Simplify Portfolio

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Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Simplify Portfolio

Post by surfer05 »

Hey Bogleheads,

I tried to use the template and have edited my first post to seek help from y'all great people.

I finished reading The little book of Common Sense investing. And I agree with all the points mentioned in that.

I also found this great community.

Now, I want to follow that path and also want to simplify my portfolio.

Emergency funds: One year + of expenses

Debt: Credit Card: $1500 (pay in full each statement), Auto Loan: $2900(APR- 1.99%, another 6-7 months left)

Tax Filing Status: Married Filing Jointly

Tax Rate: 22% Federal, 5.25% State

State of Residence: NC(moved this month from CA)

Age:33


Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 15-20% of stocks

Portfolio is in low six-figures: $296,000

Current retirement assets


Taxable
$33,000 cash (excluding emergency fund)

Robinhood: $59,667
QQQM: $3,972 (ER: 0.15%)
QQQJ: $970 (ER: 0.15%)
MSFT: $20k
VTI: $4,264 (ER: 0.03%)
FTEC: $10,398 (ER: .08%)
VOO: $2,632 (ER: 0.03%)
VYM: $1,000(ER: 0.06%)
and some random stocks totalling $10k

Wealthfront Breakup : $155,000


ticker symbol: current market value
US Stocks
VXF: $29,000
VB: $435.44
VOO: $4,166 (ER: 0.03%)
VV: $383
Foreign Stocks
VEA: $6,604
SCHF: $28,450
Emerging Markets
VWO: $18,136
IEMG: $4,744
Municipal Bonds:
VTEB: $8,525
TFI: $6,805
Dividend Growth Stocks
VIG: $11,524
SCHD: $1000

US Direct Indexing( Wealthfront's way of investing directing into individual stocks- I don't like it, but heard it helps in Tax Loss harvesting)

Vehicle Shares Market Value Cost Basis
AAPL 25 $3,121 $2,179
MSFT 15 $3,646 $3,030
GE 14 $182 $103
T 13 $384 $350
BAC 11 $464 $359
PFE 9 $360 $330
F 8 $97 $42
CMCSA 8 $440 $445
WFC 8 $375 $356
CSCO 7 $371 $349
NEE 5 $361 $351
XOM 5 $302 $288
RTX 5 $427 $417
KO 5 $272 $249
JNJ 4 $682 $555
FB 4 $1,240 $913
JPM 4 $649 $374
VZ 4 $229 $226
ABBV 4 $469 $389
MO 4 $200 $193
MDLZ 3 $187 $184
PEP 3 $437 $405
PG 3 $409 $364
SLB 3 $99 $43
EXC 3 $137 $115
COP 3 $172 $108
TXN 3 $537 $461
ABT 3 $351 $286
BMY 3 $197 $174
GM 3 $168 $62
QCOM 3 $387 $377
PYPL 3 $730 $454
DIS 3 $509 $303
CRM 3 $644 $631
PM 3 $293 $288
ORCL 3 $236 $171
V 3 $677 $650
AIG 2 $102 $51
SBUX 2 $222 $143
NKE 2 $271 $169
CARR 2 $87 $33
MS 2 $174 $93
AMGN 2 $502 $444
BK 2 $101 $83
AXP 2 $310 $293
MDT 2 $252 $230
IBM 2 $288 $292
MET 2 $131 $71
KHC 2 $87 $70
SO 2 $128 $106
HON 2 $445 $324
NVDA 2 $1,121 $1,120
EMR 2 $188 $93
LOW 2 $385 $165
USB 2 $122 $75
CL 2 $166 $131
ADBE 2 $961 $789
CVX 2 $212 $215
C 2 $153 $74
MRK 1 $79 $76
KMI 1 $19 $12
CAT 1 $240 $144
DUK 1 $103 $81
HD 1 $317 $198
OTIS 1 $79 $46
GOOG 1 $2,303 $2,289
GILD 1 $69 $64
BA 1 $227 $122
COF 1 $157 $68
NFLX 1 $486 $313
WBA 1 $55 $53
AMT 1 $246 $245
DHR 1 $250 $144
ACN 1 $283 $168
SPG 1 $123 $62
FDX 1 $306 $108
TGT 1 $207 $104
LLY 1 $195 $147
GS 1 $364 $358
BRKB 1 $288 $278
UNH 1 $411 $259
UNP 1 $223 $145
COST 1 $383 $302
UPS 1 $214 $160
GD 1 $189 $133
MMM 1 $203 $145
TMO 1 $455 $326
DD 1 $85 $54


His 401k
Callan GlidePath® 2055 Fund Class R6 (0.54%) $81k
Company match? Yes(50% - up to 6%)

Contributions

New annual Contributions
Maxing out starting this year his 401k - his contribution $6,394 (Employer Contribution- $2,137)


Available funds

Funds available in his 401(k)
Name/Inception Date Gross Expense Ratio**
AB US LG CP GR CIT W 09/26/2019   0.39%
COL SEL LG CAP EQ I3 (CLEYX) 10/02/1998   0.80%
FID 500 INDEX (FXAIX) 02/17/1988   0.02%
TRP VALUE I (TRPIX) 09/30/1994   0.64%
PRMCP ODY AGGR GRTH (POAGX) 11/01/2004   0.65%
VICTORY S ESTB VAL I (VEVIX) 08/16/1983   0.60%
TRP QM US SMCP GR I (TQAIX) 06/30/1997   0.65%
UM BEHAVIORAL VAL R6 (UBVFX) 12/28/1998   0.86%
VANG SM CAP IDX ADM (VSMAX) 10/03/1960   0.05%
DFA INTL SMALL CO I (DFISX) 09/30/1996   0.44%
FID INTL INDEX (FSPSX) 11/05/1997   0.04%
INVS DEVELOP MKT R6 (ODVIX) 11/18/1996   0.82%
MFS INTL GROWTH R6 (MGRDX) 10/24/1995   0.74%
TRP OVERSEAS STOCK I (TROIX) 12/29/2006   0.66%
FID REAL ESTATE IDX (FSRNX) 09/08/2011   0.07%
CALLAN GLIDE 2015 R6 09/04/2007   0.55%
CALLAN GLIDE 2020 R6 09/04/2007   0.55%
CALLAN GLIDE 2025 R6 09/04/2007   0.54%
CALLAN GLIDE 2030 R6 09/04/2007   0.55%
CALLAN GLIDE 2035 R6 09/04/2007   0.55%
CALLAN GLIDE 2040 R6 09/04/2007   0.54%
CALLAN GLIDE 2045 R6 09/04/2007   0.54%
CALLAN GLIDE 2050 R6 10/15/2009   0.54%
CALLAN GLIDE 2055 R6 10/15/2009   0.54%
CALLAN GLIDE 2060 R6 05/29/2013   0.54%
CALLAN GP RET INC R6 09/04/2007   0.54%
PUTNAM STABLE VALUE 02/28/1991   0.34%
BAIRD AGGR BOND INST (BAGIX) 09/29/2000   0.30%
COL INCOME OPPS I3 (CIOYX) 06/19/2003   0.68%
FID US BOND IDX (FXNAX) 03/08/1990   0.03%
PIM LT REAL RETURN I (PRAIX) 11/12/2001   1.07%
DFA COMM STRATEGY I (DCMSX) 11/09/2010   0.32%


HER is not working.


Questions:
1. Currently, I've CALLAN GLIDE 2055 R6 10/15/2009( ER: 0.54%) selected by default in my 401k. Should I change that to something with less ER? Or pick a couple of options?

2. I do not have any ROTH IRA or Traditional IRA, should I pick one? It looks like based on my income, I'll not have any deduction with Traditional IRA. Hence, thinking of opening up ROTH IRA.

3. I started funding my HSA to the max limit(this month), I am hoping to invest that money too. What should I invest that in? Stocks or Bonds? Trying to look from Asset Location perspective.

4. I want to simplify my portfolio and eventually have 2-3 funds portfolio. I want to do this as soon as possible and get done with this to sleep better at night. I understand the Stocks part(Total Stock market and foreign stock), but don't understand short term bond vs long term bond. What should be some examples of Bond index fund?

5. I have two toddlers, I've not opened any 529 accounts or started saving for their college. Should I do that? Or just keep investing into those 2-3 funds portolio and down the line use that to extract some money?

6. Am I thinking too much about Financial Parts? I want to retire around 50. I don't own a home today and eventually want to but it looks like it would be tough to do so. I've moved to the US almost 4 years ago, so that when I started saving, investing. It feels like I am late to save/invest or to build my portfolio.

Appreciate your help here or any advice that you can provide.
Last edited by surfer05 on Wed May 19, 2021 9:38 pm, edited 4 times in total.
pkcrafter
Posts: 15461
Joined: Sun Mar 04, 2007 11:19 am
Location: CA
Contact:

Re: Help Needed- Simplifying Portfolio-move from Wealthfront to DIY

Post by pkcrafter »

Welcome to the forum,

surfer05 wrote: Mon May 17, 2021 4:50 pm Hey Bogleheads,

I finished reading The little book of Common Sense investing. And I agree with all the points mentioned in that.

I also found this great community.

Now, I want to follow that path and also want to simplify my portfolio- eventually end up with only 2-3 funds max( VTI, BND(maybe)) ?

It doesn't have to be those particular funds, but total stock market and total bond are a good start. Maybe also hold international. Vanguard is a good choice, but Fidelity and Schwab are also good.

Currently, my main investment account is with Wealthfront, that I was referred by my friend when I moved here in 2017.

Here is the breakup of my networth: $345000
1. Wealthfront - $155,000
2. Robinhood Brokerage- $ 55,000( mainly technology stocks and then FTEC, VOO, VTI, and then some)

I suggest you move out of Robinhood and probably Wealthfront.
3. Fidelity 401k- $80,000
4. HSA- $3,000
5. Cash- $55,000 (Checking and Savings account)<--This is not part of investment assets. Do you have an emergency fund?

Liabilities:
1. Auto Loan- $2900
2. Credit Card usage- $1500(I pay in full every statement)

I am 33, the single earner, while my spouse focus on handling our two kids(toddlers now).

For taxes, we file jointly.

I'd need help from patrons of this group about the followings:
1. I want to move all my assets over from Wealthfront and do a DIY to have 2-3 funds portfolio.
2. I think I should open ROTH for me and my spouse.( I cannot get tax deductible for Traditional IRA, as I am earning more than the limit for 2021.

IRS limits for IRA and Roth

https://www.irs.gov/newsroom/new-income ... ty-in-2021

$198,000 to $208,000 – A taxpayer not covered by a workplace retirement plan married to someone who's covered.

https://www.fool.com/retirement/plans/r ... me-limits/

Backdoor Roth


https://www.ramseysolutions.com/retirem ... r-roth-ira

3. I am planning to buy a decent home in NC (Raleigh region) sometime in the future, not rushing right now.
3. Probably start saving for kids' education.
4. Planning to retire when I'll be 45-50 yrs old.

Can you please help me think through this?

Keep it as simple as possible

The 3 fund portfolio


viewtopic.php?f=10&t=88005

tax-efficient fund placement


https://www.bogleheads.org/wiki/Tax-eff ... _placement


Paul



When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Help Needed- Simplifying Portfolio-move from Wealthfront to DIY

Post by surfer05 »

Thank you for your time and response, Paul. All these inputs are so helpful for someone who is getting started. I realized I should have used the format for my post. Lesson learned.

Here are my responses to your questions and some of my questions to your responses.
1. Is there an issue with Robinhood? I want to move out of Wealthfront and manage my own portfolio that will have only 2-3funds as suggested. What is the best way to move out of Wealthfront, I am looking for keeping my taxes low but also don't want market correction to happen to do this switch? Should I open a new account at some other brokerage and start investing there onwards, while keeping my account at Wealthfront? Will this result into wash sales?
2. The Cash mentioned is not part of investment. That's cash in my checking and savings account. My understanding(limited) is emergency fund is something that should be accessible immediately, hence keeping it in checking and savings. Should I move it into some Bonds? What type?
3.
pkcrafter wrote: Tue May 18, 2021 9:40 am Welcome to the forum,

surfer05 wrote: Mon May 17, 2021 4:50 pm Hey Bogleheads,

I finished reading The little book of Common Sense investing. And I agree with all the points mentioned in that.

I also found this great community.

Now, I want to follow that path and also want to simplify my portfolio- eventually end up with only 2-3 funds max( VTI, BND(maybe)) ?

It doesn't have to be those particular funds, but total stock market and total bond are a good start. Maybe also hold international. Vanguard is a good choice, but Fidelity and Schwab are also good.

Currently, my main investment account is with Wealthfront, that I was referred by my friend when I moved here in 2017.

Here is the breakup of my networth: $345000
1. Wealthfront - $155,000
2. Robinhood Brokerage- $ 55,000( mainly technology stocks and then FTEC, VOO, VTI, and then some)

I suggest you move out of Robinhood and probably Wealthfront.
3. Fidelity 401k- $80,000
4. HSA- $3,000
5. Cash- $55,000 (Checking and Savings account)<--This is not part of investment assets. Do you have an emergency fund?

Liabilities:
1. Auto Loan- $2900
2. Credit Card usage- $1500(I pay in full every statement)

I am 33, the single earner, while my spouse focus on handling our two kids(toddlers now).

For taxes, we file jointly.

I'd need help from patrons of this group about the followings:
1. I want to move all my assets over from Wealthfront and do a DIY to have 2-3 funds portfolio.
2. I think I should open ROTH for me and my spouse.( I cannot get tax deductible for Traditional IRA, as I am earning more than the limit for 2021.

IRS limits for IRA and Roth

https://www.irs.gov/newsroom/new-income ... ty-in-2021

$198,000 to $208,000 – A taxpayer not covered by a workplace retirement plan married to someone who's covered.

https://www.fool.com/retirement/plans/r ... me-limits/

Backdoor Roth


https://www.ramseysolutions.com/retirem ... r-roth-ira

3. I am planning to buy a decent home in NC (Raleigh region) sometime in the future, not rushing right now.
3. Probably start saving for kids' education.
4. Planning to retire when I'll be 45-50 yrs old.

Can you please help me think through this?

Keep it as simple as possible

The 3 fund portfolio


viewtopic.php?f=10&t=88005

tax-efficient fund placement


https://www.bogleheads.org/wiki/Tax-eff ... _placement


Paul



wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Help Needed- Simplifying Portfolio-move from Wealthfront to DIY

Post by wetgear »

surfer05 wrote: Tue May 18, 2021 4:28 pm Thank you for your time and response, Paul. All these inputs are so helpful for someone who is getting started. I realized I should have used the format for my post. Lesson learned.

Here are my responses to your questions and some of my questions to your responses.
1. Is there an issue with Robinhood? I want to move out of Wealthfront and manage my own portfolio that will have only 2-3funds as suggested. What is the best way to move out of Wealthfront, I am looking for keeping my taxes low but also don't want market correction to happen to do this switch? Should I open a new account at some other brokerage and start investing there onwards, while keeping my account at Wealthfront? Will this result into wash sales?
2. The Cash mentioned is not part of investment. That's cash in my checking and savings account. My understanding(limited) is emergency fund is something that should be accessible immediately, hence keeping it in checking and savings. Should I move it into some Bonds? What type?
3.
Not too late to post in the correct format, just click the pencil icon next to your first post to edit the post and put it in said format. You'll likely get better responses once you do this.

1a) There are issues with Robinhood the biggest one in my mind being notoriously poor customer service. Folks here also don't much like it because it seems to promote day trading which goes against the principles of the long term buy and hold strategy. Could you pull off a great three fund portfolio at Robinhood, probably but Vanguard, Fidelity, and Schwab are the 3 most recommended brokerages around here because they check all the boxes of what you'd need and want in a brokerage.

1b) Best way to move out of Wealthfront and hopefully Robinhood is to open an account at one of the 3 listed above and ask the new custodian to move the funds using an "In Kind Transfer". This will move the assets as is to the new account so no selling and buying (no tax consequences or wash sales) and no time out of the market. Since you have your 401k at Fidelity that's probably your best choice because you can consolidate everything at one good institution. Simplification is something the folks around here (and most everywhere) really like.

2) You are correct your emergency fund should be accessible immediately and being as such it shouldn't be considered as part of the investment (not even put in bonds, except maybe ibonds but that must be done slowly over time because it ties up funds for 1 year). In fact the preferred asking portfolio questions format doesn't even list cash savings just notes that the EF has been funded and how many months it will cover such as (Emergency fund = yes 6 months). Beyond that note of its existence don't account for it in your portfolio as it shouldn't be considered part of your AA.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Help Needed- Simplifying Portfolio-move from Wealthfront to DIY

Post by surfer05 »

Thank you for your response. I've tried my best to edit the original post.
1 quick question for you:
[Thank you. Once I move funds, how should I simplify it? I've updated original post using the template.]
wetgear wrote: Tue May 18, 2021 6:00 pm
surfer05 wrote: Tue May 18, 2021 4:28 pm Thank you for your time and response, Paul. All these inputs are so helpful for someone who is getting started. I realized I should have used the format for my post. Lesson learned.

Here are my responses to your questions and some of my questions to your responses.
1. Is there an issue with Robinhood? I want to move out of Wealthfront and manage my own portfolio that will have only 2-3funds as suggested. What is the best way to move out of Wealthfront, I am looking for keeping my taxes low but also don't want market correction to happen to do this switch? Should I open a new account at some other brokerage and start investing there onwards, while keeping my account at Wealthfront? Will this result into wash sales?
2. The Cash mentioned is not part of investment. That's cash in my checking and savings account. My understanding(limited) is emergency fund is something that should be accessible immediately, hence keeping it in checking and savings. Should I move it into some Bonds? What type?
3.
Not too late to post in the correct format, just click the pencil icon next to your first post to edit the post and put it in said format. You'll likely get better responses once you do this.

1a) There are issues with Robinhood the biggest one in my mind being notoriously poor customer service. Folks here also don't much like it because it seems to promote day trading which goes against the principles of the long term buy and hold strategy. Could you pull off a great three fund portfolio at Robinhood, probably but Vanguard, Fidelity, and Schwab are the 3 most recommended brokerages around here because they check all the boxes of what you'd need and want in a brokerage. [Understood. Thanks]

1b) Best way to move out of Wealthfront and hopefully Robinhood is to open an account at one of the 3 listed above and ask the new custodian to move the funds using an "In Kind Transfer". This will move the assets as is to the new account so no selling and buying (no tax consequences or wash sales) and no time out of the market. Since you have your 401k at Fidelity that's probably your best choice because you can consolidate everything at one good institution. Simplification is something the folks around here (and most everywhere) really like. [Thank you. Once I move funds, how should I simplify it? I've updated original post using the template.]

2) You are correct your emergency fund should be accessible immediately and being as such it shouldn't be considered as part of the investment (not even put in bonds, except maybe ibonds but that must be done slowly over time because it ties up funds for 1 year). In fact the preferred asking portfolio questions format doesn't even list cash savings just notes that the EF has been funded and how many months it will cover such as (Emergency fund = yes 6 months). Beyond that note of its existence don't account for it in your portfolio as it shouldn't be considered part of your AA.[Thanks]
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Simplify Portfolio

Post by wetgear »

Much more clear, nice work! :sharebeer

1) CALLAN GLIDE 2055 does have a pretty high ER. If your goal is to move to a 3 fund portfolio use:
FID 500 INDEX (FXAIX) 0.02% (US stocks)
FID INTL INDEX (FSPSX) 0.04% (International stocks)
FID US BOND IDX (FXNAX) 0.03% (Bonds)

2) Yes a roth IRA is a good idea but be aware of the income limits for that and use the backdoor roth method if over the limit. Max this each year before adding to your taxable accounts.

3) HSA can be considered additional roth space (even a little better) and both should be 100% stocks from the asset location perspective. (all or most of your bonds in the 401k). The big caveat to this is if you expect to need the money for healthcare, if so leave it in cash but the general recommendation is to pay for healthcare out of pocket and let your HSA money stay invested and grow.

4) FXNAX offered in your 401k is a great total bond market index fund. Total bond funds are intermediate term bond funds (short+long+intermediate = average intermediate term) and they are appropriate for most people. They are a good balance between risk & reward.

5) 529s may make sense but maximize your 401k and roth IRA contributions first. If you have left over money after that then fund the 529s before taxable accounts.

6) I don't think you are thinking too much about the financial parts and you don't appear to have started too late. You are asking good questions and once you have everything set up it should require minimal thought/interaction moving forward.

I'd probably open a taxable account at Fidelity and ask them to move both the Wealthfront and Robinhood assets using a "in kind transfer". Many of the individual stocks have minimal gains and a few have losses you can use to offset the gains and avoid the tax bill. I'd probably sell all those immediately and move into the 3 fund portfolio. Depending on the gains on the funds which aren't listed you may also want to sell them immediately but if your gains are substantial you may want to spread the tax bill out over a few years or maybe just keep holding hold them.

For a 3 fund portfolio at Fidelity these are the recommended funds listed in the wiki:
Fidelity ZERO Total Market Index Fund (FZROX) or Fidelity Total Market Index Fund (FSKAX)
Fidelity ZERO International Index Fund (FZILX) or Fidelity Total International Index Fund (FTIHX)
Fidelity U. S. Bond Index Fund (FXNAX)

Good luck :beer
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Simplify Portfolio

Post by wetgear »

surfer05 wrote: Mon May 17, 2021 4:50 pm Appreciate your help here or any advice that you can provide.
What did you decide on?
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thanks wetgear for your detailed response and inputs. And also for the nudge.

Here are the things that I am doing right now, and will update this as and when I make progress(and assuming I'll get stuck somewhere)-
1. I am working with Fidelity to do 'in-kind' transfer for my Robinhood account. Thinking about best way to do the same for Wealthfront(see below for a question for you)
2. Fixing 401k as per your recommendation- moving out of Callan Glide, while working on how much to put into Bonds in 401k, as you mentioned all or most should be in Bonds in 401k. Correct?
3. Maximizing my contribution to HSA for this year and so on, will be investing those funds and also park money separately to pay out of pocket and don't touch HSA as recommended.
4. I am working on reading/learning more about IRA/Roth/backdoor conversion etc. (Thanks for the reference you shared earlier) I might come back to a confirmation before I make a move here.
5. Will be opening a 529 plan. Quick question- can I use 529 for NC for any college across the states?

A couple of questions:
1. You recommended Fidelity Zero Funds. It looks like those are offered only at Fidelity, I thinking if in future I need to change the brokerage firm. Will it be an issue? Also, I didn't see much of a different in terms of fee or return between Fidelity Zero Funds and other similar ETFs/MF. Any input regarding that?
2. For Wealthfront, I am thinking of choosing US Direct Indexing as zero, so that they can probably do Tax-Loss Harvesting and move to the funds. But I don't know if that is the best or I should do it. I am okay in keeping the Funds, but definitely want to remove all those(almost 100 individual stocks). Or should transfer all those and sell the individual stocks myself?

Thanks for the help from this group.

wetgear wrote: Mon May 24, 2021 9:03 pm
surfer05 wrote: Mon May 17, 2021 4:50 pm Appreciate your help here or any advice that you can provide.
What did you decide on?
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Simplify Portfolio

Post by wetgear »

surfer05 wrote: Wed May 26, 2021 11:15 am Thanks wetgear for your detailed response and inputs. And also for the nudge.

Here are the things that I am doing right now, and will update this as and when I make progress(and assuming I'll get stuck somewhere)-
1. I am working with Fidelity to do 'in-kind' transfer for my Robinhood account. Thinking about best way to do the same for Wealthfront(see below for a question for you)
2. Fixing 401k as per your recommendation- moving out of Callan Glide, while working on how much to put into Bonds in 401k, as you mentioned all or most should be in Bonds in 401k. Correct?
3. Maximizing my contribution to HSA for this year and so on, will be investing those funds and also park money separately to pay out of pocket and don't touch HSA as recommended.
4. I am working on reading/learning more about IRA/Roth/backdoor conversion etc. (Thanks for the reference you shared earlier) I might come back to a confirmation before I make a move here.
5. Will be opening a 529 plan. Quick question- can I use 529 for NC for any college across the states?

A couple of questions:
1. You recommended Fidelity Zero Funds. It looks like those are offered only at Fidelity, I thinking if in future I need to change the brokerage firm. Will it be an issue? Also, I didn't see much of a different in terms of fee or return between Fidelity Zero Funds and other similar ETFs/MF. Any input regarding that?
2. For Wealthfront, I am thinking of choosing US Direct Indexing as zero, so that they can probably do Tax-Loss Harvesting and move to the funds. But I don't know if that is the best or I should do it. I am okay in keeping the Funds, but definitely want to remove all those(almost 100 individual stocks). Or should transfer all those and sell the individual stocks myself?
1) It was more of an either or Fidelity zero or the other Fidelity fund for each of the 3 major components to a 3 fund portfolio. You may encounter issues if you'd need to transfer the zero funds to another brokerage that doesn't offer them but hopefully this is the last time you'll need to move money in taxable accounts between brokerages making that a non issue. Fidelity is widely liked here despite it being a vanguard centric forum, unless things significantly change at Fidelity staying there for your entire investing career is a very good option. While your work situation may change and create movement of money in work sponsored plans and new brokerages that's not a big deal because you can always sell and purchase whatever you want in the new accounts without any tax consequences so it doesn't matter there. Only the taxable account could cause issues but I can't currently see a reason why you'd ever need to leave Fidelity. If you still worry about it just use the other Fidelity funds instead of the zero. On to the second part of your question both options have very low fees, while the Zero funds have none the difference is negligible. Fees are important in general just not in this situation.

2b) I'm not sure I fully understand your question but an important point of this is your cost basis (how much the funds cost you) for the funds which I didn't see you list. Depending on how much they have appreciated you may have a big tax bill but on that note if you desire to move to a 3 fund portfolio getting out of all the extra funds sooner is usually better as you typically expect them to increase in value and the switch will cost more in taxes later especially if your income increases and moves you into a higher tax bracket. The funds there have a bunch of overlap with each other which is only increasing complexity and decreasing diversification as it concentrates certain sectors and types of stocks. I'd probably just have Fidelity transfer them all in-kind and then manually evaluate the current price and cost basis and not bother with making any changes at wealthfront prior to the move. Anything with a loss or a minimal gain can be immediately sold and moved into a 3 fund portfolio. Fidelity will track all of this and include it in your tax documents at year end.

5) I don't know much about 529s but I'd be surprised if you couldn't use them at any in state school. Worth googling that one.

"New annual Contributions Maxing out starting this year his 401k - his contribution $6,394 (Employer Contribution- $2,137)"
I'm assuming you meant those are your current contributions this year and you will be contributing the full $19,500 this year and maxing for each year moving forward. If not skip the 529s until you can do this.

2a) Yes whenever possible all bonds in pre-tax accounts (your 401k)

I think I answered all the questions but if I didn't or you have more please let us know.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

I thought it would make sense to provide a quick update about where am I and also ask a quick question-
1. I've moved from Robinhood to Fidelity
2. Wealthfront to Fidelity is in process.
3. Opted for recommended funds in 401k(increased contribution to max)

Questions:
1. I am still confused between non-deductible Traditional IRA vs. Roth IRA. Should I go ahead and open a ROTH account and start investing?
2. Dollar Cost Averaging: I have some extra cash, which I think I should invest in equity. I understand the concept of Dollar Cost Averaging, but what should be the tenure for this. The cash I have is not much but around $10-15k. Should I invest it over a month or a couple of months or all at once?

Thanks for the group for all the help.

wetgear wrote: Wed May 26, 2021 1:35 pm
surfer05 wrote: Wed May 26, 2021 11:15 am Thanks wetgear for your detailed response and inputs. And also for the nudge.

Here are the things that I am doing right now, and will update this as and when I make progress(and assuming I'll get stuck somewhere)-
1. I am working with Fidelity to do 'in-kind' transfer for my Robinhood account. Thinking about best way to do the same for Wealthfront(see below for a question for you)
2. Fixing 401k as per your recommendation- moving out of Callan Glide, while working on how much to put into Bonds in 401k, as you mentioned all or most should be in Bonds in 401k. Correct?
3. Maximizing my contribution to HSA for this year and so on, will be investing those funds and also park money separately to pay out of pocket and don't touch HSA as recommended.
4. I am working on reading/learning more about IRA/Roth/backdoor conversion etc. (Thanks for the reference you shared earlier) I might come back to a confirmation before I make a move here.
5. Will be opening a 529 plan. Quick question- can I use 529 for NC for any college across the states?

A couple of questions:
1. You recommended Fidelity Zero Funds. It looks like those are offered only at Fidelity, I thinking if in future I need to change the brokerage firm. Will it be an issue? Also, I didn't see much of a different in terms of fee or return between Fidelity Zero Funds and other similar ETFs/MF. Any input regarding that?
2. For Wealthfront, I am thinking of choosing US Direct Indexing as zero, so that they can probably do Tax-Loss Harvesting and move to the funds. But I don't know if that is the best or I should do it. I am okay in keeping the Funds, but definitely want to remove all those(almost 100 individual stocks). Or should transfer all those and sell the individual stocks myself?
1) It was more of an either or Fidelity zero or the other Fidelity fund for each of the 3 major components to a 3 fund portfolio. You may encounter issues if you'd need to transfer the zero funds to another brokerage that doesn't offer them but hopefully this is the last time you'll need to move money in taxable accounts between brokerages making that a non issue. Fidelity is widely liked here despite it being a vanguard centric forum, unless things significantly change at Fidelity staying there for your entire investing career is a very good option. While your work situation may change and create movement of money in work sponsored plans and new brokerages that's not a big deal because you can always sell and purchase whatever you want in the new accounts without any tax consequences so it doesn't matter there. Only the taxable account could cause issues but I can't currently see a reason why you'd ever need to leave Fidelity. If you still worry about it just use the other Fidelity funds instead of the zero. On to the second part of your question both options have very low fees, while the Zero funds have none the difference is negligible. Fees are important in general just not in this situation.

2b) I'm not sure I fully understand your question but an important point of this is your cost basis (how much the funds cost you) for the funds which I didn't see you list. Depending on how much they have appreciated you may have a big tax bill but on that note if you desire to move to a 3 fund portfolio getting out of all the extra funds sooner is usually better as you typically expect them to increase in value and the switch will cost more in taxes later especially if your income increases and moves you into a higher tax bracket. The funds there have a bunch of overlap with each other which is only increasing complexity and decreasing diversification as it concentrates certain sectors and types of stocks. I'd probably just have Fidelity transfer them all in-kind and then manually evaluate the current price and cost basis and not bother with making any changes at wealthfront prior to the move. Anything with a loss or a minimal gain can be immediately sold and moved into a 3 fund portfolio. Fidelity will track all of this and include it in your tax documents at year end.

5) I don't know much about 529s but I'd be surprised if you couldn't use them at any in state school. Worth googling that one.

"New annual Contributions Maxing out starting this year his 401k - his contribution $6,394 (Employer Contribution- $2,137)"
I'm assuming you meant those are your current contributions this year and you will be contributing the full $19,500 this year and maxing for each year moving forward. If not skip the 529s until you can do this.

2a) Yes whenever possible all bonds in pre-tax accounts (your 401k)

I think I answered all the questions but if I didn't or you have more please let us know.
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Simplify Portfolio

Post by wetgear »

surfer05 wrote: Mon Jun 14, 2021 4:28 pm I thought it would make sense to provide a quick update about where am I and also ask a quick question-
1. I've moved from Robinhood to Fidelity
2. Wealthfront to Fidelity is in process.
3. Opted for recommended funds in 401k(increased contribution to max)

Questions:
1. I am still confused between non-deductible Traditional IRA vs. Roth IRA. Should I go ahead and open a ROTH account and start investing?
2. Dollar Cost Averaging: I have some extra cash, which I think I should invest in equity. I understand the concept of Dollar Cost Averaging, but what should be the tenure for this. The cash I have is not much but around $10-15k. Should I invest it over a month or a couple of months or all at once?
Great work!

1) Yes open 2 Roth IRAs, one for yourself and have your spouse open one. If your 2021 MAGI will be under $198,000 then just contribute to them directly https://www.schwab.com/ira/roth-ira/contribution-limits. If your 2021 MAGI will be more than that then you have to use the back door method for contributing to them which has all the advantages but requires a few extra steps. A) Also open trad IRAs for you and your spouse. B) Make non-deductible contributions to the trad IRAs 6k/person. C) Rollover your trad IRAs to your Roth IRAs https://www.bogleheads.org/wiki/Backdoor_Roth

2) Lump sum investing it all at once tends to beat DCA investing 2/3rds of the time. I don't have a crystal ball to tell which will serve you better this time but your chances are better with lump summing it. I'd probably just pay off the car loan with these funds and lump sum the rest. That way you are getting a guaranteed ~2% return from the paid off loan either way which could cushion the blow and reduce monthly expenses if the market decides it's one of those 1/3 times.

Keep up the good work and let us know what your final 3 fund portfolio looks like when the dust settles.
shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Re: Simplify Portfolio

Post by shess »

surfer05 wrote: Mon May 17, 2021 4:50 pm 4. I want to simplify my portfolio and eventually have 2-3 funds portfolio. I want to do this as soon as possible and get done with this to sleep better at night. I understand the Stocks part(Total Stock market and foreign stock), but don't understand short term bond vs long term bond. What should be some examples of Bond index fund?
Sorry for the lag, I didn't see your original post until the bump.

What I would do would be to put an estimate on how much taxes I'd be willing to pay to clean things up. Then calculate your taxes if you just liquidated everything, if it's less than you'd be willing to pay, job done! If not, sort positions by net gain, least to most, and start selling from the losses towards the gains until you get to that amount. Given your portfolio, this might easily get rid of half or 2/3 of your positions.

Then I'd sort position by absolute gain, lowest to highest, and sell anything which is just too annoying to deal with. This is really your threshold, but, personally, if I didn't want a position and it had a $10 gain, I'd spend no time at all worrying about what to do about, I'd just sell that position and move on. I don't even know if I have the patience to wait for long-term gains treatment or anything. I guess you could put a price on how much overhead you consider holding a position for a year to be, and rank against that price.

Then I'd probably let things simmer, and take another pass at it next year, again aiming for that "what I tolerate" level of taxes. If you notice you have some big gainers, you might consider opening a donor-advised fund to shift them out of your portfolio to generate a deduction.

---

A similar approach is something like the debt-snowball approach. You have 88 positions from Wealthfront, plus ~10 elsewhere. So you might decide to take care of 5 per month for the next year and a half. Each month, pick either the ones least worth holding, like $55 worth of something, or look for losses or least gains, and transition those 5. If that goes well, do it again next month, and so on. At some point, maybe you decide to just let it rip and get it done, or you decide to drop back to 5 per quarter, whatever. The main goal is to make this into a low-effort gardening process you do over time, rather than a high-stress one-short process.

---

Keep in mind that if you end up with 25 shares of AAPL in 2050, it's probably not the worst thing in the world. Your 3-fund portfolio will probably be so big that it makes your couple dozen shares of AAPL look cute in comparison.

---

WRT bond funds, I just use TBM (Total Bond Market, such as Vanguard's BND or VBTLX). IMHO that's a prudent place to get things situated, then you can tweak it over time if you get a better idea. You could also consider VIPSX (inflation-protected bonds), or go 50/50.
User avatar
dratkinson
Posts: 6116
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Simplify Portfolio

Post by dratkinson »

wetgear wrote: Mon Jun 14, 2021 5:11 pm...

1) Yes open 2 Roth IRAs, one for yourself and have your spouse open one. If your 2021 MAGI will be under $198,000 then just contribute to them directly https://www.schwab.com/ira/roth-ira/contribution-limits. If your 2021 MAGI will be more than that then you have to use the back door method for contributing to them which has all the advantages but requires a few extra steps. A) Also open trad IRAs for you and your spouse. B) Make non-deductible contributions to the trad IRAs 6k/person. C) Rollover your trad IRAs to your Roth IRAs https://www.bogleheads.org/wiki/Backdoor_Roth
+1. Search for "spousal IRA", allowed to her, based on your earned income: https://www.google.com/search?q=spousal+ira


Welcome.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thank you for your response.

Update-
1. I went ahead and opened ROTH IRA for myself and my spouse. MAGI is less than the number mentioned.
2. Used the cash to contribute max limit for both.
3. I wanted to close off the auto loan, but then calculated that I don't have any other loan and not a long credit history- average age is <2years, so thinking to keep it on, while doing lump sum investment for the remaining cash.

Question-
1. Now onward, I should just keep investing into taxable accounts mainly in Equity(VTI or equivalent and some percentage into International fund), doing the same for HSA, ROTH. Is that correct? Assuming keeping BOND stuff in my 401k.
2. I didn't do anything with the current my current fund in 401k- Callan GlidePath® 2055 Fund Class R6 (0.54%) ~ $81k as of today. I picked recommended funds for new contribution. Should I rollover this into those(recommended) funds as well? Will this cause any tax implication, as I am realizing gains?

Thanks once again. I am feeling more confident than ever, thanks to this group.

wetgear wrote: Mon Jun 14, 2021 5:11 pm
surfer05 wrote: Mon Jun 14, 2021 4:28 pm I thought it would make sense to provide a quick update about where am I and also ask a quick question-
1. I've moved from Robinhood to Fidelity
2. Wealthfront to Fidelity is in process.
3. Opted for recommended funds in 401k(increased contribution to max)

Questions:
1. I am still confused between non-deductible Traditional IRA vs. Roth IRA. Should I go ahead and open a ROTH account and start investing?
2. Dollar Cost Averaging: I have some extra cash, which I think I should invest in equity. I understand the concept of Dollar Cost Averaging, but what should be the tenure for this. The cash I have is not much but around $10-15k. Should I invest it over a month or a couple of months or all at once?
Great work!

1) Yes open 2 Roth IRAs, one for yourself and have your spouse open one. If your 2021 MAGI will be under $198,000 then just contribute to them directly https://www.schwab.com/ira/roth-ira/contribution-limits. If your 2021 MAGI will be more than that then you have to use the back door method for contributing to them which has all the advantages but requires a few extra steps. A) Also open trad IRAs for you and your spouse. B) Make non-deductible contributions to the trad IRAs 6k/person. C) Rollover your trad IRAs to your Roth IRAs https://www.bogleheads.org/wiki/Backdoor_Roth

2) Lump sum investing it all at once tends to beat DCA investing 2/3rds of the time. I don't have a crystal ball to tell which will serve you better this time but your chances are better with lump summing it. I'd probably just pay off the car loan with these funds and lump sum the rest. That way you are getting a guaranteed ~2% return from the paid off loan either way which could cushion the blow and reduce monthly expenses if the market decides it's one of those 1/3 times.

Keep up the good work and let us know what your final 3 fund portfolio looks like when the dust settles.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thank you. I did that and opened an account.
dratkinson wrote: Tue Jun 15, 2021 8:45 am
wetgear wrote: Mon Jun 14, 2021 5:11 pm...

1) Yes open 2 Roth IRAs, one for yourself and have your spouse open one. If your 2021 MAGI will be under $198,000 then just contribute to them directly https://www.schwab.com/ira/roth-ira/contribution-limits. If your 2021 MAGI will be more than that then you have to use the back door method for contributing to them which has all the advantages but requires a few extra steps. A) Also open trad IRAs for you and your spouse. B) Make non-deductible contributions to the trad IRAs 6k/person. C) Rollover your trad IRAs to your Roth IRAs https://www.bogleheads.org/wiki/Backdoor_Roth
+1. Search for "spousal IRA", allowed to her, based on your earned income: https://www.google.com/search?q=spousal+ira


Welcome.
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Simplify Portfolio

Post by wetgear »

surfer05 wrote: Tue Jun 15, 2021 5:27 pm Thank you for your response.

Update-
1. I went ahead and opened ROTH IRA for myself and my spouse. MAGI is less than the number mentioned.
2. Used the cash to contribute max limit for both.
3. I wanted to close off the auto loan, but then calculated that I don't have any other loan and not a long credit history- average age is <2years, so thinking to keep it on, while doing lump sum investment for the remaining cash.

Question-
1. Now onward, I should just keep investing into taxable accounts mainly in Equity(VTI or equivalent and some percentage into International fund), doing the same for HSA, ROTH. Is that correct? Assuming keeping BOND stuff in my 401k.
2. I didn't do anything with the current my current fund in 401k- Callan GlidePath® 2055 Fund Class R6 (0.54%) ~ $81k as of today. I picked recommended funds for new contribution. Should I rollover this into those(recommended) funds as well? Will this cause any tax implication, as I am realizing gains?

Thanks once again. I am feeling more confident than ever, thanks to this group.
1) Yes keep all the bonds in any pre-tax accounts you have, the 401k in this case. After you've maxed the 401k ($19,500) and 2X Roth IRAs ($6,000/account), HSA ($7,200) then yes keep investing in your taxable account. Note: You don't need to hold international and domestic stock in all your accounts as long as the total portfolio % is correct (just like bonds only in 401k). Each account has anywhere between 1-3 funds in it. Use mutual funds in your roths (FSKAX and/or FTIHX), HSA (FSKAX and/or FTIHX), 401k (previous post funds) and ETFs in your taxable which will help you avoid wash sales between your accounts if trying to Tax Loss Harves (TLH). Start with either (VTI and/or VXUS) or (ITOT and/or IXUS) and use the other set for TLH partners. https://www.bogleheads.org/wiki/Tax_loss_harvesting

2) Exchanging funds inside tax advantaged accounts (401k, trad/roth IRA, and HSAs if you don't live in Ca or NJ) doesn't create taxable events so no reason not to do this immediately. Realizing gains is only an issue in taxable accounts.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thank you for taking time and providing your perspective. I liked the approach.
I'll be putting this into works to do the clean up.


shess wrote: Mon Jun 14, 2021 6:03 pm
surfer05 wrote: Mon May 17, 2021 4:50 pm 4. I want to simplify my portfolio and eventually have 2-3 funds portfolio. I want to do this as soon as possible and get done with this to sleep better at night. I understand the Stocks part(Total Stock market and foreign stock), but don't understand short term bond vs long term bond. What should be some examples of Bond index fund?
Sorry for the lag, I didn't see your original post until the bump.

What I would do would be to put an estimate on how much taxes I'd be willing to pay to clean things up. Then calculate your taxes if you just liquidated everything, if it's less than you'd be willing to pay, job done! If not, sort positions by net gain, least to most, and start selling from the losses towards the gains until you get to that amount. Given your portfolio, this might easily get rid of half or 2/3 of your positions.

Then I'd sort position by absolute gain, lowest to highest, and sell anything which is just too annoying to deal with. This is really your threshold, but, personally, if I didn't want a position and it had a $10 gain, I'd spend no time at all worrying about what to do about, I'd just sell that position and move on. I don't even know if I have the patience to wait for long-term gains treatment or anything. I guess you could put a price on how much overhead you consider holding a position for a year to be, and rank against that price.

Then I'd probably let things simmer, and take another pass at it next year, again aiming for that "what I tolerate" level of taxes. If you notice you have some big gainers, you might consider opening a donor-advised fund to shift them out of your portfolio to generate a deduction.

---

A similar approach is something like the debt-snowball approach. You have 88 positions from Wealthfront, plus ~10 elsewhere. So you might decide to take care of 5 per month for the next year and a half. Each month, pick either the ones least worth holding, like $55 worth of something, or look for losses or least gains, and transition those 5. If that goes well, do it again next month, and so on. At some point, maybe you decide to just let it rip and get it done, or you decide to drop back to 5 per quarter, whatever. The main goal is to make this into a low-effort gardening process you do over time, rather than a high-stress one-short process.

---

Keep in mind that if you end up with 25 shares of AAPL in 2050, it's probably not the worst thing in the world. Your 3-fund portfolio will probably be so big that it makes your couple dozen shares of AAPL look cute in comparison.

---

WRT bond funds, I just use TBM (Total Bond Market, such as Vanguard's BND or VBTLX). IMHO that's a prudent place to get things situated, then you can tweak it over time if you get a better idea. You could also consider VIPSX (inflation-protected bonds), or go 50/50.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thank you. Update about 401k- Migrated existing fund held into recommended funds(majority into Bonds)

Quick question- why MFs are recommended instead of ETFs in pre-tax(tax-advantages) accounts?

I was thinking to go with VTI/VXUS wherever possible(in tax advantage and taxable accounts), and then use ITOT/IXUS for TLH.


wetgear wrote: Tue Jun 15, 2021 6:54 pm
surfer05 wrote: Tue Jun 15, 2021 5:27 pm Thank you for your response.

Update-
1. I went ahead and opened ROTH IRA for myself and my spouse. MAGI is less than the number mentioned.
2. Used the cash to contribute max limit for both.
3. I wanted to close off the auto loan, but then calculated that I don't have any other loan and not a long credit history- average age is <2years, so thinking to keep it on, while doing lump sum investment for the remaining cash.

Question-
1. Now onward, I should just keep investing into taxable accounts mainly in Equity(VTI or equivalent and some percentage into International fund), doing the same for HSA, ROTH. Is that correct? Assuming keeping BOND stuff in my 401k.
2. I didn't do anything with the current my current fund in 401k- Callan GlidePath® 2055 Fund Class R6 (0.54%) ~ $81k as of today. I picked recommended funds for new contribution. Should I rollover this into those(recommended) funds as well? Will this cause any tax implication, as I am realizing gains?

Thanks once again. I am feeling more confident than ever, thanks to this group.
1) Yes keep all the bonds in any pre-tax accounts you have, the 401k in this case. After you've maxed the 401k ($19,500) and 2X Roth IRAs ($6,000/account), HSA ($7,200) then yes keep investing in your taxable account. Note: You don't need to hold international and domestic stock in all your accounts as long as the total portfolio % is correct (just like bonds only in 401k). Each account has anywhere between 1-3 funds in it. Use mutual funds in your roths (FSKAX and/or FTIHX), HSA (FSKAX and/or FTIHX), 401k (previous post funds) and ETFs in your taxable which will help you avoid wash sales between your accounts if trying to Tax Loss Harves (TLH). Start with either (VTI and/or VXUS) or (ITOT and/or IXUS) and use the other set for TLH partners. https://www.bogleheads.org/wiki/Tax_loss_harvesting

2) Exchanging funds inside tax advantaged accounts (401k, trad/roth IRA, and HSAs if you don't live in Ca or NJ) doesn't create taxable events so no reason not to do this immediately. Realizing gains is only an issue in taxable accounts.
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Simplify Portfolio

Post by wetgear »

surfer05 wrote: Tue Jun 15, 2021 9:47 pm Thank you. Update about 401k- Migrated existing fund held into recommended funds(majority into Bonds)

Quick question- why MFs are recommended instead of ETFs in pre-tax(tax-advantages) accounts?

I was thinking to go with VTI/VXUS wherever possible(in tax advantage and taxable accounts), and then use ITOT/IXUS for TLH.
MF vs ETF: The reasons to choose one over the other are roughly split 50/50 with the ETFs being a little more tax efficient in most cases so may have a very slight edge in a taxable account. https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds

The reason to hold different fund types in tax advantaged vs taxable accounts is mostly just to make your life easier by building into your portfolio a way to prevent accidental wash sales between all your accounts when TLH. https://www.bogleheads.org/wiki/Wash_sale
If you don't hold "substantially identical" funds in your tax advantaged vs taxable accounts you don't even have to worry about whether or not a automatic reinvestment in one of these accounts is going to mess with your TLH. While "substantially identical" is sort of poorly defined by the IRS I think most people agree that even if their performance is nearly identical because they track the same index a EFT is never "substantially identical" to a MF. You'll have to check your taxable accounts when trying to do TLH to make sure you aren't creating a wash sale there but by employing this strategy you don't have to then check all your other accounts for the same.

I personally like to have the MFs in all my tax advantaged accounts on autopilot with automatic reinvestments and use specific identification in my taxable accounts with ETFs so that I can easily TLH and control to some degree the realized gains/losses on each sale. I find this strategy offers a good balance of convenience and granular control only where I want it. https://www.bogleheads.org/wiki/Specifi ... _of_shares

So this is all pretty minor in comparison to all the other changes you are making but it may provide a slight increase in tax efficacy and slightly increased convenience.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thank you.

Finally, all the positions are in Fidelity, consolidated(Robhinhood and Wealthfront). It feels good.

Next step is I have started selling stocks that have loss, or have minimal gain(irrespective of their term- short/long).

I have two questions-
1. Which fund(ETF or MF should I pick for HSA via TD Ameritrade)- It is costing money to purchase MFs. I am looking for ETFs- does SCHB(ER .03%) is good to continue investing in HSA? As per recommendation, don't want to buy VTI. I initially got units(6) of VTI. Leaving those as is for now.
2. I have the following positions that makes most of my portfolio. Which one should I sell first? There's no need for money as of now, but goal is to simplify my portfolio into 3 funds(I can live with some additional funds/stocks for a few months/years)
Want to understand- whether I should sell Bonds first or any other Funds? (This is why sharing most of my data points, including gains.) My 401k has Bond% per my AA.

Thanks for the help everyone.

Code: Select all

| Symbol | Description                                     | Current Value | Total Gain/Loss Dollar | Total Gain/Loss Percent | Cost Basis Total |
|--------|-------------------------------------------------|---------------|------------------------|-------------------------|------------------|
| VXF    | VANGUARD EXTENDED MARKETS INDEX FUND            | $30,674.56    | $11,879.24             | 63.20%                  | $18,795.32       |
| SCHF   | SCHWAB STRATEGIC TR INTL EQUITY ETF             | $28,843.20    | $10,585.40             | 57.98%                  | $18,257.80       |
| MSFT   | MICROSOFT CORP                                  | $26,019.98    | $7,551.62              | 40.89%                  | $18,468.36       |
| VWO    | VANGUARD INTL EQUITY INDEX FDS FTSE EMR MKT ETF | $18,426.45    | $4,381.08              | 31.19%                  | $14,045.37       |
| VIG    | VANGUARD SPECIALIZED FUNDS DIV APP ETF          | $11,460.00    | $3,198.36              | 38.71%                  | $8,261.64        |
| FTEC   | FIDELITY MSCI INFORMATION TECHNOLOGY INDEX ETF  | $11,311.16    | $2,633.66              | 30.35%                  | $8,677.50        |
| PLUG   | PLUG POWER INC                                  | $10,274.04    | $2,378.03              | 30.12%                  | $7,896.01        |
| VTEB   | VANGUARD MUN BD FDS TAX EXEMPT BD               | $8,566.85     | $185.89                | 2.22%                   | $8,380.96        |
| VOO    | VANGUARD INDEX FUNDS S&P 500 ETF USD            | $7,024.32     | $1,500.26              | 27.16%                  | $5,524.06        |
| TFI    | SPDR SER TR NUVEEN BRC MUNIC                    | $6,831.65     | $409.77                | 6.38%                   | $6,421.88        |
| VEA    | VANGUARD TAX-MANAGED INTL FD FTSE DEV MKT ETF   | $6,643.20     | $1,490.52              | 28.93%                  | $5,152.68        |
| IEMG   | ISHARES INC CORE MSCI EMERGING MKTS ETF         | $4,812.16     | $1,788.80              | 59.17%                  | $3,023.36        |
| VTI    | VANGUARD IDX FUND                               | $4,419.80     | $174.90                | 4.12%                   | $4,244.90        |
| QQQM   | INVESCO EXCH TRADED FD TR II NASDAQ 100 ETF     | $4,285.20     | $148.70                | 3.59%                   | $4,136.50        |
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Simplify Portfolio

Post by wetgear »

surfer05 wrote: Tue Jun 22, 2021 3:58 pm Thank you.

Finally, all the positions are in Fidelity, consolidated(Robhinhood and Wealthfront). It feels good.

Next step is I have started selling stocks that have loss, or have minimal gain(irrespective of their term- short/long).

I have two questions-
1. Which fund(ETF or MF should I pick for HSA via TD Ameritrade)- It is costing money to purchase MFs. I am looking for ETFs- does SCHB(ER .03%) is good to continue investing in HSA? As per recommendation, don't want to buy VTI. I initially got units(6) of VTI. Leaving those as is for now.
2. I have the following positions that makes most of my portfolio. Which one should I sell first? There's no need for money as of now, but goal is to simplify my portfolio into 3 funds(I can live with some additional funds/stocks for a few months/years)
Want to understand- whether I should sell Bonds first or any other Funds? (This is why sharing most of my data points, including gains.) My 401k has Bond% per my AA.

Thanks for the help everyone.

Code: Select all

| Symbol | Description                                     | Current Value | Total Gain/Loss Dollar | Total Gain/Loss Percent | Cost Basis Total |
|--------|-------------------------------------------------|---------------|------------------------|-------------------------|------------------|
| VXF    | VANGUARD EXTENDED MARKETS INDEX FUND            | $30,674.56    | $11,879.24             | 63.20%                  | $18,795.32       |
| SCHF   | SCHWAB STRATEGIC TR INTL EQUITY ETF             | $28,843.20    | $10,585.40             | 57.98%                  | $18,257.80       |
| MSFT   | MICROSOFT CORP                                  | $26,019.98    | $7,551.62              | 40.89%                  | $18,468.36       |
| VWO    | VANGUARD INTL EQUITY INDEX FDS FTSE EMR MKT ETF | $18,426.45    | $4,381.08              | 31.19%                  | $14,045.37       |
| VIG    | VANGUARD SPECIALIZED FUNDS DIV APP ETF          | $11,460.00    | $3,198.36              | 38.71%                  | $8,261.64        |
| FTEC   | FIDELITY MSCI INFORMATION TECHNOLOGY INDEX ETF  | $11,311.16    | $2,633.66              | 30.35%                  | $8,677.50        |
| PLUG   | PLUG POWER INC                                  | $10,274.04    | $2,378.03              | 30.12%                  | $7,896.01        |
| VTEB   | VANGUARD MUN BD FDS TAX EXEMPT BD               | $8,566.85     | $185.89                | 2.22%                   | $8,380.96        |
| VOO    | VANGUARD INDEX FUNDS S&P 500 ETF USD            | $7,024.32     | $1,500.26              | 27.16%                  | $5,524.06        |
| TFI    | SPDR SER TR NUVEEN BRC MUNIC                    | $6,831.65     | $409.77                | 6.38%                   | $6,421.88        |
| VEA    | VANGUARD TAX-MANAGED INTL FD FTSE DEV MKT ETF   | $6,643.20     | $1,490.52              | 28.93%                  | $5,152.68        |
| IEMG   | ISHARES INC CORE MSCI EMERGING MKTS ETF         | $4,812.16     | $1,788.80              | 59.17%                  | $3,023.36        |
| VTI    | VANGUARD IDX FUND                               | $4,419.80     | $174.90                | 4.12%                   | $4,244.90        |
| QQQM   | INVESCO EXCH TRADED FD TR II NASDAQ 100 ETF     | $4,285.20     | $148.70                | 3.59%                   | $4,136.50        |
1) SCHB is a fine fund to use in your HSA. Alternatively you can use this process once a year roll all those HSA funds over to a HSA at Fidelity and use your standard mutual funds there: https://thefinancebuff.com/how-to-rollo ... r-fee.html

2) You've got some big capital gains on these funds but that's good because you made money. I'd probably start with QQQM, TFI, VTEB, and PLUG as they have smallish capital gains. Even in the worst case scenario of high capital gains you are still paying < 1k to move these into a 3 fund portfolio. I'd probably keep both VTI, VXF, VOO and just consider those both parts of you US stock allocations and then move them to ITOT if a TLH opportunity presents itself. I also might keep VEA as your international portion for now and try to TLH into VXUS or IXUS if an opportunity exists. Anything with a high ER or a single stock would be the next on the chopping block. You can sort of choose how much you will end up paying in taxes each year on this switch to a 3 fund but ripping off the band aid and just getting it over with also isn't the worst idea just make sure to calculate how much this will cost you in taxes and be ready for it.
User avatar
dratkinson
Posts: 6116
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Simplify Portfolio

Post by dratkinson »

surfer05 wrote: Tue Jun 22, 2021 3:58 pm Thank you.

Finally, all the positions are in Fidelity, consolidated(Robhinhood and Wealthfront). It feels good.

Next step is I have started selling stocks that have loss, or have minimal gain(irrespective of their term- short/long).

I have two questions-
1. Which fund(ETF or MF should I pick for HSA via TD Ameritrade)- It is costing money to purchase MFs. I am looking for ETFs- does SCHB(ER .03%) is good to continue investing in HSA? As per recommendation, don't want to buy VTI. I initially got units(6) of VTI. Leaving those as is for now.
2. I have the following positions that makes most of my portfolio. Which one should I sell first? There's no need for money as of now, but goal is to simplify my portfolio into 3 funds(I can live with some additional funds/stocks for a few months/years)
Want to understand- whether I should sell Bonds first or any other Funds? (This is why sharing most of my data points, including gains.) My 401k has Bond% per my AA.

Thanks for the help everyone.

Code: Select all

| Symbol | Description                                     | Current Value | Total Gain/Loss Dollar | Total Gain/Loss Percent | Cost Basis Total |
|--------|-------------------------------------------------|---------------|------------------------|-------------------------|------------------|
| VXF    | VANGUARD EXTENDED MARKETS INDEX FUND            | $30,674.56    | $11,879.24             | 63.20%                  | $18,795.32       |
| SCHF   | SCHWAB STRATEGIC TR INTL EQUITY ETF             | $28,843.20    | $10,585.40             | 57.98%                  | $18,257.80       |
| MSFT   | MICROSOFT CORP                                  | $26,019.98    | $7,551.62              | 40.89%                  | $18,468.36       |
| VWO    | VANGUARD INTL EQUITY INDEX FDS FTSE EMR MKT ETF | $18,426.45    | $4,381.08              | 31.19%                  | $14,045.37       |
| VIG    | VANGUARD SPECIALIZED FUNDS DIV APP ETF          | $11,460.00    | $3,198.36              | 38.71%                  | $8,261.64        |
| FTEC   | FIDELITY MSCI INFORMATION TECHNOLOGY INDEX ETF  | $11,311.16    | $2,633.66              | 30.35%                  | $8,677.50        |
| PLUG   | PLUG POWER INC                                  | $10,274.04    | $2,378.03              | 30.12%                  | $7,896.01        |
| VTEB   | VANGUARD MUN BD FDS TAX EXEMPT BD               | $8,566.85     | $185.89                | 2.22%                   | $8,380.96        |
| VOO    | VANGUARD INDEX FUNDS S&P 500 ETF USD            | $7,024.32     | $1,500.26              | 27.16%                  | $5,524.06        |
| TFI    | SPDR SER TR NUVEEN BRC MUNIC                    | $6,831.65     | $409.77                | 6.38%                   | $6,421.88        |
| VEA    | VANGUARD TAX-MANAGED INTL FD FTSE DEV MKT ETF   | $6,643.20     | $1,490.52              | 28.93%                  | $5,152.68        |
| IEMG   | ISHARES INC CORE MSCI EMERGING MKTS ETF         | $4,812.16     | $1,788.80              | 59.17%                  | $3,023.36        |
| VTI    | VANGUARD IDX FUND                               | $4,419.80     | $174.90                | 4.12%                   | $4,244.90        |
| QQQM   | INVESCO EXCH TRADED FD TR II NASDAQ 100 ETF     | $4,285.20     | $148.70                | 3.59%                   | $4,136.50        |
Assuming you are only talking about your taxable account....
--Decide which of your ETFs you want to keep. (Everything else is a candidate to sell.)
--Having some bonds can help, and if in a sufficiently high tax bracket*, then you could benefit from municipal bond fund/etf in taxable that produce more after-tax income than TBM.



* Bonds in taxable. Looking for tax-efficiency and to use as an extended tier of your 1st-tier EFs (checking, savings, mmkt account, CDs).

You currently have some muni funds. Your 22% fed tax bracket is too low to benefit from safe/recommended muni funds/etfs that produce more after-tax income than TBM** (VBTLX/BND). (** Disclosure. I'm in the 22% tax bracket and use the less-safe VWLTX to produce more after-tax income than TBM, but it doesn't have an ETF share class, so you'd need a taxable Vanguard account just for one muni fund. I've done that... have a small mutual fund family brokerage account to hold a non-Vanguard single-state muni fund.)

However, your current munis should produce more after-tax income than current CDs; so could use them as a CD substitute as an extended tier EF. You'll need to compute your munis' TEYs (taxable-equivalent yield) to know. (Disclosure. I keep 3yrs of living expenses in the safer, less volatile VWITX as a CD substitute, because it produces more after-tax income than CDs/HY savings, but not more than TBM.)

Some use savings bonds because their interest can be tax-deferred until redeemed, and are state tax-exempt when redeemed. This makes them useful as an extended-tier EF---no tax owed until redeemed. However, they mature and must be redeemed at 30yrs, so you'll be forced to redeem them when in your highest earnings years, and into retirement when wanting more tax bracket headroom to convert traditional accounts to Roth. They also come with annual purchase limits, memory items, other hurdles,... and are another account to manage. (I used them, but eventually redeemed them and bought munis instead to simplify my life for me and my heirs.)

Some use treasury funds/ETFs in taxable because they are exempt from state income tax. One example would be VFITX or VGIT.

If you want bonds as an extended-tier EF and failing all else and in the 22% tax bracket, you can use BND or any taxable broad-market low-cost intermediate-term bond ETF. Why? They should produce more after-tax income than safe muni candidates available to you. But their dividends are taxable and will push toward the next higher tax bracket.

But if you decide you don't want some bonds in taxable, then sell your munis to clean up account. (I like having some bonds in taxable.)

Were I you and knew that my munis produced more after-tax income than CDs (higher muni TEY than CD APY), then I'd keep them as an extended-tier EF. I'd prefer the Vanguard muni over the Nuveen muni, but would not sell the Nuveen muni if I had to pay CGs. (Why? Disclosure. Recall reading a Nuveen single-state muni prospectus and thinking that better funds existed. I've not read the Nuveen national muni prospectus; look for negative things like AMT exposure and the use of leverage. Why? The current tax code sunset might bring a return of AMT exposure to lower incomes. Plan for the worst, hope for the best.)

Your choice.



Among your candidates to sell. Ideas:
--Sell first, those with smallest gain/loss. (Will most quickly reduce the number of ETFs remaining in your taxable account.)
--or Sell first, those that are the least tax efficient. (Will increase the tax-efficiency of your remaining taxable account until you can clean it up.)

Your choice.


A way to wag equity tax efficiency. Look at last 1099DIV for each ETF in taxable.
--Box 1a, total dividends (ordinary, QDI, STCG from internal fund operation).
--Box 1b, QDI dividends (taxed like LTCGs).
--For each equity ETF, compute its QDI%. QDI% = box 1b / box 1a. (The higher the QDI%, the more tax efficient the equity.)
--Sell your least tax-efficient equities, first.



The big picture to double-check. It would be helpful if you would provide a table listing all of your family accounts and the funds you plan to hold in each of your family accounts. Why? So the forum can double-check the logic of your family investing.

Example. I recall SCHB and VTI track different indexes. (You must read the prospectus to confirm this is so, as I could be wrong.) This means, if SCHB is used in your HSA, and VTI is used in your taxable account, and you want to be able to TLH VTI, then SCHB will not cause problems with VTI TLHing.

Everything affects everything. But other problems could be lurking in your family investing plan*, so this is why we need to see a picture/table of ALL of your planned family accounts/holdings. Why?
--A table is more descriptive than a narrative for visual learners.
--* Include your wife's accounts/holdings (spousal IRA,...) in your family's investing plan---hence the term.



Whatever you decide to do is okay by us, as long as you have a good reasons for your decisions. "Internet strangers told me to do it" is NOT a good reason.

Investing knowledge. Read several of the recommended books. Where recommended authors agree, that is the central road to Dublin (doublin'), and is safe for new investors. Were they disagree, those are alternate routes, are more risky, so only recommended for investors who know they can withstand more risk.

Self knowledge of true risk tolerance. This can only come from managing your investments through several market corrections. (Skew toward safety before then.) During the correction:
--Were you panicked enough to sell?
--Were you nervous but didn't sell?
--Did you see the correction as a buying opportunity?

Your "good reasons" come from matching your investments to advice from recommended authors and your true risk tolerance, which allows you to pass the SWAN (sleep well at night) test.


Example.
--Your bonds. You hold your major recommended bonds in tax-deferred accounts; but have some munis in taxable that produce* more after-tax income than CDs, to use as a CD substitute and extended-tier EF, to avoid taxable equities CGs issues and tapping retirement accounts during a financial emergency. You will TLH** the muni risk when it appears. (* You know this because you computed the munis TEYs. ** You know how to avoid the daily-accrual vs monthly-accrual and TLHing gotchas.)
--Your equities in taxable are chosen for tax efficiency and....
--Your tax-deferred accounts. ....
--Your tax-free accounts. ....



IPS (Investment Policy Statement). Once you get all of this figured out, it's a good idea to write everything down in an IPS---so you don't forget what you are doing and why.

See IPS: https://www.bogleheads.org/wiki/Investm ... _statement

We are advised to keep our IPS short and simple. Make yours as long as you need it to be.

But just as important as the IPS's "what" and "why", is the "how". So it's a good idea to attach to your IPS, additional clarifying information that applies to your financial situation/investments. Example:
--The holding period requirements for daily-accrual vs monthly-accrual funds vs ETFs, and gotchas if not met.
--The holding period requirements for QDI and LTCG, and gotchas if not met.
--The requirements to TLH, and gotchas if not met.
--....

We can have good investments, but if we manage them improperly, we'll have less after-tax income (wash sale resulting in disallowed TLH,...). So knowing the "how" is what keeps us out of trouble.



Edit. Second thoughts.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thank you for your prompt response. I apologize for not able to get back to you.

I've made progress based on the recommendation here. I'll update my post soon to show where I am now and anything else needs to be taken care.

I really appreciate this forum. Finally, I am feeling positive and in control of my finances.

wetgear wrote: Tue Jun 22, 2021 4:58 pm
surfer05 wrote: Tue Jun 22, 2021 3:58 pm Thank you.

Finally, all the positions are in Fidelity, consolidated(Robhinhood and Wealthfront). It feels good.

Next step is I have started selling stocks that have loss, or have minimal gain(irrespective of their term- short/long).

I have two questions-
1. Which fund(ETF or MF should I pick for HSA via TD Ameritrade)- It is costing money to purchase MFs. I am looking for ETFs- does SCHB(ER .03%) is good to continue investing in HSA? As per recommendation, don't want to buy VTI. I initially got units(6) of VTI. Leaving those as is for now.
2. I have the following positions that makes most of my portfolio. Which one should I sell first? There's no need for money as of now, but goal is to simplify my portfolio into 3 funds(I can live with some additional funds/stocks for a few months/years)
Want to understand- whether I should sell Bonds first or any other Funds? (This is why sharing most of my data points, including gains.) My 401k has Bond% per my AA.

Thanks for the help everyone.

Code: Select all

| Symbol | Description                                     | Current Value | Total Gain/Loss Dollar | Total Gain/Loss Percent | Cost Basis Total |
|--------|-------------------------------------------------|---------------|------------------------|-------------------------|------------------|
| VXF    | VANGUARD EXTENDED MARKETS INDEX FUND            | $30,674.56    | $11,879.24             | 63.20%                  | $18,795.32       |
| SCHF   | SCHWAB STRATEGIC TR INTL EQUITY ETF             | $28,843.20    | $10,585.40             | 57.98%                  | $18,257.80       |
| MSFT   | MICROSOFT CORP                                  | $26,019.98    | $7,551.62              | 40.89%                  | $18,468.36       |
| VWO    | VANGUARD INTL EQUITY INDEX FDS FTSE EMR MKT ETF | $18,426.45    | $4,381.08              | 31.19%                  | $14,045.37       |
| VIG    | VANGUARD SPECIALIZED FUNDS DIV APP ETF          | $11,460.00    | $3,198.36              | 38.71%                  | $8,261.64        |
| FTEC   | FIDELITY MSCI INFORMATION TECHNOLOGY INDEX ETF  | $11,311.16    | $2,633.66              | 30.35%                  | $8,677.50        |
| PLUG   | PLUG POWER INC                                  | $10,274.04    | $2,378.03              | 30.12%                  | $7,896.01        |
| VTEB   | VANGUARD MUN BD FDS TAX EXEMPT BD               | $8,566.85     | $185.89                | 2.22%                   | $8,380.96        |
| VOO    | VANGUARD INDEX FUNDS S&P 500 ETF USD            | $7,024.32     | $1,500.26              | 27.16%                  | $5,524.06        |
| TFI    | SPDR SER TR NUVEEN BRC MUNIC                    | $6,831.65     | $409.77                | 6.38%                   | $6,421.88        |
| VEA    | VANGUARD TAX-MANAGED INTL FD FTSE DEV MKT ETF   | $6,643.20     | $1,490.52              | 28.93%                  | $5,152.68        |
| IEMG   | ISHARES INC CORE MSCI EMERGING MKTS ETF         | $4,812.16     | $1,788.80              | 59.17%                  | $3,023.36        |
| VTI    | VANGUARD IDX FUND                               | $4,419.80     | $174.90                | 4.12%                   | $4,244.90        |
| QQQM   | INVESCO EXCH TRADED FD TR II NASDAQ 100 ETF     | $4,285.20     | $148.70                | 3.59%                   | $4,136.50        |
1) SCHB is a fine fund to use in your HSA. Alternatively you can use this process once a year roll all those HSA funds over to a HSA at Fidelity and use your standard mutual funds there: https://thefinancebuff.com/how-to-rollo ... r-fee.html

2) You've got some big capital gains on these funds but that's good because you made money. I'd probably start with QQQM, TFI, VTEB, and PLUG as they have smallish capital gains. Even in the worst case scenario of high capital gains you are still paying < 1k to move these into a 3 fund portfolio. I'd probably keep both VTI, VXF, VOO and just consider those both parts of you US stock allocations and then move them to ITOT if a TLH opportunity presents itself. I also might keep VEA as your international portion for now and try to TLH into VXUS or IXUS if an opportunity exists. Anything with a high ER or a single stock would be the next on the chopping block. You can sort of choose how much you will end up paying in taxes each year on this switch to a 3 fund but ripping off the band aid and just getting it over with also isn't the worst idea just make sure to calculate how much this will cost you in taxes and be ready for it.
Topic Author
surfer05
Posts: 41
Joined: Mon May 17, 2021 4:32 pm

Re: Simplify Portfolio

Post by surfer05 »

Thank you for your detailed response. I apologize for not able to get back to you.

I've made progress based on the recommendation here. I'll update my post soon to show where I am now and anything else needs to be taken care.

I really appreciate this forum. Finally, I am feeling positive and in control of my finances.

dratkinson wrote: Tue Jun 22, 2021 7:11 pm
surfer05 wrote: Tue Jun 22, 2021 3:58 pm Thank you.

Finally, all the positions are in Fidelity, consolidated(Robhinhood and Wealthfront). It feels good.

Next step is I have started selling stocks that have loss, or have minimal gain(irrespective of their term- short/long).

I have two questions-
1. Which fund(ETF or MF should I pick for HSA via TD Ameritrade)- It is costing money to purchase MFs. I am looking for ETFs- does SCHB(ER .03%) is good to continue investing in HSA? As per recommendation, don't want to buy VTI. I initially got units(6) of VTI. Leaving those as is for now.
2. I have the following positions that makes most of my portfolio. Which one should I sell first? There's no need for money as of now, but goal is to simplify my portfolio into 3 funds(I can live with some additional funds/stocks for a few months/years)
Want to understand- whether I should sell Bonds first or any other Funds? (This is why sharing most of my data points, including gains.) My 401k has Bond% per my AA.

Thanks for the help everyone.

Code: Select all

| Symbol | Description                                     | Current Value | Total Gain/Loss Dollar | Total Gain/Loss Percent | Cost Basis Total |
|--------|-------------------------------------------------|---------------|------------------------|-------------------------|------------------|
| VXF    | VANGUARD EXTENDED MARKETS INDEX FUND            | $30,674.56    | $11,879.24             | 63.20%                  | $18,795.32       |
| SCHF   | SCHWAB STRATEGIC TR INTL EQUITY ETF             | $28,843.20    | $10,585.40             | 57.98%                  | $18,257.80       |
| MSFT   | MICROSOFT CORP                                  | $26,019.98    | $7,551.62              | 40.89%                  | $18,468.36       |
| VWO    | VANGUARD INTL EQUITY INDEX FDS FTSE EMR MKT ETF | $18,426.45    | $4,381.08              | 31.19%                  | $14,045.37       |
| VIG    | VANGUARD SPECIALIZED FUNDS DIV APP ETF          | $11,460.00    | $3,198.36              | 38.71%                  | $8,261.64        |
| FTEC   | FIDELITY MSCI INFORMATION TECHNOLOGY INDEX ETF  | $11,311.16    | $2,633.66              | 30.35%                  | $8,677.50        |
| PLUG   | PLUG POWER INC                                  | $10,274.04    | $2,378.03              | 30.12%                  | $7,896.01        |
| VTEB   | VANGUARD MUN BD FDS TAX EXEMPT BD               | $8,566.85     | $185.89                | 2.22%                   | $8,380.96        |
| VOO    | VANGUARD INDEX FUNDS S&P 500 ETF USD            | $7,024.32     | $1,500.26              | 27.16%                  | $5,524.06        |
| TFI    | SPDR SER TR NUVEEN BRC MUNIC                    | $6,831.65     | $409.77                | 6.38%                   | $6,421.88        |
| VEA    | VANGUARD TAX-MANAGED INTL FD FTSE DEV MKT ETF   | $6,643.20     | $1,490.52              | 28.93%                  | $5,152.68        |
| IEMG   | ISHARES INC CORE MSCI EMERGING MKTS ETF         | $4,812.16     | $1,788.80              | 59.17%                  | $3,023.36        |
| VTI    | VANGUARD IDX FUND                               | $4,419.80     | $174.90                | 4.12%                   | $4,244.90        |
| QQQM   | INVESCO EXCH TRADED FD TR II NASDAQ 100 ETF     | $4,285.20     | $148.70                | 3.59%                   | $4,136.50        |
Assuming you are only talking about your taxable account....
--Decide which of your ETFs you want to keep. (Everything else is a candidate to sell.)
--Having some bonds can help, and if in a sufficiently high tax bracket*, then you could benefit from municipal bond fund/etf in taxable that produce more after-tax income than TBM.



* Bonds in taxable. Looking for tax-efficiency and to use as an extended tier of your 1st-tier EFs (checking, savings, mmkt account, CDs).

You currently have some muni funds. Your 22% fed tax bracket is too low to benefit from safe/recommended muni funds/etfs that produce more after-tax income than TBM** (VBTLX/BND). (** Disclosure. I'm in the 22% tax bracket and use the less-safe VWLTX to produce more after-tax income than TBM, but it doesn't have an ETF share class, so you'd need a taxable Vanguard account just for one muni fund. I've done that... have a small mutual fund family brokerage account to hold a non-Vanguard single-state muni fund.)

However, your current munis should produce more after-tax income than current CDs; so could use them as a CD substitute as an extended tier EF. You'll need to compute your munis' TEYs (taxable-equivalent yield) to know. (Disclosure. I keep 3yrs of living expenses in the safer, less volatile VWITX as a CD substitute, because it produces more after-tax income than CDs/HY savings, but not more than TBM.)

Some use savings bonds because their interest can be tax-deferred until redeemed, and are state tax-exempt when redeemed. This makes them useful as an extended-tier EF---no tax owed until redeemed. However, they mature and must be redeemed at 30yrs, so you'll be forced to redeem them when in your highest earnings years, and into retirement when wanting more tax bracket headroom to convert traditional accounts to Roth. They also come with annual purchase limits, memory items, other hurdles,... and are another account to manage. (I used them, but eventually redeemed them and bought munis instead to simplify my life for me and my heirs.)

Some use treasury funds/ETFs in taxable because they are exempt from state income tax. One example would be VFITX or VGIT.

If you want bonds as an extended-tier EF and failing all else and in the 22% tax bracket, you can use BND or any taxable broad-market low-cost intermediate-term bond ETF. Why? They should produce more after-tax income than safe muni candidates available to you. But their dividends are taxable and will push toward the next higher tax bracket.

But if you decide you don't want some bonds in taxable, then sell your munis to clean up account. (I like having some bonds in taxable.)

Were I you and knew that my munis produced more after-tax income than CDs (higher muni TEY than CD APY), then I'd keep them as an extended-tier EF. I'd prefer the Vanguard muni over the Nuveen muni, but would not sell the Nuveen muni if I had to pay CGs. (Why? Disclosure. Recall reading a Nuveen single-state muni prospectus and thinking that better funds existed. I've not read the Nuveen national muni prospectus; look for negative things like AMT exposure and the use of leverage. Why? The current tax code sunset might bring a return of AMT exposure to lower incomes. Plan for the worst, hope for the best.)

Your choice.



Among your candidates to sell. Ideas:
--Sell first, those with smallest gain/loss. (Will most quickly reduce the number of ETFs remaining in your taxable account.)
--or Sell first, those that are the least tax efficient. (Will increase the tax-efficiency of your remaining taxable account until you can clean it up.)

Your choice.


A way to wag equity tax efficiency. Look at last 1099DIV for each ETF in taxable.
--Box 1a, total dividends (ordinary, QDI, STCG from internal fund operation).
--Box 1b, QDI dividends (taxed like LTCGs).
--For each equity ETF, compute its QDI%. QDI% = box 1b / box 1a. (The higher the QDI%, the more tax efficient the equity.)
--Sell your least tax-efficient equities, first.



The big picture to double-check. It would be helpful if you would provide a table listing all of your family accounts and the funds you plan to hold in each of your family accounts. Why? So the forum can double-check the logic of your family investing.

Example. I recall SCHB and VTI track different indexes. (You must read the prospectus to confirm this is so, as I could be wrong.) This means, if SCHB is used in your HSA, and VTI is used in your taxable account, and you want to be able to TLH VTI, then SCHB will not cause problems with VTI TLHing.

Everything affects everything. But other problems could be lurking in your family investing plan*, so this is why we need to see a picture/table of ALL of your planned family accounts/holdings. Why?
--A table is more descriptive than a narrative for visual learners.
--* Include your wife's accounts/holdings (spousal IRA,...) in your family's investing plan---hence the term.



Whatever you decide to do is okay by us, as long as you have a good reasons for your decisions. "Internet strangers told me to do it" is NOT a good reason.

Investing knowledge. Read several of the recommended books. Where recommended authors agree, that is the central road to Dublin (doublin'), and is safe for new investors. Were they disagree, those are alternate routes, are more risky, so only recommended for investors who know they can withstand more risk.

Self knowledge of true risk tolerance. This can only come from managing your investments through several market corrections. (Skew toward safety before then.) During the correction:
--Were you panicked enough to sell?
--Were you nervous but didn't sell?
--Did you see the correction as a buying opportunity?

Your "good reasons" come from matching your investments to advice from recommended authors and your true risk tolerance, which allows you to pass the SWAN (sleep well at night) test.


Example.
--Your bonds. You hold your major recommended bonds in tax-deferred accounts; but have some munis in taxable that produce* more after-tax income than CDs, to use as a CD substitute and extended-tier EF, to avoid taxable equities CGs issues and tapping retirement accounts during a financial emergency. You will TLH** the muni risk when it appears. (* You know this because you computed the munis TEYs. ** You know how to avoid the daily-accrual vs monthly-accrual and TLHing gotchas.)
--Your equities in taxable are chosen for tax efficiency and....
--Your tax-deferred accounts. ....
--Your tax-free accounts. ....



IPS (Investment Policy Statement). Once you get all of this figured out, it's a good idea to write everything down in an IPS---so you don't forget what you are doing and why.

See IPS: https://www.bogleheads.org/wiki/Investm ... _statement

We are advised to keep our IPS short and simple. Make yours as long as you need it to be.

But just as important as the IPS's "what" and "why", is the "how". So it's a good idea to attach to your IPS, additional clarifying information that applies to your financial situation/investments. Example:
--The holding period requirements for daily-accrual vs monthly-accrual funds vs ETFs, and gotchas if not met.
--The holding period requirements for QDI and LTCG, and gotchas if not met.
--The requirements to TLH, and gotchas if not met.
--....

We can have good investments, but if we manage them improperly, we'll have less after-tax income (wash sale resulting in disallowed TLH,...). So knowing the "how" is what keeps us out of trouble.



Edit. Second thoughts.
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