Is it OK to exchange a stock fund within a retirement account?

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Atticus713
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Is it OK to exchange a stock fund within a retirement account?

Post by Atticus713 »

Hi Forum,
Let's say someone has been contributing regularly to their 401k by investing into the Vanguard Total Market Index Fund (VTSAX) for several years. If, just out of preference since the returns have been pretty comparable, they wanted to instead start regularly investing into the Vanguard 500 Index (VFIAX), is there any downside to exchanging their existing FTSAX holdings for VFIAX within their 401k?
As always, many thanks!
Atticus713
“Simplicity is the master key to financial success” J.C. Bogle | S&P 500 Index + Total U.S. Bond Index | Age-10 in Bonds at start; 30:70 at retirement | Rebalance Annually | Stay the Course
BogleTaxPro
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Re: Is it OK to exchange a stock fund within a retirement account?

Post by BogleTaxPro »

Atticus713 wrote: Tue Jul 09, 2024 10:43 am Hi Forum,
Let's say someone has been contributing regularly to their 401k by investing into the Vanguard Total Market Index Fund (VTSAX) for several years. If, just out of preference since the returns have been pretty comparable, they wanted to instead start regularly investing into the Vanguard 500 Index (VFIAX), is there any downside to exchanging their existing FTSAX holdings for VFIAX within their 401k?
As always, many thanks!
Atticus713
There are no tax implications for exchanging funds within a 401K. As to whether there are other downsides to these particular choices, I'll let others weigh in on that!
Doctor Rhythm
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Re: Is it OK to exchange a stock fund within a retirement account?

Post by Doctor Rhythm »

The downside -- as with any exchange -- is that you may be making a bad financial decision. But at least you won't be taxed on your mistake.
lakpr
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Re: Is it OK to exchange a stock fund within a retirement account?

Post by lakpr »

Some plans, at least mine, prohibits buying a fund for 30 days if you sold it completely. As to whether that's a downside, depends on the context.
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nisiprius
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Re: Is it OK to exchange a stock fund within a retirement account?

Post by nisiprius »

lakpr wrote: Wed Jul 10, 2024 2:07 am Some plans, at least mine, prohibits buying a fund for 30 days if you sold it completely. As to whether that's a downside, depends on the context.
Just to be clear, I assume you mean again buying the same fund you just sold?
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livesoft
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Re: Is it OK to exchange a stock fund within a retirement account?

Post by livesoft »

Atticus713 wrote: Tue Jul 09, 2024 10:43 am Hi Forum,
Let's say someone has been contributing regularly to their 401k by investing into the Vanguard Total Market Index Fund (VTSAX) for several years. If, just out of preference since the returns have been pretty comparable, they wanted to instead start regularly investing into the Vanguard 500 Index (VFIAX), is there any downside to exchanging their existing FTSAX holdings for VFIAX within their 401k?
As always, many thanks!
Atticus713
Yes it is OK. I can even imagine a scenario where one would want to exchange VTSAX into VFIAX or FTSAX into VFIAX in a retirement account if such exchanges would be helpful to avoid a wash sale in one's separate taxable account when planning for an upcoming tax-loss harvesting trade
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lakpr
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Re: Is it OK to exchange a stock fund within a retirement account?

Post by lakpr »

nisiprius wrote: Wed Jul 10, 2024 5:48 am
lakpr wrote: Wed Jul 10, 2024 2:07 am Some plans, at least mine, prohibits buying a fund for 30 days if you sold it completely. As to whether that's a downside, depends on the context.
Just to be clear, I assume you mean again buying the same fund you just sold?
Correct. One is free to buy any other funds in the lineup.
Topic Author
Atticus713
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Joined: Sat May 25, 2019 9:24 am

Re: Is it OK to exchange a stock fund within a retirement account?

Post by Atticus713 »

Hi Forum,
I just wanted to say thanks and express our appreciation for the time all of you took to answer the question and share your collective wisdom. We really appreciate it!
Peace,
Atticus713
“Simplicity is the master key to financial success” J.C. Bogle | S&P 500 Index + Total U.S. Bond Index | Age-10 in Bonds at start; 30:70 at retirement | Rebalance Annually | Stay the Course
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