Diversify portfolio?

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Topic Author
stt816
Posts: 126
Joined: Wed Nov 07, 2018 4:59 pm

Diversify portfolio?

Post by stt816 »

Hi I have the following at fidelity....

Individual Account--FSKAX (fidelity total market)
Roth IRA FZROX (fidelity total market zero)
Soon to be Rollover Roth IRA
HSA

The rollover IRA and HSA I'm just starting and both have a 0 balance I want them to be total market or similar but I was told you shouldn't have all of the same stocks in different accounts due to tax loss harvesting. Do you have any suggestions for me?


Thanks
sycamore
Posts: 2556
Joined: Tue May 08, 2018 12:06 pm

Re: Diversify portfolio?

Post by sycamore »

Indeed, one option to avoid wash sales is to use a different fund in tax-advantaged than what's in taxable. But that's not the only way. Another way is to use the same security but just be careful about when you sell and buy. A wash sale occurs when you buy a substantially identical security within 30 days before and after selling at a loss.

So if you sell FSKAX in taxable at a loss, just make sure you don't buy FSKAX in your Roth IRA or HSA. This is certainly a reasonable way to avoid the wash sale, but you have to be mindful when you make trades, and of course you have to have some control over the timing of trades. For example, if you have an automatic purchase for your Roth or HSA, then that could interfere.

Anyway, if you do want to use different fund, I would suggest keeping FSKAX in taxable and only using FZROX in your Roth IRA, Rollover Roth IRA, and HSA. Another good alternative is FXAIX - it's an S&P 500 fund which performs quite similar to a total market fund.
Topic Author
stt816
Posts: 126
Joined: Wed Nov 07, 2018 4:59 pm

Re: Diversify portfolio?

Post by stt816 »

sycamore wrote: Wed Jun 16, 2021 1:34 pm Indeed, one option to avoid wash sales is to use a different fund in tax-advantaged than what's in taxable. But that's not the only way. Another way is to use the same security but just be careful about when you sell and buy. A wash sale occurs when you buy a substantially identical security within 30 days before and after selling at a loss.

So if you sell FSKAX in taxable at a loss, just make sure you don't buy FSKAX in your Roth IRA or HSA. This is certainly a reasonable way to avoid the wash sale, but you have to be mindful when you make trades, and of course you have to have some control over the timing of trades. For example, if you have an automatic purchase for your Roth or HSA, then that could interfere.

Anyway, if you do want to use different fund, I would suggest keeping FSKAX in taxable and only using FZROX in your Roth IRA, Rollover Roth IRA, and HSA. Another good alternative is FXAIX - it's an S&P 500 fund which performs quite similar to a total market fund.

Yes for simplicity I'd like to use different funds. So FSKAX in taxable and FZROX in all others would be fine then correct?

Also I had another question, currently I have

100k in taxable
31k in roth ira
32k in vanguard 401k (which im moving to rollover roth ira)

Should I be looking to move out the money in the taxable account to my other accounts for tax advantages? I also have a solo 401k, not sure if it would be more wise to put it in there instead
sycamore
Posts: 2556
Joined: Tue May 08, 2018 12:06 pm

Re: Diversify portfolio?

Post by sycamore »

stt816 wrote: Wed Jun 16, 2021 1:40 pm Yes for simplicity I'd like to use different funds. So FSKAX in taxable and FZROX in all others would be fine then correct?
Correct!
stt816 wrote: Wed Jun 16, 2021 1:40 pm Also I had another question, currently I have

100k in taxable
31k in roth ira
32k in vanguard 401k (which im moving to rollover roth ira)

Should I be looking to move out the money in the taxable account to my other accounts for tax advantages? I also have a solo 401k, not sure if it would be more wise to put it in there instead
I'm not quite sure what you mean by "move out the money". You're allowed to contribute to tax-advantaged accounts like Roth and Trad IRAs, solo 401k, etc. under certain conditions and limits. Basically you can't simply transfer the 100k whenever or wherever.

IRAs are limited to a certain contribution amount per year (depends on your age); you must have enough earned income to contribute; and you're not eligible to make a contribution at all if your income is too high (the income limit depends on tax filing status, like single vs married).

I've only had a 401k from my employer. Contributions could only come out of my paycheck -- I couldn't just transfer money from a taxable account. There may be similar restrictions for a solo 401k. Best to check into your 401k plan to see what's allowed.

A typical suggestion for what accounts to fund is described in the wiki article Prioritizing investments.

Typically people will be in a higher tax bracket when they're working and in a lower bracket when they retire. This condition makes it advantageous to use a solo 401k. Does that sound like your situation? If so, a solo 401k is a good idea. But if you're in a very low tax bracket right now (10 or 12%) it might actually be better to make Roth contributions (i.e., after-tax contributions) instead of a traditional contribution. We can help you figure out these questions if you post more details as described by the "Asking Portfolio Questions" thread.

The caveat of course is that once contributions go into these tax-advantaged accounts, you can't make withdrawals before 59.5 (for IRAs), sometimes 55 for 401k's without paying a penalty. The assumption is that you can afford to tie up the money in the account for possibly several decades before withdrawing. The big exception to that is Roth IRAs - you're allowed to withdraw contribution amounts at any time. See https://www.bogleheads.org/wiki/Roth_IRA#Distributions for details.
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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm

Re: Diversify portfolio?

Post by Duckie »

stt816 wrote: Wed Jun 16, 2021 1:26 pm Hi I have the following at fidelity....

Individual Account--FSKAX (fidelity total market)
Roth IRA FZROX (fidelity total market zero)
Soon to be Rollover Roth IRA
HSA
Is the Rollover Roth IRA coming from a former Roth 401k plan? If so you can just roll it into your current Roth IRA, you don't need a separate account. If it is coming from a pre-tax 401k plan then are you planning to roll it into a Roth IRA and pay the taxes? That'll be a chunk of change. If pre-tax you could roll it into your solo 401k plan.
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