Can I exchange VTSAX for FSKAX?

[pnw_guy]

I use Vanguard for all of my investments. For TLH reasons in my taxable account, I want to exchange VTSAX for FSKAX in my IRA.

Does anyone know if I can exchange these funds? Or do I have to sell VTSAX and then buy FSKAX with the proceeds? I had always assumed that exchanging funds was a way to show that funds weren't being withdrawn from a tax-advantaged account, and thus, triggering a penalty since I'm not of retirement age.

[telemark]

EDIT: for some reason I assumed this was going to happen at Fidelity, but on re-reading I see that the IRA is held at Vanguard. I don't know the mechanics of doing this at Vanguard. Original message follows.

You can go through the motions of doing an exchange (I just previewed just this action at Fidelity) but the message you will see says

This trade will be completed at the next available price. This is not an exchange. This trade will take two business days to execute.

And if you click on the "Learn More" link you will see

Mutual Funds in Different Families

The settlement date for the sale is one business day later than the trade date. Therefore, the purchase takes place on the next business day following the sale. On the sale of your mutual funds, you will receive the next available price, and on the purchase of your mutual funds, you will receive the next business day's price.

This order first appears as a single order identifying both the sell and the buy. You can attempt to cancel the entire order before the sale executes. When the sell executes, the order will appear as a separate sell and buy order. After the sell order has executed, you can only attempt to cancel the buy order up until the buy order executes.

But the distinction turns out not to matter. In a taxable account this will always be a taxable event, however you do it. Likewise, in a tax-advantaged account, it will not, unless you actually withdraw money from the account. "Selling" simply transfers the money to the settlement fund inside your IRA.

[sycamore]

I use Vanguard for all of my investments. For TLH reasons in my taxable account, I want to exchange VTSAX for FSKAX in my IRA.

Does anyone know if I can exchange these funds? Or do I have to sell VTSAX and then buy FSKAX with the proceeds? I had always assumed that exchanging funds was a way to show that funds weren't being withdrawn from a tax-advantaged account, and thus, triggering a penalty since I'm not of retirement age.

While an exchange is one way to indicate you're not making a withdrawal, it's not the ONLY way.

Simply sell the fund. In a brokerage IRA account, selling a fund does not imply making a withdrawal.

Maybe there is a brokerage that considers "sell" and "withdraw" synonymous but I sure hope not!

Just pay attention to the user interface. In my experience it's pretty clear what action will be taken, whether it's a sell, a withdrawal, an exchange (which is really just a sell and a buy).

As for whether you can exchange directly from one fund family to another (like Vanguard to Fidelity) that depends on the brokerage. Some only allow an exchange between their own family of funds.

[Kookaburra]

FSKAX isn’t all that tax efficient, as it produces capital gains. You might want to use VFIAX as a TLH partner instead.

[exodusNH]

I use Vanguard for all of my investments. For TLH reasons in my taxable account, I want to exchange VTSAX for FSKAX in my IRA.

Does anyone know if I can exchange these funds? Or do I have to sell VTSAX and then buy FSKAX with the proceeds? I had always assumed that exchanging funds was a way to show that funds weren't being withdrawn from a tax-advantaged account, and thus, triggering a penalty since I'm not of retirement age.

In your IRA, since you don't have to worry about taxes, you have a couple of options.

Exchange VTSAX for VFIAX (S&P 500). They perform virtually identically. This will happen on the same day, at the end of trading. If you only intend to hold this for 31 days, that's the easiest, since the funds perform nearly identically over the long run; over such a short period, they should be indistinguishable.

If you're going to hold it for longer, you can buy 82% VFIAX and 18% VEXAX, the completion index. That will get you nearly the same holdings at VTSAX. Similar to the above, you can do this as an exchange that will take place on the same day.

[anon_investor]

I use Vanguard for all of my investments. For TLH reasons in my taxable account, I want to exchange VTSAX for FSKAX in my IRA.

Does anyone know if I can exchange these funds? Or do I have to sell VTSAX and then buy FSKAX with the proceeds? I had always assumed that exchanging funds was a way to show that funds weren't being withdrawn from a tax-advantaged account, and thus, triggering a penalty since I'm not of retirement age.

No, Vanguard only allows "exchanges" within the same fund family. So you can exchange into other Vanguard mutual funds. I suggest VFIAX (S&P 500 index) or VLCAX (large cap index).

[ruralavalon]

I use Vanguard for all of my investments. For TLH reasons in my taxable account, I want to exchange VTSAX for FSKAX in my IRA.

Does anyone know if I can exchange these funds? Or do I have to sell VTSAX and then buy FSKAX with the proceeds? I had always assumed that exchanging funds was a way to show that funds weren't being withdrawn from a tax-advantaged account, and thus, triggering a penalty since I'm not of retirement age.

You cannot "exchange" between the two funds. You must sell one and buy the other. Done inside your IRA this will not be a withdrawal or trigger tax liability.

[rkhusky]

When you sell you will be asked where you want the proceeds sent. If you choose your current account (IRA), including settlement account, you won't be withdrawing. If you choose a different account (taxable, bank account, send a check, etc), you will be withdrawing.

Will Vanguard charge you a fee for purchasing FSKAX?

[dan7800]

I am considering exchanging VTSAX for FSKAX in my Vanguard TA accounts. The reason is that this way, I can avoid any wash sales (enabling me to switch from VTI/ITOT in my taxable account and keep things simple).

Thoughts?

[toddthebod]

I use Vanguard for all of my investments. For TLH reasons in my taxable account, I want to exchange VTSAX for FSKAX in my IRA.

Does anyone know if I can exchange these funds? Or do I have to sell VTSAX and then buy FSKAX with the proceeds? I had always assumed that exchanging funds was a way to show that funds weren't being withdrawn from a tax-advantaged account, and thus, triggering a penalty since I'm not of retirement age.

No, you cannot do a direct exchange (i.e., simultaneous sell and buy). You have to sell one and buy the other the next day. This is not a taxable event or a withdrawal. Vanguard may allow you to place the order all at once, but it will execute the sale after COB on the day you place the order and the purchase after COB the following business day.

FSKAX isn’t all that tax efficient, as it produces capital gains. You might want to use VFIAX as a TLH partner instead.

This is in his IRA. Capital gains are irrelevant.

[welderwannabe]

FSKAX isn’t all that tax efficient, as it produces capital gains. You might want to use VFIAX as a TLH partner instead.

According to Fidelity's research tab on the fund it hasn't thrown off capital gains since April of 2019, and when it did it was 12.7 cents a share on a fund with a NAV > $100.

[dan7800]

For Vanguard customers, using FSKAX instead of VTSAX in TA accounts seems to make a lot of sense. This would enable them to use VTI/ITOT as TLH partners in taxable accounts while not triggering any wash sales.

Any thoughts regarding this? I'm considering moving all of my VTI in my TA to FSKAX just to make TLH easier.

[toddthebod]

For Vanguard customers, using FSKAX instead of VTSAX in TA accounts seems to make a lot of sense. This would enable them to use VTI/ITOT as TLH partners in taxable accounts while not triggering any wash sales.

Any thoughts regarding this? I'm considering moving all of my VTI in my TA to FSKAX just to make TLH easier.

Why not use SCHB and avoid the transaction fee?

[dan7800]

For Vanguard customers, using FSKAX instead of VTSAX in TA accounts seems to make a lot of sense. This would enable them to use VTI/ITOT as TLH partners in taxable accounts while not triggering any wash sales.

Any thoughts regarding this? I'm considering moving all of my VTI in my TA to FSKAX just to make TLH easier.

Why not use SCHB and avoid the transaction fee?

I do not believe that FSKAX has a transaction fee.

[toddthebod]

For Vanguard customers, using FSKAX instead of VTSAX in TA accounts seems to make a lot of sense. This would enable them to use VTI/ITOT as TLH partners in taxable accounts while not triggering any wash sales.

Any thoughts regarding this? I'm considering moving all of my VTI in my TA to FSKAX just to make TLH easier.

Why not use SCHB and avoid the transaction fee?

I do not believe that FSKAX has a transaction fee.

When buying at Vanguard? I think it's $50.

https://investor.vanguard.com/mutual-fu ... IntExt=EXT

[dan7800]

For Vanguard customers, using FSKAX instead of VTSAX in TA accounts seems to make a lot of sense. This would enable them to use VTI/ITOT as TLH partners in taxable accounts while not triggering any wash sales.

Any thoughts regarding this? I'm considering moving all of my VTI in my TA to FSKAX just to make TLH easier.

Why not use SCHB and avoid the transaction fee?

I do not believe that FSKAX has a transaction fee.

When buying at Vanguard? I think it's $50.

https://investor.vanguard.com/mutual-fu ... IntExt=EXT

Here is what I see when starting an order for $3000 in my Vanguard account to buy FSKAX

Estimated transaction details
Buy amount $3,000.00
Vanguard Brokerage fee None
Net amount $3,000.00

From the wording on the Vanguard website, it says "up to $50"



"Fidelity's FundsNetwork allows you to invest in mutual funds from hundreds of fund companies outside of Fidelity, including many available with no transaction fees."

https://www.fidelity.com/mutual-funds/overview

[dan7800]

For Vanguard customers, using FSKAX instead of VTSAX in TA accounts seems to make a lot of sense. This would enable them to use VTI/ITOT as TLH partners in taxable accounts while not triggering any wash sales.

Any thoughts regarding this? I'm considering moving all of my VTI in my TA to FSKAX just to make TLH easier.

Why not use SCHB and avoid the transaction fee?

I do not believe that FSKAX has a transaction fee.

When buying at Vanguard? I think it's $50.

https://investor.vanguard.com/mutual-fu ... IntExt=EXT

Here is what I see when starting an order for $3000 in my Vanguard account to buy FSKAX

Estimated transaction details
Buy amount $3,000.00
Vanguard Brokerage fee None
Net amount $3,000.00

From the wording on the Vanguard website, it says "up to $50"



"Fidelity's FundsNetwork allows you to invest in mutual funds from hundreds of fund companies outside of Fidelity, including many available with no transaction fees."

https://www.fidelity.com/mutual-funds/overview

Just for the knowledge of everyone else: I called Vanguard to inquire about purchasing FSKAX in my TA accounts, and they said that there would be no broker fee.

[nantha]

Question:

I buy VTSAX within my 401k withing Fidelity Brokerage. Doing it for a while and have not seen any transaction fee charge. Wondering is it because I am buying within 401k and not a taxable account?