Are these funds too similar to have both? If not, which one should I keep? [And request for portfolio review.]

[robindbee]

These are both in my Roth portion of portfolio. One is actively managed, other is index. Should I keep both or absorb one into the other? Thanks, as always!


Vanguard Equity Income Fund Inv/VEIPX (Large Value) Vanguard Dividend Apprec Idx Adm/VDADX (Large Blend)

[OP’s duplicate post requesting a portfolio review was merged into this thread below - moderator ClaycordJCA]

[NateH]

I would use neither, but I don't know your Asset Allocation plan details.
There are better funds available for both Large Value and Large Blend.

Since you are in tax-advantaged account, no harm in swapping both for something that follows your AA.

[deltaneutral83]

If they have a different CUSIP you are not going to be hit with a wash sale by your brokerage. If you get audited by the IRS, you'd be the first person I've seen get audited on a wash sale with different CUSIPs. But again, the burden is on the taxpayer to decide beforehand what is "substantially identical"

[Makefile]

If they have a different CUSIP you are not going to be hit with a wash sale by your brokerage. If you get audited by the IRS, you'd be the first person I've seen get audited on a wash sale with different CUSIPs. But again, the burden is on the taxpayer to decide beforehand what is "substantially identical"

Poster jason2459 has described having gone through a "full bore" IRS audit in which everything was questioned including all capital losses as to whether they were wash sales, and looking at the prospectus to determine whether investment companies were substantially identical. See: viewtopic.php?p=6699373#p6699373 for one description.

[clip651]

If they have a different CUSIP you are not going to be hit with a wash sale by your brokerage. If you get audited by the IRS, you'd be the first person I've seen get audited on a wash sale with different CUSIPs. But again, the burden is on the taxpayer to decide beforehand what is "substantially identical"

Since these are in the OP's Roth, there is only a potential issue with wash sales if OP also holds either of these in taxable. If they are only held in Roth (and/or traditional IRA, and/or 401K or other tax sheltered account, but not in taxable), then there is no wash sale issue to be concerned with.

Maybe OP can specify why they are worried about the funds being too similar. It depends on what the goals are for the overall portfolio, and how these fit in.

[deltaneutral83]

If they have a different CUSIP you are not going to be hit with a wash sale by your brokerage. If you get audited by the IRS, you'd be the first person I've seen get audited on a wash sale with different CUSIPs. But again, the burden is on the taxpayer to decide beforehand what is "substantially identical"

Poster jason2459 has described having gone through a "full bore" IRS audit in which everything was questioned including all capital losses as to whether they were wash sales, and looking at the prospectus to determine whether investment companies were substantially identical. See: viewtopic.php?p=6699373#p6699373 for one description.

Very interesting, but as he pointed out, the wash sale portion of his audit wasn't the target, once they decided to audit him initially (and I don't know if the IRS tells you what the red flag was), I'm assuming they left no stone unturned in his entire tax situation and it appeared they didn't want to give him much wiggle room on any issue (denoted by the $400 deposit which for most people could be explained a birthday gift or something trivial like that).

Maybe OP can specify why they are worried about the funds being too similar. It depends on what the goals are for the overall portfolio, and how these fit in.

If one fund is Large Blend and the other is Large Value then that pretty much negates any wash sale, right? Of course if your agent isn't leaving with his pound of flesh then you have bigger issues, those two funds are not just not substantially identical, but they are indeed substantially different.

[Makefile]

Very interesting, but as he pointed out, the wash sale portion of his audit wasn't the target, once they decided to audit him initially (and I don't know if the IRS tells you what the red flag was), I'm assuming they left no stone unturned in his entire tax situation and it appeared they didn't want to give him much wiggle room on any issue (denoted by the $400 deposit which for most people could be explained a birthday gift or something trivial like that).

I suspect it was one of these: https://www.lataxattorney.com/irs-natio ... udits.html

[SmileyFace]

I would swap them both for VTSAX but I don't know what you are trying to do.
Why do you have these funds?

[robindbee]

[Second thread merged here - moderator ClaycordJCA]

I am original poster (Is it OK to bump this and get portfolio review?)

I would like AA to be 60% stock 40% bond. I am 69 yo and struggling to achieve AA I want and how to draw down effectively until I have to take RMD (which for me now is 73)

According to my VG portfolio tool: 45% stock/33% bond/22% other (Which is my TIAA TRAD I consider bond fund)
Because Stocks/Bonds scattered in different funds, it was difficult for me to get portfolio to align but I am almost there, I think

VG Taxable Brokerage:
VTSAX Total Stock $27K

Regular Taxable IRA :
VTSAX Total Stock $77K
VWIAX Wellesley $160K

VG Roth:
VBTLX Total Bond $47K
VDADX Div Appreciation $18K
VEIPX Equity Income $17K

TIAA TRAD $97K

Income: SS $24K PA
Need to use approx 4% drawdown to meet monthly expenses and desired travel needs
DEC 2022 first time I took dividends and cap gains and I think I want to continue doing that for now to close gap

Single/Fed Tax 10%

Thanks!

[arcticpineapplecorp.]

if you want 60/40 but you're 45/55 don't have total bond in the Roth IRA (that's kinda wasted there. You want growth in Roth and bonds in traditional IRA).

If you replace the total bond with stock in the Roth IRA that would instead give you $145k in fixed income out of total portfolio of $443 for 32% in bonds so 68% in stock. So that's closer, but overshot a little.

If you switch the total stock in traditional IRA for total bond that adds $77k to the $145k in bonds for $222k in bonds out of $443 total for allocation of 50/50 portfolio.

If you want the same funds but the amounts to be 60/40 ($266k stocks/$177k fixed income) I'd do this (especially considering you can switch funds/amounts in IRA or Roth with no tax consequences):
VG Taxable Brokerage:
VTSAX Total Stock $27K

Regular Taxable IRA :
VTSAX Total Stock $77K
VWIAX Wellesley $160K
VTSAX Total Stock $122K
VWIAX Wellesley $115K (70% is bonds)

VG Roth:
VBTLX Total Bond $47K
VTSAX Total Stock$47K
VDADX Div Appreciation $18K
VEIPX Equity Income $17K

TIAA TRAD $97K

That oughta do it and get the right stocks in Roth and more bonds in tax deferred.

Only other question is if you want to tax loss harvest you don't want the same funds in taxable as trad IRA if you plan to buy more in taxable or reinvest dividends (easily solved by sending to settlement).

Other issue/question is why you want div appreciation and equity income in Roth.

Another issue is if you want any international stock which you seem to be lacking unless I'm missing something (if it's in div appreciation or equity income, but don't think so).

[robindbee]

"Other issue/question is why you want div appreciation and equity income in Roth."

I thought it was good spot for dividend funds, but I am wide open for changing. Suggestions? Considering I have
no foreign funds, should I switch these? I have read conflicting information here how they fit into a 2 fund portfolio?
If switch in order, suggestions for international/global fund?
Thank you so much for concrete detailed responses!

[ruralavalon]

In my opinion a 60/40 asset allocation is within the range of what is reasonable at age 69 and retired.

Here is my portfolio suggestion. Current portfolio =$443k. 4% drawdown = $22k annually.

Taxable Brokerage at Vanguard 06% of current portfolio; $27k)
06%, $27k, Vanguard Total Stock Market Index Fund (VTSAX) ER 0.04%

traditional IRA at Vanguard (53% of current portfolio; $237k)
18%, $80K, Vanguard Bond Stock Market Index Fund (VBTLX) ER 0.05%
35%, $190k, Vanguard Total Stock Market Index Fund (VTSAX) ER 0.04%

Roth IRA at Vanguard (19% of total portfolio, $82k)
19%, $82k, Vanguard Total Stock Market Index Fund (VTSAX) ER 0.04%

TIAA TRAD (22% of current portfolio; $97K)

For drawdown before Required Minimum Distributions (RMDs) I suggest first from sales of shares in the taxable account.

[robindbee]

Thank you so much for such a clear picture of 60/40 with all changes/percentages perfectly aligned. I am not good at the math part, it seems very easy when someone else writes it out for you, which you did and I appreciate it. Now I just have to LEAVE IT ALONE, delete VG website (so i don't look with my morning coffee every day) and live my life! Thanks.

[LadyGeek]

FYI - The OP is asking about a withdrawal strategy here: AA repaired--New Q: How to structure drawdown?

[squirrel1963]

These are both in my Roth portion of portfolio. One is actively managed, other is index. Should I keep both or absorb one into the other? Thanks, as always!


Vanguard Equity Income Fund Inv/VEIPX (Large Value) Vanguard Dividend Apprec Idx Adm/VDADX (Large Blend)

[OP’s duplicate post requesting a portfolio review was merged into this thread below - moderator ClaycordJCA]

ETF version of VDADX is VIG, which I love (along with SCHD).
I’d keep VDADX/VIG in favor of VEIPX.

[squirrel1963]

"Other issue/question is why you want div appreciation and equity income in Roth."

I thought it was good spot for dividend funds, but I am wide open for changing. Suggestions? Considering I have
no foreign funds, should I switch these? I have read conflicting information here how they fit into a 2 fund portfolio?
If switch in order, suggestions for international/global fund?
Thank you so much for concrete detailed responses!

Lots of BH here have bought the line that total stock market is better than dividend funds, this against Jack Bogle’s own advice, who loved dividend funds.
During the accumulation phase I would probably only keep total stock market, but once retired it’s perfectly appropriate to hold a dividend fund. I’m retired too and have about half in total stock market and half in dividend funds. So do millions of other retired people.

As to domestic va international, that’s another source of disagreement among BH. Personally I hold about 65% US and 35% international. Any allocation of 0% to 40% in international is probably good for a US based investor.

[arcticpineapplecorp.]

Lots of BH here have bought the line that total stock market is better than dividend funds, this against Jack Bogle’s own advice, who loved dividend funds.
During the accumulation phase I would probably only keep total stock market, but once retired it’s perfectly appropriate to hold a dividend fund. I’m retired too and have about half in total stock market and half in dividend funds. So do millions of other retired people.

if we look at the chart back as early as we can go for the three funds (vtsax and the div appreciation and equity income (and in the proportions the OP has it 52/49 for div appreciation/equity income here's what we see:



source:
https://www.portfoliovisualizer.com/bac ... tion3_3=24

sure div appreciation and veipx did better overall than vtsax but not hugely, anywhere from 0.18% to 0.23% over 16 years. In another 16 years who knows? And if you look at the "why" these other two funds outperformed, it's really just since 2020 and then mostly because total stock had a run up above the other two funds and then a run down. Look at the first 14 of those years. Pretty much neck and neck. You say in retirement 50/50 vtsax/vig and veipx is somehow superior? Not for the first 14 years it wasn't. So I have to ask, are we chasing recent performance here or what? I wouldn't stake my flag for 2 years of outperformance over a 16 year period. That doesn't look to me like an enduring outcome.

[robindbee]

"but once retired it’s perfectly appropriate to hold a dividend fund. I’m retired too and have about half in total stock market and half in dividend funds."

Thank you. What VG dividend funds do you like? I appreciate the backtest, I can't ever figure out how to use correctly! Is there one dividend fund you like over others or do you have a few different ones? If so, which ones? And am I correct in thinking that dividends/cap gains realized from Regular Ira would only be taxed at 10% if that? Thanks.