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do you slice and dice in taxable accts?
Old 04-11-2007, 06:42 PM   #1
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do you slice and dice in taxable accts?

I'm often guilty of over analyzing things, and this may be yet another instance. In Feb, I posted my proposed asset allocation here and got much useful feedback. I'm still happy with the AA I decided to go with, but now am wondering if there's really any advantage to doing a "slice and dice" strategy in my taxable accounts, and whether it might be a disadvantage instead.

In taxable accounts:
30% Large Market (VTI/VFINX)
15% Small/Mid Market (VB/VTI, individual stocks to be phased out)
10% International Europe (VGK)
5% International Pacific (VPL)
5% Emerging Markets (VWO)
5% Random self-picked stocks (play money)

In tax-deferred/nontaxable:
5% International Value (EFV)
5% Small Value (VBR)
20% Lehman Agg Bond Fund

I'd been planning to rebalance by adding new money (currently about 10% of the portfolio annually). But as the pot grows, once I get near FIRE, I'll only be adding around 3-4% annually - might not be enough to rebalance with. So I'll either have to take capital gains with tax consequences to rebalance, or live with the imbalance until my contributions catch up. Alternatively, I could just use the new vanguard all-world-ex-US ETF in place of the Eur/Pac/EM ETFs, and then I'd just have to worry about rebalancing between US and international. Over time, perhaps I'd just fold my US small cap into the Total Market ETF as well.

What do you do in your taxable accts? What would you do in this situation? Am I overthinking this?

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Re: do you slice and dice in taxable accts?
Old 04-11-2007, 07:06 PM   #2
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Re: do you slice and dice in taxable accts?

Do you have a tax differed account?

Never mind I need to read closer.

Anyways why not put the high turn over stuff in your Tax-differed account and in your taxable account things that generate low tax events. For my taxable accounts I use an index fund and I don't touch it.
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Re: do you slice and dice in taxable accts?
Old 04-11-2007, 07:36 PM   #3
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Re: do you slice and dice in taxable accts?

I do not rebalance in my after tax account. I simply contribute more to bring it back in line as I can. So yes, I live with inbalances sometimes until I can free up some investment money.

I'm about to be Very out of whack due to rolling my 401k into an IRA. So I will be compensating in my after tax for the next year or so
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Re: do you slice and dice in taxable accts?
Old 04-11-2007, 09:37 PM   #4
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Re: do you slice and dice in taxable accts?

our 401(k)s and IRAs have enough options for us to do all the re-balancing each June and July without tax hits
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Re: do you slice and dice in taxable accts?
Old 04-13-2007, 12:34 PM   #5
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Re: do you slice and dice in taxable accts?

Ok, I've decided to just live with occasional imbalances in my AA without selling taxable funds. This should still be an improvement (how much depends on the volatility) over holding a total international type of fund. Thanks for the responses.
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