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Fixing individual stock portfolio

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  • Avatar saildawg 
    Participant
    Status: Physician
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    Joined: 01/24/2016

    I am helping my father move from a portfolio of individual stocks (148 individual equities comprised of companies in the s&p 500), to a market cap broad based index fund portfolio.

    We cut ties with he advisory firm, his assets are at Schwab and after I spoke to a representative, they are going to give us around 375 free trades (online equity and etf) for the year.  I am debating the following options (note this is not a discussion of capital gains etc, I am only going to sell losses and up to the point of around 30K in gains a year to keep him in 0% capital gains bracket as he is in retirement with social security)

    Option 1:

    Sell stock and replace with SCHB (schwab total stock etf)

    Option 2:

    Sell stock replace with VTI (vanguard total stock etf) through schwab, and after a year or two once all stock is sold transfer assets to Vanguard

    Option 3:

    Sell stock, transfer cash to vanguard and buy VTSAX

     

    I am leaning toward #3 as I am very familiar with the vanguard interface/mutual funds and would have an easier time managing and doing Tax loss harvesting etc, but am weary of time out of market.  I suspect it may just be a day or two so maybe overthinking it.

    Any advice comments is appreciated

    #231805 Reply
    Avatar jacoavlu 
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    Joined: 03/01/2018

    good for you for helping. I like your plan

    I like option 3.

    If you worry about time out of the market you’ll have to play with the timing a bit to see how long it takes funds to bounce around, but Vanguard seems to let you enter an mutual fund Buy order and give you credit for the purchase before they even have the money.

    If you’re really looking to optimize, you could have a Schwab bank account linked to the brokerage account. Then you can instantly transfer cash from ETF sale from brokerage to bank account, and if that bank account is linked to Vanguard you might actually end up with almost no time out of the market

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #231809 Reply
    Liked by saildawg, Peds
    Avatar Peds 
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    but am weary of time out of market

    Click to expand…

    this is literally the least of your concerns.

    #231812 Reply
    CordMcNally CordMcNally 
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    Status: Physician
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    Option 1 and Option 3 are both fine. If you are more comfortable with the Vanguard interface then go with Option 3. Time out of the market will be irrelevant. You may lose a few bucks but you may also gain a few bucks.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #231820 Reply
    Avatar jhwkr542 
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    All 3 are reasonable options. If you’re going to be managing going forward as well, option 3 is probably easiest for you. The day or 2 out of the market is nothing. Hopefully it goes down those days!

    #231824 Reply
    IntensiveCareBear IntensiveCareBear 
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    Status: Physician
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    Joined: 12/22/2018

    You can sell slightly ITM short term covered calls on all of stock where he has 100+ shares, wait 2-3wks time until the middle of the next month, make significantly more money that way (esp if your free trades include option trades) than just the $0 you make selling market rate… then sell any odd numbered or remaining shares at market if the calls didn’t take them. It sounds like he has enough mass that the 1-3% you’d make by doing it that way would matter significantly. Optional? Yes. Easy? Totally. Lucrative? Yep.

    Of your options, options 1 and 2 are same… pick whichever you get cheaper/free trades for in the future. I’d buy all VOO or IVV or VTI with the cash freed up, take divi as cash (for retirement walking around $) and be done… SCHB or ITOT or whatever are fine also. All of those do the same thing at same costs.

    Or, preferably, teach him how to sell covered calls on the newfound VOO or VTI since he is retired and needs regular cash income. Done.

    …Mutual funds are for the dinosaurs. They have more ways of hiding fees, they don’t update real time which is very problematic in any sort of momentum market (you order to sell at noon down 2% and might end up selling down 7% at the end of the day instead), they have annoying minimums, and they just offer zero real advantages anymore… unless you are the brokerage or agent peddling them. At best best best, you can say that some – very few, VTSAX is one – low cost mutual funds are as good as their ETF equivalents in some cost regards. They offer no advantage in this day in age since they don’t update regularly, though. GL

    "Hmm, that sounds risky." - motto of the middle class

    #231828 Reply
    Avatar Kamban 
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    Joined: 08/01/2016

    Would you not have individual stocks that you do not want to sell still left in Schwab even after selling some. And later on,  VTSAX in Vanguard.

    I wonder if there is an equivalent of VTSAX in Schwab (ETF or mutual fund) with comparable expense ratio that you can but there and make life simpler with all in one brokerage.

    #231833 Reply
    IntensiveCareBear IntensiveCareBear 
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    …I wonder if there is an equivalent of VTSAX in Schwab (ETF or mutual fund) with comparable expense ratio that you can but there and make life simpler with all in one brokerage.

    Click to expand…

    There is, SCHB… as he mentioned. SCHX (their VOO type one… but US top 750, not S&P 500) and others are also similar and good and low ER. They’re among the best choices for indexers who use Schwab and can get those commission-free. The total market and S&P 500 are so similar and skew weighted that it doesn’t even matter for all intents and purposes; simply look at the graphs long term.

    SCHB = VTI = ITOT = VTSAX = bla bla blah … all are 0.03 or 0.04 ER, all track total US market… and all should have dividends within a sliver of one another (if not, pick highest divi one from divi minus ER = winner). VTSAX, being a mutual fund, only updates once daily at day’s end, has minimums, much easier to hide fees or erroneous tracking of index if Vanguard so chooses, etc etc etc problems of mutual funds.

    The only reason to choose one ETF with same track index (and assuming accurate tracking and same divi) over the other is ER or liquidity or free to trade in certain brokerages. They are really quite comparable. For Fidelity, the indexer pick are IVV and ITOT since they give free trades on those. Maybe Vanguard does VOO and VTI free, etc. For some brokerages that offer free trades on anything, it doesn’t matter… choose on ER and/or liquidity. The reasons to go ETF over mutual fund are numerous, though. They are all very good and cheap vehicles compared to what was out there in the past, but some are still a bit better at same cost. Have a good weekend

    "Hmm, that sounds risky." - motto of the middle class

    #231838 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 335
    Joined: 01/24/2016

    You can sell slightly ITM short term covered calls on all of stock where he has 100+ shares, wait 2-3wks time until the middle of the next month, make significantly more money that way (esp if your free trades include option trades) than just the $0 you make selling market rate… then sell any odd numbered or remaining shares at market if the calls didn’t take them. It sounds like he has enough mass that the 1-3% you’d make by doing it that way would matter significantly. Optional? Yes. Easy? Totally. Lucrative? Yep.

    Of your options, options 1 and 2 are same… pick whichever you get cheaper/free trades for in the future. I’d buy all VOO or IVV or VTI with the cash freed up, take divi as cash (for retirement walking around $) and be done… SCHB or ITOT or whatever are fine also. All of those do the same thing at same costs.

    Or, preferably, teach him how to sell covered calls on the newfound VOO or VTI since he is retired and needs regular cash income. Done.

    …Mutual funds are for the dinosaurs. They have more ways of hiding fees, they don’t update real time which is very problematic in any sort of momentum market (you order to sell at noon down 2% and might end up selling down 7% at the end of the day instead), they have annoying minimums, and they just offer zero real advantages anymore… unless you are the brokerage or agent peddling them. At best best best, you can say that some – very few, VTSAX is one – low cost mutual funds are as good as their ETF equivalents in some cost regards. They offer no advantage in this day in age since they don’t update regularly, though. GL

    Click to expand…

    Not an option for him to learn, and I am too busy with my 3 clinical jobs to do that.  I am happy with a passive approach even if it is not 100% optimized.  I agree most Mutual funds lag etf in terms tax efficiency except for Vanguard mutual funds notably VTSAX.  I am going to continue to play around with Schwab interface, but I think the ease of familiarity with VG is worth it to me.  As well as the structure of the company, all things being equal I go with VG.

    #231887 Reply
    Avatar borg 
    Participant
    Status: Physician
    Posts: 30
    Joined: 03/21/2019

    I have no problems with schwab interface–as others mentioned, it doesn’t matter AT ALL going between SCHB, VTI, VTSAX, etc.  i use both SCHB and VTI at schwab for tax loss harvesting in my taxable.

    #231891 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 335
    Joined: 01/24/2016

    Ended up staying with schwab and exchanging some individual equities (that had capital gain losses)  for SCHB, it will be a multi year process most likely.  Ill have to try and hit them up for some more free trades in the future.

     

    #234649 Reply
    Avatar LIFO 
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    Status: Physician
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    Joined: 01/27/2018

    Any rhyme or reason for the 148 stocks?  If you’ve eliminated the churn (by firing the advisor) and have broad sector diversity you may not need to sell that much.  Selling the losers is probably a good idea.  I would let the winners ride.  I would also hold the strong balance sheet companies. eg No point in selling berkshire just to buy the s&p 500.

    #234687 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 335
    Joined: 01/24/2016

    Any rhyme or reason for the 148 stocks?  If you’ve eliminated the churn (by firing the advisor) and have broad sector diversity you may not need to sell that much.  Selling the losers is probably a good idea.  I would let the winners ride.  I would also hold the strong balance sheet companies. eg No point in selling berkshire just to buy the s&p 500.

    Click to expand…

    No rhyme or reason I can identify, I suspect it is due to them wanting to create a complex portfolio nobody would want to manage on their own, and the ability to take a rip for each trade.  Glad I am intervening now, he still did better way better than he would of done not investing.

    The plan is to sell the losers first and foremost

    Sell investments when we need to refill his cash position, and up to the point of 0% capital gain federal bracket, and move toward broad based indexed portfolio any chance we get.  I suspect we will still have a good amount of individual equities that do well and have large gains.

    The real win is getting ride of the AUM fee, the rest is just more work for me but I kind of like it so we will see how it goes.

     

    #234705 Reply

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