Portfolio Questions
Portfolio Questions
Hello, I would like to preface with the fact that I have a decent amount of individual stocks. I would like to reallocate the individual stocks to index funds because I would like to make this journey easier.
Emergency funds: 5 months emergency savings in a savings account.
Debt: No current debt!
Tax Filing Status: Single
Tax Rate: 22%
State of Residence: IN
Age: 27
Desired Asset Allocation: 90% stocks 10% bonds
I am low five-figures so far in my account, but feel I may need to be more risky to reach my goal. I am willing to go 100% stocks if need be.
Current Allocation
Taxable
08% Cash Available to use
05% ARKK(0.75)
05% ARKG(0.75)
06% ARKF(0.75)
02% Individual Stocks
401k
49% FIAM BLEND TD FUND 2060
Roth IRA
23% Individual Stocks
Current Contributions
$16k in 401k
$6k in Roth IRA
401k Options
Fidelity Contrafund Pool(0.43)
Fidelity Income equity K(0.5)
Fidelity Growth Co Pool(0.5)
Fidelity total market index(.15)
Fidelity international total market(.06)
Fiam blend td 2060(0.26)
Vanguard Inflation-Protected Securities Fund Institutional Shares(.07)
Vanguard Total Bond Market Index Fund Institutional Shares(.035)
Vanguard Federal Money Market Fund Investor Shares(0.11)
I appreciate any advice. My main objective is to sell my individual stocks and buy back into index funds. How should I go about that? Should I wait a year so I will get long term tax gains? Should I sell these stocks now?
Emergency funds: 5 months emergency savings in a savings account.
Debt: No current debt!
Tax Filing Status: Single
Tax Rate: 22%
State of Residence: IN
Age: 27
Desired Asset Allocation: 90% stocks 10% bonds
I am low five-figures so far in my account, but feel I may need to be more risky to reach my goal. I am willing to go 100% stocks if need be.
Current Allocation
Taxable
08% Cash Available to use
05% ARKK(0.75)
05% ARKG(0.75)
06% ARKF(0.75)
02% Individual Stocks
401k
49% FIAM BLEND TD FUND 2060
Roth IRA
23% Individual Stocks
Current Contributions
$16k in 401k
$6k in Roth IRA
401k Options
Fidelity Contrafund Pool(0.43)
Fidelity Income equity K(0.5)
Fidelity Growth Co Pool(0.5)
Fidelity total market index(.15)
Fidelity international total market(.06)
Fiam blend td 2060(0.26)
Vanguard Inflation-Protected Securities Fund Institutional Shares(.07)
Vanguard Total Bond Market Index Fund Institutional Shares(.035)
Vanguard Federal Money Market Fund Investor Shares(0.11)
I appreciate any advice. My main objective is to sell my individual stocks and buy back into index funds. How should I go about that? Should I wait a year so I will get long term tax gains? Should I sell these stocks now?
Re: Portfolio Questions
Welcome to the forum!
You are off to a great start - anyone in their 20s who is contributing the max to their Roth plus just a bit less than the maximum to your 401K is doing the right things. I didn’t make my first retirement account contribution until I was 30.
It appears that the majority of your individual stocks are in a Roth account. There are no tax consequences for anything that happens inside a Roth account. Also the same for the 401K, no tax consequence for changes inside the account. So you can sell all your stocks in Roth immediately with no tax impact.
If you have large (percentage) gains on particular stocks in taxable, you can wait for 12 months to sell to get capital gains rate on that specific stock. I would immediately sell any stocks in taxable that have no gains or have losses. Also, if you have a loss on any stock in taxable you can sell that stock and another stock (or stocks) this year with a matching gain and pay no tax - the loss offsets the gain.
[edit] For the amount of stock in taxable (2% of a low 5 digit portfolio), I would probably sell everything in taxable immediately. For example, if you had a large (say, 50%) net gain across all your taxable stocks and your total portfolio is, say, $30,000, your taxable gain is about $200 and your tax bill will be about $44. Is that worth the effort to track individual stocks and carry some for 12 months? That’s up to you, but as I recall, I had better things to do at 27.
You are off to a great start - anyone in their 20s who is contributing the max to their Roth plus just a bit less than the maximum to your 401K is doing the right things. I didn’t make my first retirement account contribution until I was 30.
It appears that the majority of your individual stocks are in a Roth account. There are no tax consequences for anything that happens inside a Roth account. Also the same for the 401K, no tax consequence for changes inside the account. So you can sell all your stocks in Roth immediately with no tax impact.
If you have large (percentage) gains on particular stocks in taxable, you can wait for 12 months to sell to get capital gains rate on that specific stock. I would immediately sell any stocks in taxable that have no gains or have losses. Also, if you have a loss on any stock in taxable you can sell that stock and another stock (or stocks) this year with a matching gain and pay no tax - the loss offsets the gain.
[edit] For the amount of stock in taxable (2% of a low 5 digit portfolio), I would probably sell everything in taxable immediately. For example, if you had a large (say, 50%) net gain across all your taxable stocks and your total portfolio is, say, $30,000, your taxable gain is about $200 and your tax bill will be about $44. Is that worth the effort to track individual stocks and carry some for 12 months? That’s up to you, but as I recall, I had better things to do at 27.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Portfolio Questions
+1 to all that. Definitely "run the numbers" on selling short-term cap gains versus waiting until they turn into long-term gains. The difference in tax rates would be 22% versus 15%. So you'd pay a 7% cost to sell now, at least assuming the additional gains don't push you into a higher tax bracket.David Jay wrote: ↑Mon May 17, 2021 7:09 am Welcome to the forum!
You are off to a great start - anyone in their 20s who is contributing the max to their Roth plus just a bit less than the maximum to your 401K is doing the right things. I didn’t make my first retirement account contribution until I was 30.
It appears that the majority of your individual stocks are in a Roth account. There are no tax consequences for anything that happens inside a Roth account. Also the same for the 401K, no tax consequence for changes inside the account. So you can sell all your stocks in Roth immediately with no tax impact.
If you have large (percentage) gains on particular stocks in taxable, you can wait for 12 months to sell to get capital gains rate on that specific stock. I would immediately sell any stocks in taxable that have no gains or have losses. Also, if you have a loss on any stock in taxable you can sell that stock and another stock (or stocks) this year with a matching gain and pay no tax - the loss offsets the gain.
[edit] For the amount of stock in taxable (2% of a low 5 digit portfolio), I would probably sell everything in taxable immediately. For example, if you had a large (say, 50%) net gain across all your taxable stocks and your total portfolio is, say, $30,000, your taxable gain is about $200 and your tax bill will be about $44. Is that worth the effort to track individual stocks and carry some for 12 months? That’s up to you, but as I recall, I had better things to do at 27.
Also, if you're not sure about selling the individual stocks in taxable right away, for now I'd turn off dividend reinvestment on those stocks (if indeed they even pay dividends) so that any dividends go into your settlement account. Then you can use that money to buy your desired index fund.
Re: Portfolio Questions
I appreciate the input! I had a few questions if you don’t mind. I want a 3-4 index fund portfolio and I am also with Fidelity. Out of the available 401k options, which do you suggest? In my 401k, should I sell the TD 2060 fund or just proceed to put the rest of my checks into the total market index? Lastly, I understand why I doesn’t make sense to wait to sell at a profit, because it will be minuscule to my overall portfolio. But wouldn’t selling at a loss(20-25%) be a big detriment? Because I’m also losing more through short term tax gains. I’m thinking about selling my ARK funds too. Thanks for any help.David Jay wrote: ↑Mon May 17, 2021 7:09 am Welcome to the forum!
You are off to a great start - anyone in their 20s who is contributing the max to their Roth plus just a bit less than the maximum to your 401K is doing the right things. I didn’t make my first retirement account contribution until I was 30.
It appears that the majority of your individual stocks are in a Roth account. There are no tax consequences for anything that happens inside a Roth account. Also the same for the 401K, no tax consequence for changes inside the account. So you can sell all your stocks in Roth immediately with no tax impact.
If you have large (percentage) gains on particular stocks in taxable, you can wait for 12 months to sell to get capital gains rate on that specific stock. I would immediately sell any stocks in taxable that have no gains or have losses. Also, if you have a loss on any stock in taxable you can sell that stock and another stock (or stocks) this year with a matching gain and pay no tax - the loss offsets the gain.
[edit] For the amount of stock in taxable (2% of a low 5 digit portfolio), I would probably sell everything in taxable immediately. For example, if you had a large (say, 50%) net gain across all your taxable stocks and your total portfolio is, say, $30,000, your taxable gain is about $200 and your tax bill will be about $44. Is that worth the effort to track individual stocks and carry some for 12 months? That’s up to you, but as I recall, I had better things to do at 27.
Re: Portfolio Questions
Thanks Sycamore, I appreciate the help! I will definitely check those numbers. I also don’t have any dividend stocks right now in my taxable account.sycamore wrote: ↑Mon May 17, 2021 7:51 am+1 to all that. Definitely "run the numbers" on selling short-term cap gains versus waiting until they turn into long-term gains. The difference in tax rates would be 22% versus 15%. So you'd pay a 7% cost to sell now, at least assuming the additional gains don't push you into a higher tax bracket.David Jay wrote: ↑Mon May 17, 2021 7:09 am Welcome to the forum!
You are off to a great start - anyone in their 20s who is contributing the max to their Roth plus just a bit less than the maximum to your 401K is doing the right things. I didn’t make my first retirement account contribution until I was 30.
It appears that the majority of your individual stocks are in a Roth account. There are no tax consequences for anything that happens inside a Roth account. Also the same for the 401K, no tax consequence for changes inside the account. So you can sell all your stocks in Roth immediately with no tax impact.
If you have large (percentage) gains on particular stocks in taxable, you can wait for 12 months to sell to get capital gains rate on that specific stock. I would immediately sell any stocks in taxable that have no gains or have losses. Also, if you have a loss on any stock in taxable you can sell that stock and another stock (or stocks) this year with a matching gain and pay no tax - the loss offsets the gain.
[edit] For the amount of stock in taxable (2% of a low 5 digit portfolio), I would probably sell everything in taxable immediately. For example, if you had a large (say, 50%) net gain across all your taxable stocks and your total portfolio is, say, $30,000, your taxable gain is about $200 and your tax bill will be about $44. Is that worth the effort to track individual stocks and carry some for 12 months? That’s up to you, but as I recall, I had better things to do at 27.
Also, if you're not sure about selling the individual stocks in taxable right away, for now I'd turn off dividend reinvestment on those stocks (if indeed they even pay dividends) so that any dividends go into your settlement account. Then you can use that money to buy your desired index fund.
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
"The Three-Fund Portfolio"
draggo21:Driggo21 wrote: ↑Sun May 16, 2021 9:01 pm Hello, I would like to preface with the fact that I have a decent amount of individual stocks. I would like to reallocate the individual stocks to index funds because I would like to make this journey easier.
Emergency funds: 5 months emergency savings in a savings account.
Debt: No current debt!
Tax Filing Status: Single
Tax Rate: 22%
State of Residence: IN
Age: 27
Desired Asset Allocation: 90% stocks 10% bonds
I am low five-figures so far in my account, but feel I may need to be more risky to reach my goal. I am willing to go 100% stocks if need be.
Current Allocation
Taxable
08% Cash Available to use
05% ARKK(0.75)
05% ARKG(0.75)
06% ARKF(0.75)
02% Individual Stocks
401k
49% FIAM BLEND TD FUND 2060
Roth IRA
23% Individual Stocks
Current Contributions
$16k in 401k
$6k in Roth IRA
401k Options
Fidelity Contrafund Pool(0.43)
Fidelity Income equity K(0.5)
Fidelity Growth Co Pool(0.5)
Fidelity total market index(.15)
Fidelity international total market(.06)
Fiam blend td 2060(0.26)
Vanguard Inflation-Protected Securities Fund Institutional Shares(.07)
Vanguard Total Bond Market Index Fund Institutional Shares(.035)
Vanguard Federal Money Market Fund Investor Shares(0.11)
I appreciate any advice. My main objective is to sell my individual stocks and buy back into index funds. How should I go about that? Should I wait a year so I will get long term tax gains? Should I sell these stocks now?
I believe you are wise to get rid of your individual stocks.
Take a look at the many benefits of The Three Fund Portfolio
Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
Re: Portfolio Questions
Do sell the ARK funds, they have high ERs. Regarding the loss, you usually don't want to lock in losses but in this situation if you immediately reinvest into total stock market funds you are only locking those losses in on paper as you can reasonably assume the TSM index fund will recover those losses for you in time. Additionally you are "harvesting" the tax loss which can offset your gains this year reducing the taxes you have to pay. If you have more losses than gains then they carry over (after offsetting up to 3k of normal income).Driggo21 wrote: ↑Mon May 17, 2021 1:11 pm I appreciate the input! I had a few questions if you don’t mind. I want a 3-4 index fund portfolio and I am also with Fidelity. Out of the available 401k options, which do you suggest? In my 401k, should I sell the TD 2060 fund or just proceed to put the rest of my checks into the total market index? Lastly, I understand why I doesn’t make sense to wait to sell at a profit, because it will be minuscule to my overall portfolio. But wouldn’t selling at a loss(20-25%) be a big detriment? Because I’m also losing more through short term tax gains. I’m thinking about selling my ARK funds too. Thanks for any help.
Re: Portfolio Questions
i would use the two Fidelity total stock market and total international stock market index funds and for bonds I would use Vanguar's index bond fund. I would also establish an emergency fund with at least enough money to last 6 months.
Re: Portfolio Questions
The best options are:
- Fidelity total market index (.15) -- Complete US stocks (the e.r. is 0.015%, not 0.15%)
- Fidelity international total market (.06) -- Complete international stocks
- Vanguard Total Bond Market Index (.035) -- US bonds
Sell everything in taxable especially if at a loss. You can use that loss against regular income. Sell everything in the Roth IRA. There are no tax consequences. Sell the TD fund in the 401k.My main objective is to sell my individual stocks and buy back into index funds. How should I go about that? Should I wait a year so I will get long term tax gains? Should I sell these stocks now?
_______________________
The following example has an AA of 90% stocks, 10% bonds, with 30% of stocks in international. That breaks down to 63% US stocks, 27% international stocks, and 10% bonds. Ignoring the tax consequences of selling in taxable and adding the missing 2% you could have:
Taxable at Fidelity -- 27%
27% (FSKAX) Fidelity Total Market Index Fund (0.015%)
401k -- 50%
13% (FSKAX) Fidelity Total Market Index Fund (0.015%)
27% (FTIHX) Fidelity Total International Index Fund (0.06%)
10% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.035%)
Roth IRA at Fidelity -- 23%
23% (FZROX) Fidelity Zero Total Market Index Fund (0.00%)
Just some possibilities.
Re: Portfolio Questions
The only change I would make is that one should probably not hold a Fidelity mutual fund in taxable. You will pay less in taxes if you use an ETF in taxable. VTI (Vanguard), ITOT (iShares) or SCHB (Schwab) would be fine, you can purchase any of these in your Fidelity account.Duckie wrote: ↑Mon May 17, 2021 5:50 pmThe following example has an AA of 90% stocks, 10% bonds, with 30% of stocks in international. That breaks down to 63% US stocks, 27% international stocks, and 10% bonds. Ignoring the tax consequences of selling in taxable and adding the missing 2% you could have:
Taxable at Fidelity -- 27%
27% (FSKAX) Fidelity Total Market Index Fund (0.015%)
401k -- 50%
13% (FSKAX) Fidelity Total Market Index Fund (0.015%)
27% (FTIHX) Fidelity Total International Index Fund (0.06%)
10% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.035%)
Roth IRA at Fidelity -- 23%
23% (FZROX) Fidelity Zero Total Market Index Fund (0.00%)
Just some possibilities.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
One investment company or several?
Bogleheads:
I believe it is important to hold all our securities with one good company for these reasons:
1. Both companies (Fidelity and Vanguard) have strength, honesty, and integrity.
2. Many experts believe that "expense" is the most important criteria in selecting funds. You know you always have this advantage working for you in both companies.
3. Service is important. Vanguard and Fidelity services are among the best.
4. We like a good web-site. Vanguard and Fidelity are among the best.
5. Premium Service: Consolidating everything with Vanguard results in earlier eligibility for Admiral, Voyager, and Flagship service. Fidelity also has lower cost with larger funds. Both companies appreciate loyalty, and respond accordingly. (When my son died Vanguard sent me flowers.)
6. Fund selection. Both Vanguard and Fidelity have enough funds to be adequate for anyone.
7. Company knowledge: By concentrating on one company, we can much better learn fund details, including: fee's, past returns, risk, manager changes, etc.
8. Exchanges and other transactions are easier within one good company.
9. One easily understood consolidated statement.
10. In event of disability or death, it will be much easier for survivors if they have only one company to deal with.
I doubt if the tax-efficiency of Vanguard or Fidelity total market index funds will have much long-term difference although Vanguard may have a small advantage.
Read my "Simplicity" link at the bottom.
Best wishes.
Taylor
I believe it is important to hold all our securities with one good company for these reasons:
1. Both companies (Fidelity and Vanguard) have strength, honesty, and integrity.
2. Many experts believe that "expense" is the most important criteria in selecting funds. You know you always have this advantage working for you in both companies.
3. Service is important. Vanguard and Fidelity services are among the best.
4. We like a good web-site. Vanguard and Fidelity are among the best.
5. Premium Service: Consolidating everything with Vanguard results in earlier eligibility for Admiral, Voyager, and Flagship service. Fidelity also has lower cost with larger funds. Both companies appreciate loyalty, and respond accordingly. (When my son died Vanguard sent me flowers.)
6. Fund selection. Both Vanguard and Fidelity have enough funds to be adequate for anyone.
7. Company knowledge: By concentrating on one company, we can much better learn fund details, including: fee's, past returns, risk, manager changes, etc.
8. Exchanges and other transactions are easier within one good company.
9. One easily understood consolidated statement.
10. In event of disability or death, it will be much easier for survivors if they have only one company to deal with.
I doubt if the tax-efficiency of Vanguard or Fidelity total market index funds will have much long-term difference although Vanguard may have a small advantage.
Read my "Simplicity" link at the bottom.
Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "When there are multiple solutions to a problem, choose the simplest one."
"Simplicity is the master key to financial success." -- Jack Bogle
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- Posts: 82
- Joined: Mon May 03, 2021 9:18 am
Re: Portfolio Questions
Random mention, but I used to live in IN, and I know there's a great state tax deduction for contributing to a 529. You can contribute up to $5k yearly and take $1k off your taxes. I did that a few years ago for 2 years and ended up using the money to go back to school, but you can also transfer the 529 to a child, niece/nephew, whoever, in the future.
- abuss368
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- Joined: Mon Aug 03, 2009 2:33 pm
- Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
- Contact:
Re: One investment company or several?
Excellent reminder Taylor and the many reasons why we consolidated everything with Vanguard. In hindsight, it was the best financial decision we ever made.Taylor Larimore wrote: ↑Tue May 18, 2021 11:28 am Bogleheads:
I believe it is important to hold all our securities with one good company for these reasons:
1. Both companies (Fidelity and Vanguard) have strength, honesty, and integrity.
2. Many experts believe that "expense" is the most important criteria in selecting funds. You know you always have this advantage working for you in both companies.
3. Service is important. Vanguard and Fidelity services are among the best.
4. We like a good web-site. Vanguard and Fidelity are among the best.
5. Premium Service: Consolidating everything with Vanguard results in earlier eligibility for Admiral, Voyager, and Flagship service. Fidelity also has lower cost with larger funds. Both companies appreciate loyalty, and respond accordingly. (When my son died Vanguard sent me flowers.)
6. Fund selection. Both Vanguard and Fidelity have enough funds to be adequate for anyone.
7. Company knowledge: By concentrating on one company, we can much better learn fund details, including: fee's, past returns, risk, manager changes, etc.
8. Exchanges and other transactions are easier within one good company.
9. One easily understood consolidated statement.
10. In event of disability or death, it will be much easier for survivors if they have only one company to deal with.
I doubt if the tax-efficiency of Vanguard or Fidelity total market index funds will have much long-term difference although Vanguard may have a small advantage.
Read my "Simplicity" link at the bottom.
Best wishes.
TaylorJack Bogle's Words of Wisdom: "When there are multiple solutions to a problem, choose the simplest one."
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Re: One investment company or several?
Thank you for this info. So if I have a Fidelity account(my 401k is through Fidelity) I should only utilize fidelity index funds. Or can I get all Vanguard funds through a Fidelity account?Taylor Larimore wrote: ↑Tue May 18, 2021 11:28 am Bogleheads:
I believe it is important to hold all our securities with one good company for these reasons:
1. Both companies (Fidelity and Vanguard) have strength, honesty, and integrity.
2. Many experts believe that "expense" is the most important criteria in selecting funds. You know you always have this advantage working for you in both companies.
3. Service is important. Vanguard and Fidelity services are among the best.
4. We like a good web-site. Vanguard and Fidelity are among the best.
5. Premium Service: Consolidating everything with Vanguard results in earlier eligibility for Admiral, Voyager, and Flagship service. Fidelity also has lower cost with larger funds. Both companies appreciate loyalty, and respond accordingly. (When my son died Vanguard sent me flowers.)
6. Fund selection. Both Vanguard and Fidelity have enough funds to be adequate for anyone.
7. Company knowledge: By concentrating on one company, we can much better learn fund details, including: fee's, past returns, risk, manager changes, etc.
8. Exchanges and other transactions are easier within one good company.
9. One easily understood consolidated statement.
10. In event of disability or death, it will be much easier for survivors if they have only one company to deal with.
I doubt if the tax-efficiency of Vanguard or Fidelity total market index funds will have much long-term difference although Vanguard may have a small advantage.
Read my "Simplicity" link at the bottom.
Best wishes.
TaylorJack Bogle's Words of Wisdom: "When there are multiple solutions to a problem, choose the simplest one."
Re: Portfolio Questions
You can get Vanguard funds through Fidelity too, but every purchase of the Vanguard fund would set you back $75 in fees (automatic dividend reinvestment exempted). But there is no fee to hold ETFs, so you could achieve almost the same end effect, without the fees, by buying Vanguard ETFs (VTI, VOO, VV, VEA etc.)