The time to do some tax-loss harvesting?

[fosterscik]

I'm a relatively new taxable investor in mutual funds (although long-time sheltered investor in IRAs/403b/457 accounts). So I'm just starting to consider tax consequences of dividends and capital gains from mutual funds.

Given the recent drop in stock prices (especially international) I assume this is a good time to harvest my losses in VTIAX and immediately reinvest. I do understand that I have to be careful about wash sales but as I understand the rules I will be OK if the repurchase is not “substantially identical”.

Does this mean I could buy/exchange into a US-focused mutual fund (VTSAX) or a balanced fund (VWENX) without waiting 30 days? Could I exchange for a different international fund (more regionally restricted than VTIAX)? Any advice would be appreciated.

 

[pb4uski]

IMO VTIAX is not substantially identical to VTSAX or VWENX. A more regionally restricted international fund would probably be ok too.

This article even suggests that VFWAX isn't substantially identical to VTIAX because of small cap difference so that might be a good play to harvest losses but keep close to your current AA.

Capital Loss Harvesting for the Index Investor – Saverocity Finance

 

[fosterscik]

Thanks for the info pb4uski - your view is what I suspected but its nice to have some confirmation. The big question now is whether to pull the trigger or assume VTIAX will rebound quickly (within the next 30 days). My suspicion is that the US markets will recover over that time period but Europe in particular may languish or drop further.

 

[ArkTinkerer]

Just another suggestion--if you can, take the tax loss in your non-retirement funds and go ahead and make the full yearly contributions to the tax sheltered ones. That way the gain is now tax sheltered. Yes it is a bit like timing the market but if you are going to make the contributions anyway...

 

[fosterscik]

Thanks for the idea Ark, but I made my max Roth contribution back in January (and I'm maxing out my 403b and 435 by payroll deduction).

 

[ArkTinkerer]

You're really bad at this market timing thing! ;-)

 

[fosterscik]

I don't need reminding
Any investment advice I give should be treated very cautiously...