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Old 08-07-2009, 05:40 PM   #21
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Who were you adressing that question to?


LOL
A question concerning tax harvesting: You say by owning a balanced fund instead of individual equities and bonds you lose the ability to do any tax harvesting. Well if you own a few funds, and you have loses on one fund, and gains on the other fund, can't that be used for tax harvesting? Or does it not apply to funds?
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Old 08-07-2009, 06:17 PM   #22
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You cannot tax-loss harvest gains in any fund. You can harvest gains, but that is not the same as tax-loss harvesting.

If the bonds in your balanced fund go up by 10% and the equities in your balanced fund drop by the same dollar amount or less, your balanced fund does not show a loss and thus you cannot do any tax-loss harvesting.

But if you had two separate funds, an equity fund and a fixed income fund, then the equity fund (in taxable) would show the loss, so exchange into a "not substantially identical" equity fund of the same asset class. The bond fund (in tax-sheltered) shows the gains, but you don't owe taxes on the gain if you don't withdraw shares.
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Old 08-07-2009, 07:30 PM   #23
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I was addressing the question to Want2Retire or anyone that could tell me about the dividends during the rough times we've had. This seems like a conservative, steady fund,
and I understand this throws taxable income, which might not be good if your in a high tax bracket, but if your retired or nearing retirement, it looks like a good holding.
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Old 08-07-2009, 07:51 PM   #24
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Originally Posted by audreyh1 View Post

Personally, I love having a balanced fund do the rebalancing for me. Then I can invest and forget about it, just reap the dividends - I don't have think about the investment ever again.

Audrey
100% agree Audrey. My DW has not a clue for investing. No fuss, too easy, hands off. And yes I pay a little extra for the rebalancing in a balance fund to know when I'm not around she doesn't have some annuity salesperson.......well you know the rest of the story.
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Old 08-07-2009, 08:09 PM   #25
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If you click on the link she provided then click on price history, then yield, you look back as far as you want. It stays fairly consistant, but the fund price fluctuates.

LOL,

I understand what you said about not being able to break up the bond funds from the equity funds in a balanced fund, and about trading funds. But what I'm asking is: Supose you have a $3,000 loss with a Dodge Cox International Fund and a $3,000 gain with lets say Wellington. If the gain in the Wellington fund is due to stocks rising, can the stock portion of that fund be offset by the loss from the Dodge Cox Fund when you sell both fund? And likewise, say if you have two income or two dividend equity funds. If they are the same type of funds can you tax harvest between them?
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Old 08-07-2009, 09:19 PM   #26
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Originally Posted by modhatter View Post
.... Supose you have a $3,000 loss with a Dodge Cox International Fund and a $3,000 gain with lets say Wellington. If the gain in the Wellington fund is due to stocks rising, can the stock portion of that fund be offset by the loss from the Dodge Cox Fund when you sell both fund?
Whenever you sell funds held in taxable accounts in the same tax year, the sales are reported on your Schedule D and the net capital gain/loss is figured and reported. So you can do what you wrote, but I do not see why you would want to do so. If you just sold the stock fund with a loss, then your would have a net capital loss that could be deducted against ordinary income. Since ordinary (i.e. not a capital gain) income is taxed at a higher rate than a long term capital gain, you want your losses to offset ordinary income if you can (there is a $3000 limit, any more is carried over to the next tax year). If you can use stock losses to reduce ordinary income, maybe you can even convert rollover IRAs to Roth IRA at a lower tax rate.

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And likewise, say if you have two income or two dividend equity funds. If they are the same type of funds can you tax harvest between them?
If you have 2 funds of the same type, they will very likely have similar returns. That is, when one fund has a losing year, the other fund will have a losing year as well. You could tax-loss harvest between them, but you must make your trades to avoid a wash sale if you want to deduct the loss that year on your taxes.

Perhaps a more realistic scenario might be something like this:
1. Buy shares of VEU (an international fund) in January and July.
2. In December note that your January shares have a gain, but your July shares have a loss.
3. Sell the shares bought in July to book the loss, use the proceeds to buy VEA (an international fund). Now you own both VEU and VEA. You cannot buy more VEU until 31 days after you sold VEU. So in February buy more VEU. If the VEA has a gain, so no reason to sell it. If it has a loss, you should sell it and book the loss and use the proceeds to buy VEU.

You continue to own VEU and VEA with gains essentially forever.

Since every year you sell any position with a loss, eventually you will have no losing positions to sell, but only gains. When you need to sell a fund, only sell a fund with a long term gain. You may still have carry over losses to offset the gain.

In the past 18 months there were many tax-loss harvesting opportunities for holders of stock funds in taxable accounts. I have a large amount for my carryover loss, so that I won't be paying any capital gains taxes for years. I will be offsetting $3000 of ordinary income each year for quite some time.
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