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  • Lordosis Lordosis 
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    Status: Physician
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    Been reading for the past year or so.  Got my financial life in order.  I have maxed my taxed advantaged accounts including did my first his/her backdoor roth in 2018 and already did 2019.  Got the HSA maxed.  I have 529s going.  Plenty of Efund.  Decided to start a taxable account this year.  I have it all in VTSAX per my IPS.  I decided based on advice I have seen here that I should not have my dividends reinvested and will invest them when I invest more periodically to avoid multiple tax lots.  My question to the forum is how often do you invest.  Monthly, Quarterly?  I am using vanguard and would like to automate this as much as possible.  I use their prime MMF for some of my Efund.  I was thinking about making auto contributions to the MMF and then quarterly dump the excess into VTSAX. I would still need to go in and sweep that settlement fund into there as well.  Am I overthinking this?

    Thanks for the help!

    “Never let your sense of morals prevent you from doing what is right.”

    #189864 Reply
    ENT Doc ENT Doc 
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    Status: Physician
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    Joined: 01/14/2017

    I don’t subscribe to turning off dividend reinvestments.  The act of having to go in and manually invest is arguably more taxing than having to change things around in the event a tax loss harvesting opportunity comes around.  Plus, you can miss out on large market movements which are a large determinant of returns.  So I invest monthly and put an automatic amount from my working capital account into taxable.  I also successfully performed a tax loss harvest this past December and lived to tell about it.

    #189875 Reply
    Lordosis Lordosis 
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    See that sounds like a much easier way to handle things.  Having not done this yet I do not fully understand it.  Won’t that cause mini wash sales? Or are they too small to worry about.

    “Never let your sense of morals prevent you from doing what is right.”

    #189879 Reply
    ENT Doc ENT Doc 
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    See that sounds like a much easier way to handle things.  Having not done this yet I do not fully understand it.  Won’t that cause mini wash sales? Or are they too small to worry about.

    Click to expand…

    A wash sale is only created when you execute a sale and violate the wash sale rules.  When markets turn down they don’t typically go down for a week and pop right back up, which leaves you plenty of time to wait, turn off dividend reinvestment, turn off your automatic investments (into the old fund) and then execute the sale in a manner that avoids the wash sale.

    Indeed, I believe the method I suggested is much easier.  As for rebalancing, you can turn your auto-investments and lump sum investments to a different asset class.

    #189890 Reply
    Lordosis Lordosis 
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    I am going to give it a shot.  I like the simplicity.  Since 95% of the time you do not need to worry just pay attention when it is needed.

    What about the fact that the reinvested dividends make a bunch of little tax lots.  Does that bother in any way or am I reading too much into that.

    “Never let your sense of morals prevent you from doing what is right.”

    #189900 Reply
    Liked by Vagabond MD
    CordMcNally CordMcNally 
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    Joined: 01/03/2017

    As @ENT Doc mentioned, you’re typically going to have plenty of time to turn off the dividend reinvestment if you want to tax loss harvest. Another benefit of not reinvesting the dividends is that you will have some more capital to make rebalancing a little easier. Honestly, if you’re at the point where you’re talking about reinvesting dividends or not for TLH, you’re setting yourself up for a great financial future regardless of what you decide.

     

    But to help answer your question, I invest in taxable monthly and I don’t reinvest the dividends. If I’m going to TLH, I change my purchases accordingly.

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

    #189906 Reply
    ENT Doc ENT Doc 
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    What about the fact that the reinvested dividends make a bunch of little tax lots.

    Click to expand…

    You turn your tax basis on individual lots so you can identify the ones in red (at a loss).  Select the ones in red.  Press sell.

    4 dividend distributions per yer isn’t going to kill anyone’s psyche.  Plus brokerage companies have been required to track the cost basis for you for nearly 7 years so it’s all kept track of.  In the days of non-covered lots and for people who still have non-covered shares yeah it’s a lot more paperwork, tracking and annoyance.

    #189935 Reply
    Lordosis Lordosis 
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    I see your point.  It is only quarterly that they are paid out.  For some reason I was getting it confused with the monthly MMF.  Also I did not realize that the cost basis tracking is that new.  I am going to turn the dividends back on.  Thanks!

    “Never let your sense of morals prevent you from doing what is right.”

    #189949 Reply
    Liked by ENT Doc
    Avatar saildawg 
    Participant
    Status: Physician
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    Here is what I do,

     

    1) Set up spec ID for cost basis

    2)Turn off automatic dividend

    3) Invest anytime I have met my needed emergency fund number, usually on payday 1x per month.  So if I state I want 25k in checking account, and after I get paid I have 30k, I will log onto vanguard and invest 5k.  When I log on if I see dividends paid out I will manually reinvest those.

    This allows me to have an easier time tax loss harvesting

    #189998 Reply
    birddog birddog 
    Participant
    Status: Physician
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    Joined: 02/05/2019
    Earnest refinancing bonus

    I do biweekly with each payday but understand the simplicity for TLH in doing less frequently like monthly.

    #190000 Reply
    Avatar ID Doc 
    Participant
    Status: Physician
    Posts: 60
    Joined: 02/23/2017

    Haven’t been doing taxable that long – what’s going in thus far is for our PSLF side fund. We invest monthly. Using SpecID, and I have dividend reinvestment turned off. We have a minimum each month we aim to put there, but often add more after we do our budget. Since it’s not the same each month, I go in manually once a month anyway with the amount we allocate, and just add any new dividends in at that point to invest.

    Does anyone use two Vanguard taxable accounts? I’m not going to be able to put as much in Mega Backdoor Roth this year due to HCE designation, so now I’m going to need to use taxable to get to our 20% for retirement. Asset allocation would be different than the PSLF side fund, so I’m thinking of opening a 2nd account to make the asset allocation easier. Other than having to watch two accounts instead of one for TLH opportunities, any reason not to do this?

    #190636 Reply
    Avatar FIREshrink 
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    Status: Physician
    Posts: 842
    Joined: 01/11/2017

    Total stock index
    Dividends to reinvest
    Set it, forget it.

    #190898 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 571
    Joined: 02/11/2019

    Total stock index
    Dividends to reinvest
    Set it, forget it.

    Click to expand…

    Thanks to the sage advice above I am now the same.  I changed dividends over to reinvest.

    I think I am getting to the point where this is starting to become easy and I am looking to make it more complicated then it has to be.  I think I have found a good place to stop making changes for a while.

    “Never let your sense of morals prevent you from doing what is right.”

    #190914 Reply
    Avatar ko 
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    Status: Other Professional
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    Joined: 02/03/2016

    Oh the auto reinvest question and TLH – my understanding is that, let’s say I want to TLH today but I had some dividends auto-reinvested a week ago (so within the 30 day period prior to when I want to TLH). My understanding is that, as long as I sell the lots I bought a week ago along with the lots I want to sell for TLH generally, I’ve got no problem. And then at that point I turn off auto-reinvest so that I don’t get any more purchases within the next 30 days of that fund (this assumes I’m leaving some of my lots of that fund untouched and only tax loss harvesting part of them).

    Am I correct to understand that this resolved the TLH issue with auto-reinvest?

    #190949 Reply
    ENT Doc ENT Doc 
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    Joined: 01/14/2017

    Oh the auto reinvest question and TLH – my understanding is that, let’s say I want to TLH today but I had some dividends auto-reinvested a week ago (so within the 30 day period prior to when I want to TLH). My understanding is that, as long as I sell the lots I bought a week ago along with the lots I want to sell for TLH generally, I’ve got no problem. And then at that point I turn off auto-reinvest so that I don’t get any more purchases within the next 30 days of that fund (this assumes I’m leaving some of my lots of that fund untouched and only tax loss harvesting part of them).

    Am I correct to understand that this resolved the TLH issue with auto-reinvest?

    Click to expand…

    It depends how close that auto-investment of the dividend is to your other automatic investments, capital gains distributions, etc.

    #190986 Reply
    Liked by Lordosis, Peds

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