Not sure what to do with legacy Russell ETFs

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847
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Not sure what to do with legacy Russell ETFs

Post by 847 »

Hello all,

We hold S&P 500 in most accounts. One of the taxable accounts has legacy holdings with low basis. Should we sell, paying the 15% LT capital gain, rebalance slightly, or leave alone?

25% = IWF, iShares Russell 1000 Growth
24% = MMF
22% = IWD, iShares Russell 1000 Value ETF
11% = IWP, iShares Russell Mid-Cap Growth ETF
9% = IWS, iShares Russell Mid-Cap Value ETF
4.5% = VOO, Vanguard S&P 500 ETF [formerly iShares Russell 2000 Value ETF holding]
4.5% = IWO, iShares Russell 2000 Growth ETF

Thank you
Accumulating millennials, S&P 500 all day
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retired@50
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Re: Not sure what to do with legacy Russell ETFs

Post by retired@50 »

I'd look at the expense ratios and the dividends.

I'd be trying to get out of the highest ER funds, and/or the funds that create the most tax drag due to either high dividend yields, or low percentages of qualified dividends.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
livesoft
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Re: Not sure what to do with legacy Russell ETFs

Post by livesoft »

I would leave alone and earmark these shares as the ones that I am likely to donate to our Donor Advised Fund some time in the future.
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847
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Re: Not sure what to do with legacy Russell ETFs

Post by 847 »

retired@50 wrote: Mon Jun 10, 2024 11:02 am I'd look at the expense ratios and the dividends.

I'd be trying to get out of the highest ER funds, and/or the funds that create the most tax drag due to either high dividend yields, or low percentages of qualified dividends.

Regards,
Thanks, expense ratios are between 0.19% and 0.24%. Compared to VOO's 0.03%
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jjj_22
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Re: Not sure what to do with legacy Russell ETFs

Post by jjj_22 »

You have a bunch of big/mid/small growth/value funds that probably more or less balance out to approximate a total market just using a bunch of funds instead of one.

You could check historically how closely that portfolio tracks to something like VTI to double check. Personally I wouldn’t pay any cap gains tax just to basically hold the same stuff but in one box with a different label on it.
OhioGozaimas
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Re: Not sure what to do with legacy Russell ETFs

Post by OhioGozaimas »

It looks like the 76% in Russell funds originally might have been trying to represent a total stock market fund.

If you have S&P 500 everywhere else, I assume you have no interest in holding any TSM. (?)

Eyeballing it, it appears that the Russell funds have a weighted ER of ~20 bps vs 3 bps for VOO/VTI.

(Think about: What percentage of your total taxable assets do the Russell funds represent? And the “extra” ER represents how many dollars per year?)

Possibly, roll this account into another taxable account, so you quit seeing it/dealing with it in isolation. Maybe think of it as a chunk of “enhanced-VOO.”

Over time, you will come up with its ultimate fate...

Good luck.
Map out your future – but do it in pencil. – Jon Bon Jovi
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BrooklynInvest
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Re: Not sure what to do with legacy Russell ETFs

Post by BrooklynInvest »

The money market fund aside, for low-ish cost index funds that you're not contributing to I'd leave well enough alone.

In total they're a tolerable approximation of the market with some overlap and gaps but who cares. Your money's better spent in a slightly inefficient allocation than it is paying the gains.
BirdFood
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Re: Not sure what to do with legacy Russell ETFs

Post by BirdFood »

My asset allocation spreadsheet has columns for the major components of a fund--X% large cap, X% small/mid cap, etc. Then it shows me the total dollar and percentage allocation to each category at the bottom.

I would probably just force those to fit that model, so they're accounted for in my total allocation, and leave them alone. (For example, I'd figure out roughly what percentage of Russell 1000 is large cap (or is it all large cap by definition?). I'd declare both of the Mid-Caps to be small/mid cap. And so on.)

I guess if the sad day comes that any of them are break-even or a loss, you could swap them for the preferred funds then.

This is assuming that you do the math on those ERs and confirm that they aren't costing you enough to be worth selling and paying the taxes. I feel like they probably aren't, but I can't claim any meaningful intuition for that.
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anon_investor
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Re: Not sure what to do with legacy Russell ETFs

Post by anon_investor »

BrooklynInvest wrote: Mon Jun 10, 2024 12:31 pm The money market fund aside, for low-ish cost index funds that you're not contributing to I'd leave well enough alone.

In total they're a tolerable approximation of the market with some overlap and gaps but who cares. Your money's better spent in a slightly inefficient allocation than it is paying the gains.
+1. I would just shift the dividends to S&P500 and leave those ETFs alone.
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retired@50
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Re: Not sure what to do with legacy Russell ETFs

Post by retired@50 »

847 wrote: Mon Jun 10, 2024 11:06 am
retired@50 wrote: Mon Jun 10, 2024 11:02 am I'd look at the expense ratios and the dividends.

I'd be trying to get out of the highest ER funds, and/or the funds that create the most tax drag due to either high dividend yields, or low percentages of qualified dividends.

Regards,
Thanks, expense ratios are between 0.19% and 0.24%. Compared to VOO's 0.03%
The legacy funds are certainly more expensive, but it may not be "worth it" to pay the capital gains taxes just to eliminate them from your portfolio. Keep an eye out for tax loss harvesting opportunities in the future, or donate to charity.

You can always review the wiki page on paying a tax cost to switch funds to see if it makes sense for your particular case.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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847
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Re: Not sure what to do with legacy Russell ETFs

Post by 847 »

Thank you everyone!
Accumulating millennials, S&P 500 all day
bombcar
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Re: Not sure what to do with legacy Russell ETFs

Post by bombcar »

It'd depend on the total dollar amount, for me.

If the tax wouldn't be a terrible hard hit, I'd probably simplify just to simplify.

Even if it was moderately large, they'd be the first on the chopping block.
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