in your taxable account? Why did you choose that fund?

Currently VFIAX (Vanguard's S&P 500 fund) is the only mutual fund I own in a taxable account.
It's very low-cost, tax efficient, and Vanguard was where I was doing most of my savings/investing. I also used to own their Federal Money Market fund and at times their Short-Term Bond Index fund - I used to do most of my short term cash 'savings' in those funds, but no longer.

I've been in the process of trying to funnel all of my taxable 'mutual funds' into my retirement accounts, and I expect that at some point in the not too distant future I won't have any taxable mutual funds or yearly 1099-B statements.
Going forward I expect to be using U.S. Savings Bonds and high-yield bank accounts as the only assets in my 'taxable' accounts.

[anon_investor]

What fund or funds are in your taxable account? Why did you choose that fund?

Currently VFIAX (Vanguard's S&P 500 fund) is the only mutual fund I own in a taxable account.
It's very low-cost, tax efficient, and Vanguard was where I was doing most of my savings/investing. I also used to own their Federal Money Market fund and at times their Short-Term Bond Index fund - I used to do most of my short term cash 'savings' in those funds, but no longer.

I've been in the process of trying to funnel all of my taxable 'mutual funds' into my retirement accounts, and I expect that at some point in the not too distant future I won't have any taxable mutual funds or yearly 1099-B statements.
Going forward I expect to be using U.S. Savings Bonds and high-yield bank accounts as the only assets in my 'taxable' accounts.

How are you "funneling" your taxable account into retirement accounts?

[Onlineid3089]

Currently 100% VTSAX in our taxable account. Might start adding some VTIAX when we hit 100,000 in taxable. That'll probably be at least a year and a half down the road so haven't given it serious consideration yet.

[GoPackGo]

VXF - Vanguard Extended Market ETF (most of my taxable and is my extended market allocation for my whole portfolio)
VOO - Vanguard S&P 500 ETF (to fill out the rest of my taxable)

I chose these funds for tax efficiency.

[JoMoney]

What fund or funds are in your taxable account? Why did you choose that fund?

Currently VFIAX (Vanguard's S&P 500 fund) is the only mutual fund I own in a taxable account.
It's very low-cost, tax efficient, and Vanguard was where I was doing most of my savings/investing. I also used to own their Federal Money Market fund and at times their Short-Term Bond Index fund - I used to do most of my short term cash 'savings' in those funds, but no longer.

I've been in the process of trying to funnel all of my taxable 'mutual funds' into my retirement accounts, and I expect that at some point in the not too distant future I won't have any taxable mutual funds or yearly 1099-B statements.
Going forward I expect to be using U.S. Savings Bonds and high-yield bank accounts as the only assets in my 'taxable' accounts.

How are you "funneling" your taxable account into retirement accounts?

By spending / paying current expenses out of the taxable mutual fund account while contributing maximum to 401k... I've also been contributing/moving assets to cash/savings bonds (which isn't technically retirement accounts, but is contributing to the reduction of my taxable mutual fund account).

[1789]

Only CASH in taxable account. SPAXX

[avp]

Only CASH in taxable account. SPAXX

May I ask why you're holding it in SPAXX?

[avp]

Oldest fund I now have is Fidelity Total Stock. I started buying Vanguard Total Stock because of the ETF share class. I then tax loss harvested underwater shares of Vanguard Total Stock into Vanguard 500. No bond funds in taxable. FSKAX, VTSAX, VFIAX

I hold FSKAX in my taxable and I, too, am starting to go with VTI in the taxable. Looking to TLH this year after some planning!

[1789]

Only CASH in taxable account. SPAXX

May I ask why you're holding it in SPAXX?

Sure. I think that was one of default CASH reserve funds available In Fidelity and we dont chase yield on our CASH. We only have CASH in brokerage account for emergency needs and all stocks are in tax deferred accounts. 401ks and Roth IRAs.

[Taz]

VTSAX - Vanguard Total Stock Market
VMRXX - Vanguard Cash Reserves Federal Money Market Fund

Boring but it works for us.
EDIT: Forgot about a bunch of EE Bonds bought while I was in the Navy. Probably need to start cashing them in.

[wander]

VOO and EE Bonds.

[Blue456]

Wellington.

[Erwin007]

Wellington.

I would think that much bond exposure in a taxable account would be not ideal for most investors.

[Blue456]

Wellington.

I would think that much bond exposure in a taxable account would be not ideal for most investors.

That is correct. On paper this is definitely not optimal for me. However as Dr. Bernstein said, a suboptimal plan you can stick with is better than an optimal one.

[Erwin007]

Wellington.

I would think that much bond exposure in a taxable account would be not ideal for most investors.

That is correct. On paper this is definitely not optimal for me. However as Dr. Bernstein said, a suboptimal plan you can stick with is better than an optimal one.

Did you buy that fund before a big salary increase? Or before you knew of the tax implications? Or if you’re below a certain AGI then it likely doesn’t matter either.

[Blue456]

Wellington.

I would think that much bond exposure in a taxable account would be not ideal for most investors.

That is correct. On paper this is definitely not optimal for me. However as Dr. Bernstein said, a suboptimal plan you can stick with is better than an optimal one.

Did you buy that fund before a big salary increase? Or before you knew of the tax implications? Or if you’re below a certain AGI then it likely doesn’t matter either.

I got it fully knowing the tax implications.

[LilyFleur]

SCHB*
SCHD*
Apple (play money)
Cash (Emergency fund, or can use to pay taxes for future Roth rollovers)

I do not reinvest the dividends but use them to pay bills (I'm retired.)

[ImmigrantSaver]

VTWAX. Less tax efficient than VTSAX/VTIAX combo but hides the underperformance of VTIAX which is good for my SWAN
VTMSX - that's from TLH of VSIAX. I only add to it annually and will probably keep VTMSX fund even if TLH back opportunity arises

[Chrono Triggered]

What fund or funds are in your taxable account? Why did you choose that fund?

VOO - Vanguard S&P500 ETF
IJS - S&P600 (Small Cap Value) ETF
VXUS - Vanguard Total International ETF

Why? I have an extensive SCV tilt so I had to purchase some of it in taxable, which actually happens to be pretty tax efficient. The other funds also supplement my AA. They are not rigid, however. I tax-loss harvested IXUS (iShares Total Intl) to VXUS earlier in the year, for example.

[goodenyou]

VTI
VTSAX
VFINX
VWIUX
VTIAX
SWISX
VUSXX
VMRXX

[Chrono Triggered]

My taxable account contains my most tax-efficient holdings:

Total Stock Market Index (VTSAX)
Developed Markets ETF (VEA)
Emerging Markets Index (VEMAX)
FTSE All-World Ex-US Small-Cap ETF (VSS)
iShares EAFE Value Factor ETF (IVLU)

My Roth IRA and HSA hold the less tax-efficient US value and REIT stocks; US small-cap is in my employer plan.

Can you elaborate on why a fund such as VSS is more tax efficient than a US small-cap fund such as IJS (iShares Small Cap Value)? Are these differences tax bracket specific?

[adalaio]

VTI only. Tax efficient, simple.

[grabiner]

My taxable account contains my most tax-efficient holdings:

Total Stock Market Index (VTSAX)
Developed Markets ETF (VEA)
Emerging Markets Index (VEMAX)
FTSE All-World Ex-US Small-Cap ETF (VSS)
iShares EAFE Value Factor ETF (IVLU)

My Roth IRA and HSA hold the less tax-efficient US value and REIT stocks; US small-cap is in my employer plan.

Can you elaborate on why a fund such as VSS is more tax efficient than a US small-cap fund such as IJS (iShares Small Cap Value)? Are these differences tax bracket specific?

For VSS versus IJS (or Vanguard's similar funds) the reason is that IJS is a value fund; value funds are less tax-efficient than blend funds because of the higher dividend yield. A US small-cap blend index would likely be about as tax-efficient as VSS; you have to work out the numbers for your own tax situation.

But the main reason that I don't hold a US small-cap index in my taxable account is that I have a US small-cap fund available in my employer plan, while I don't have an international small-cap fund available there.

I hold IVLU in taxable and VFVA (Vanguard US Factor Value ETF) in my Roth IRA because IVLU appears to be more tax-efficient. It has a higher percentage of qualified dividends than most international funds, and the yield difference isn't that large.