VWUAX Inheritance, A winning 10 year proposition? [Vanguard US Growth]

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Topic Author
KatieG
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Joined: Fri May 13, 2022 1:08 pm

VWUAX Inheritance, A winning 10 year proposition? [Vanguard US Growth]

Post by KatieG »

My question is, "Should I hold VWUAX Vanguard World Fund - Vanguard U.S. Growth Fund Admiral Shares until the price goes back up?".
The background of my question is that I inherited 824 shares of this on 11/16/2021, when the share price was 205.77. I received it after probate on 5/6/2022 when the share price was 116.26. Yesterday, the share price was 106.24. I think the market will eventually recover, and I don't expect to need the money for about a decade, so is it reasonable to wait it out? Thanks.
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arcticpineapplecorp.
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Re: VWUAX Inheritance, A winning 10 year proposition? [Vanguard US Growth]

Post by arcticpineapplecorp. »

KatieG wrote: Fri May 13, 2022 1:25 pm My question is, "Should I hold VWUAX Vanguard World Fund - Vanguard U.S. Growth Fund Admiral Shares until the price goes back up?".
The background of my question is that I inherited 824 shares of this on 11/16/2021, when the share price was 205.77. I received it after probate on 5/6/2022 when the share price was 116.26. Yesterday, the share price was 106.24. I think the market will eventually recover, and I don't expect to need the money for about a decade, so is it reasonable to wait it out? Thanks.
my condolences and welcome to the group.

1. first off, i'm not sure where the term "vanguard world fund..." comes from. This fund (vwuax) is not a world fund. It is a Vanguard U.S. Growth Fund Admiral Shares as you say, so i'm not sure what the term "world fund" comes from. can you elaborate?

2. next question is if you are thinking of selling this fund, what would you be thinking of replacing it with?

3. next, is this fund in a taxable account or a tax advantaged account (inherited IRA)?

4. if it's in a taxable account and you plan to invest in something else, if the alternate fund is not substantially identical you could take advantage of tax loss harvesting since you could sell (roughly) for $106.24 per share X 824 shares ($87,541.76) but the value when you inherited (not received it) was $205.77/share after the original owner's death ($169,554.48). That's your step up in basis. Selling gets you a tax loss of $169,554.48 - $87,541.76 = $82,012.72 in losses. You can either use those to offset gains on sale of other stocks (if you have them) and if not you can use $3000 per year to reduce your ordinary income (carried over until used up 27.33 years or if you sell other investments in the future with gains equal or exceeding remaining losses not used up).

5. it's also less diversified (267 stocks) vs 4124 stocks in the total stock market index fund.

6. you're asking if this fund will recover. who knows? probably but is it the right fund to own? It's not an index fund so it's actively managed. That could underperform a growth index. And what if value outperforms growth? Don't you want both? Here's how your fund did compared to the total stock market index fund as far back as portfolio visualizer goes (had to use investor shares for both to go back as far as we could):

Image

source:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

7. you can see it underperformed the market, had higher risk (standard deviation) but lower risk adjusted returns (sharpe/sortino ratios) and is more expensive (0.28% expense ratio compared with 0.04% for total stock market index fund)

make sense? questions?
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WoodSpinner
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Re: VWUAX Inheritance, A winning 10 year proposition? [Vanguard US Growth]

Post by WoodSpinner »

OP,

Out of curiosity did you as the beneficiary indicate you wanted cash or to inherit the funds in-kind? Were other beneficiaries also contacted?

That’s a big drop….

WoodSpinner
Topic Author
KatieG
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Joined: Fri May 13, 2022 1:08 pm

Re: VWUAX Inheritance, A winning 10 year proposition? [Vanguard US Growth]

Post by KatieG »

WoodSpinner: We all agreed we would like to receive the shares instead of cash, so that we could get the tax benefit of the loss. The delay of the distribution was out of our hands.
Topic Author
KatieG
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Joined: Fri May 13, 2022 1:08 pm

Re: VWUAX Inheritance, A winning 10 year proposition? [Vanguard US Growth]

Post by KatieG »

arcticpineapplecorp: Thank you for your condolences, for welcoming me to the group, for your comments and for the VWUAX performance chart you shared. I discussed your responses with my brother, who explained to me that I was partaking of the Sunk Cost Fallacy by wanting to recover my losses by hanging on to VWUAX. I'm not certain what I will reinvest the money in, but it will probably be through the advise of the Vanguard PAS, based on my risk tolerance. Thanks so much for responding to my post. KatieG

The World Fund name came from here: https://finance.yahoo.com/quote/VWUAX/s ... ty?p=VWUAX.
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