Tax Loss Harvesting --- Deciding when to do it

[Dash man]

No problem giving the fund names... i just didn't want to muddy the waters if me typing the similarities/descriptions would suffice. Based on the explanation in the video I'm pretty sure the funds I described are too similar, so we'll reassess.

Both are at Vanguard:

Thinking of leaving VWUAX

Was looking at VIGAX

At first glance I see one is actively managed with a higher expense ratio than the other, which is an index fund. Switching between these funds wouldn’t result in a wash sale in my opinion.

 

[Montecfo]

Wow. Thanks everyone!



I guess we'll reinvest in something, then, as you and everyone else suggest. I am just so scared to create a wash sale that I figured it would be better to just hold it for a few weeks, especially with the amount of loss we would realize.



With our Roth conversions we are not in line for the 0% gains rate, but thanks for the heads up on that.

I doubt this fund would create such a large gain that it would impact the extra dings you and Mathjack mentioned, but that's also good to keep in mind.






So, getting back to avoiding a wash sale... after reading all of your replies, I read several Kitces articles and one from Investopedia, and it sounds like we could choose a fund at the same brokerage with different benchmarks and different managers even though the top holdings are the same and we'd be OK? Specifically, the 'loser' is a Growth Fund and the other one we like is a Growth Index Fund that will be paying DIV in just a few weeks. Or are those too similar?

No. Because pretty much no fund is too similar to another.

Certainly no actively managed fund would be "substantially Identical" to an index.

 

[GoBears]

You might want to wait to sell and buy the index fund on or after its ex-dividend date. When dividends are declared the fund will decrease in price by the amount of dividends to be paid so once the dividend is received (either reinvested or kept in cash) the value of your holdings won’t change, but you’ll owe taxes on the dividends. Buying shares just before the ex-dividend date is not tax efficient.

 

[always_learning]

At first glance I see one is actively managed with a higher expense ratio than the other, which is an index fund. Switching between these funds wouldn’t result in a wash sale in my opinion.

Fantastic. I wouldn't have thought that active vs passive index was enough to do the trick. It does make me feel better when I add it to the list of other differences between them.

No. Because pretty much no fund is too similar to another.

Certainly no actively managed fund would be "substantially Identical" to an index.

Thank you. I really wish there was an official checklist of things to consider. I can't believe that after all this time since mutual funds came to be, it's still a vague notion and we just have to hope we don't do it wrong.

You might want to wait to sell and buy the index fund on or after its ex-dividend date. When dividends are declared the fund will decrease in price by the amount of dividends to be paid so once the dividend is received (either reinvested or kept in cash) the value of your holdings won’t change, but you’ll owe taxes on the dividends. Buying shares just before the ex-dividend date is not tax efficient.

Yep. Will pay attention to that. Thanks for the reminder to not lose sight of the 'small things' while deciding on the 'big things'. It would be easy to overlook that and feel like this after ---> .

Thank you to everyone to responded to my questions. I really appreciate the help.