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Tax loss harvesting and swaps

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  • Tax loss harvesting and swaps

    I TLHd for the first time, and now have a concern. I swapped VSIAX > VSMAX and VTIAX > VFWAX. When the 30 days were up on the VFWAX swap, the gain equalled the loss harvested, so I left it in. VSMAX will be ready to swap back in a week or two, and it appears I will be in the same predicament.

    I originally bought VSIAX as my goal is to tilt to value, and as VSMAX is a blend, it doesn't suit my needs for the long term. I listened to the gurus say 'Only swap into what you're comfortable holding for the long term', and although they also tilt to value, they do advise VSMAX as an appropriate swap for VSIAX. I imagine there are others in the same boat given the swift comeback of the markets recently. Any thoughts would be greatly appreciated.

  • #2
    “'Only swap into what you're comfortable holding for the long term', and although they also tilt to value, they do advise VSMAX as an appropriate swap for VSIAX.”

    Looks like you’re comfort level is not the same as the gurus. Not intended as snarky. A number of others have been stuck with less than their optimal. Some wait it out for LTCG’s and fix it then. Some bite the bullet and wipeout the TLH after 30 days.

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    • #3
      Only swap to what you can hold long term.....

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      • #4
        I am new to this as well but I agree that the key seems to be that you should only swap to something similar and that you would want to hold in the long term. Otherwise may just be best not to do it, bite the bullet and cancel it out, or risk a wash sale.

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        • #5
          "Looks like you’re comfort level is not the same as the gurus."

          Thank you all for your responses.
          Tim, I have a pretty solid comfort level, as long as the move is logical, and still trying to figure out the logic here. I am interested in their rationale for comfort with a blended fund, when they feel that a value tilted fund is the way to go.

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          • #6
            Originally posted by drpzaz View Post
            "Looks like you’re comfort level is not the same as the gurus."

            Thank you all for your responses.
            Tim, I have a pretty solid comfort level, as long as the move is logical, and still trying to figure out the logic here. I am interested in their rationale for comfort with a blended fund, when they feel that a value tilted fund is the way to go.
            If you’re not comfortable holding your new holdings indefinitely until retirement then your comfort level, although “pretty solid,” is not the same. If you don’t want to hold these new funds forever then bite the bullet and consider it a lesson learned. It is not a TLH objective to swap back in to your original funds ASAP.

            I won’t comment on value versus blended and the two funds, but you may want to see if the historical returns mirror each other. For example, Total Stock Market, S&P 500 index and Large Cap pretty much move in lockstep despite tracking different indexes.

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            • #7
              Just like any other skill, after the first time you do something on your own, you learn a lot - not only how to do it better, but also about yourself, and why you did it a certain way.
              You've already been given good advice above, so I won't beat any dead horses.

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              • #8
                Originally posted by TheDangerZone View Post

                If you’re not comfortable holding your new holdings indefinitely until retirement then your comfort level, although “pretty solid,” is not the same. If you don’t want to hold these new funds forever then bite the bullet and consider it a lesson learned. It is not a TLH objective to swap back in to your original funds ASAP.

                I won’t comment on value versus blended and the two funds, but you may want to see if the historical returns mirror each other. For example, Total Stock Market, S&P 500 index and Large Cap pretty much move in lockstep despite tracking different indexes.
                Thank you, TheDangerZone. Your clarification is really helpful!

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                • #9
                  Originally posted by BruinBones View Post
                  Just like any other skill, after the first time you do something on your own, you learn a lot - not only how to do it better, but also about yourself, and why you did it a certain way.
                  You've already been given good advice above, so I won't beat any dead horses.
                  Exactly right. Regardless of your due diligence, there are some things you can only learn by doing it yourself, and making mistakes. I've always taken a very long time to make a new financial move, secondary to the anxiety of making a costly mistake. This can backfire, as time and opportunities are passing us by.

                  Upon reflection, one of the things I've learned from this move is after doing the research, just take the plunge - but with a small amount of money. This will lessen the anxiety of possible mistakes/losses, yet still benefit from lessons learned.

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