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Rebalancing away from (taxable) Wellington
Old 06-29-2022, 11:00 PM   #1
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Rebalancing away from (taxable) Wellington

I've been wanting to get the Wellington shares out of my taxable accounts for awhile ... hating those CG tax hits that sneak in at the end of the year but I didn't want to deal with the CG hit of selling the shares (not necessarily great logic here!)



Seems like now would be a great time to make that shift - since the CG due from the sale will be minimal at the current rates (And no - not many options for losses ... bought long enough ago that they are still above water)


I've looked at old threads as I consider what it should be moved into.
(I hate rebalancing/making changes as you might be able to tell ...I will buy it and forget it) I'm past 59 1/2 - so access to all funds if needed.

Which brings me to the idea to sell VWENX and buy VTMFX (or something else ?) to give me a little balance but without those taxable CG hits at the end of each year)




30% of my investment portfolio in taxable accounts with this currently allocation

VTTVX -Target 2025 10%

VTIAX - International 4%

VTSAX Total Stock 6%

VWENX - Wellington 78%

cash/CD ladder 3% (was just getting started on the ladder in early 2020!)

The 70% Pre-tax Retirement Accounts are at an 88/12 AA
(a messy mix split across Fidelity, Schwab and Vanguard )

(Tiniest bit is in a ROTH IRA - just figured out the rollovers when I started a PT job which moved me into the 22% bracket Could've been doing them close to tax free for the 5 years before that!)

I have a CRT and RE income and the PT job which cover annual cash flow and keep me in the lower end of the 22% bracket.

Maybe I just sell (some/all?) the VWENX now and then take a week or so to work out the details for what to do with it (Don't want to wait too long to reinvest or I may not actually do it)
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Old 06-30-2022, 05:22 AM   #2
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https://www.bogleheads.org/wiki/Tax-...fund_placement
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Old 06-30-2022, 05:39 AM   #3
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Originally Posted by BeanCounter62 View Post
I've been wanting to get the Wellington shares out of my taxable accounts for awhile ... hating those CG tax hits that sneak in at the end of the year but I didn't want to deal with the CG hit of selling the shares (not necessarily great logic here!)

Seems like now would be a great time to make that shift - since the CG due from the sale will be minimal at the current rates (And no - not many options for losses ... bought long enough ago that they are still above water)

I've looked at old threads as I consider what it should be moved into.
(I hate rebalancing/making changes as you might be able to tell ...I will buy it and forget it) I'm past 59 1/2 - so access to all funds if needed.

Which brings me to the idea to sell VWENX and buy VTMFX (or something else ?) to give me a little balance but without those taxable CG hits at the end of each year)


30% of my investment portfolio in taxable accounts with this currently allocation

VTTVX -Target 2025 10%

VTIAX - International 4%

VTSAX Total Stock 6%

VWENX - Wellington 78%

cash/CD ladder 3% (was just getting started on the ladder in early 2020!)

The 70% Pre-tax Retirement Accounts are at an 88/12 AA
(a messy mix split across Fidelity, Schwab and Vanguard )

(Tiniest bit is in a ROTH IRA - just figured out the rollovers when I started a PT job which moved me into the 22% bracket Could've been doing them close to tax free for the 5 years before that!)

I have a CRT and RE income and the PT job which cover annual cash flow and keep me in the lower end of the 22% bracket.

Maybe I just sell (some/all?) the VWENX now and then take a week or so to work out the details for what to do with it (Don't want to wait too long to reinvest or I may not actually do it)
If it were me I'd make a 10-year projection of income and taxes. Take a hit now on CG due to selling, or smooth it out over the years. Also, if the end of year CG hit I'd add that to the factors column which supports the move.

So I think the details matter in this case, and you have them. I think the allocation percentages say something. You're thinking of changing overall AA and removing bonds from taxable, and I agree with that as a general construct.
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Old 06-30-2022, 06:37 AM   #4
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Just for context, I have about 1/3 in IRA, 1/2 in taxable, and 1/6 in Roth.

All of my bonds are in the IRA(100%), taxable is all equites(70%) and 30% cash for a house purchase in the next year, and all equities in the Roth. This ends up with a 50/30/20 allocation Stock/bond/cash. I would definitely move the Wellington out of taxable if the CG hit is manageable. I would stay away from target date and balanced funds in taxable. All equities and cash would be the best with the fixed income portion inside your tax deferred accounts.

Best to you,

VW
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Old 06-30-2022, 07:19 AM   #5
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I would probably buy Vtsax. Wouldn't you want to get the bonds out of the taxable portfolio?
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Old 06-30-2022, 07:24 AM   #6
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Are you likely to qualify for the 0% CG tax rate in the future, perhaps when youíre done with your PT job? If so, you could wait. If not, Iíd sell now, set aside any cash needed to pay the tax, and invest the rest in VTSAX and, if you like, ST treasuries/CDs. Managed funds arenít ideal in taxable accounts, and moreover, the bonds in Wellington will probably decline more over the next few months. Iíd also consider selling the Target fund.
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Old 06-30-2022, 07:41 AM   #7
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The bonds in VTMFX are tax-free munis. 4.4 year average duration.
https://investor.vanguard.com/invest.../profile/vtmfx
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Old 06-30-2022, 07:57 AM   #8
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Stocks should be in taxable and Roth. Bonds in traditional IRA.

So if you are able to, sell the target fund and wellington fund in taxable and replace with VTSAX. Then rebalance in your tIRA to get to your target asset allocation.
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Old 06-30-2022, 08:36 AM   #9
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1. Determine what your AA should be.
2. Determine how to invest this AA.
3. Determine how to hold selected investments between taxable and nontaxable accounts.
4. Fiddle with #2 and #3 as necessary.

(never) Look at one account in isolation.

IMO, anyway.
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Old 06-30-2022, 09:13 AM   #10
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The bonds in VTMFX are tax-free munis. 4.4 year average duration.
https://investor.vanguard.com/invest.../profile/vtmfx
I would still wonder if they are taking up valuable space in the taxable account that could be used for equities.
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Old 06-30-2022, 12:08 PM   #11
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I would still wonder if they are taking up valuable space in the taxable account that could be used for equities.
Something else usually managed about balanced funds--is that you sell both parts of the AA when needing money, and don't get a choice to pick one or the other. For that reason I might chose to not reinvest income dividends.
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