Ask Rande 10,000+
- Rande
- Kirk
- Rande
- dewam
- smile_1
- Rande
- Moonlight
- Rande
- Moonlight
- Rande
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» Kirk - VTI vs VTSMX?
Do you still like Vipers (VTI) as a way to buy the total stock market?I am going to stick to my HP diversification plan and lock in some huge profits with the recent rise from $12 to $20 to offset some BOWG losses. I still want to be in the market and I want to build my more diverse holdings (i.e. get less tech exposure NOW since I am getting a pile of tech options soon) in taxable accounts. VTSMX is a real pain with all the rules... but I can buy VTI at Fidelity, have them reinvest dividends, and their software is now good enough to keep track of reinvested cap gains for me... so I don't have to do the spreadsheet to keep track.
Anyway... comparing VTI to VTSMX, I find
Expenses
VTI = 0.15%
VTSMX = 0.20%
10 years on $10,000 that 0.5% is a $5 savings so it won't pay the $15 commission, but if I get growth of 7% a year, then the total will be $20,000 in 10.2 yrs. Still not enough to pay the commission to sell, but the convenience is well worth the $10 or $20....
I also like the idea that if the market DOES crash to levels the bears say are possible, then I can hold my VTI shares and not worry about fund redemptions creating a tax bill. That insurance policy is also worth money to me well in excess of the commission.
Anything else I need to look at before I make a final decision between VTSMX and VTI?
Lastly, I am converting stuff that is at 20% cap gains rate to a new starting time where I can get the 18% rate in 5 yrs... This will add up if I put $10K a year (or more) under cover of tax losses for the inevitable bad stock picks into VTI for 20 years that now has a starting point back in the 1980's!
Thanks
-- posted by Kirk
» Rande - Re: VTI vs VTSMX?
In response to message posted by Kirk:Kirk,
I think the VTI is really a matter of convenience more than anything. Easy to purchase and hold in any brokerage account. Unlike other ETFs, I believe VTI simply represents another class of VTSMX, so there could well be distributable gains from redemptions in a major sell-off. As far as re-starting the holding period to take advantage of the 5-year lower cap gain rate, that might make sense if the gain is small. There is an option of simply marking-to-market and paying the tax on existing gains so as to increase basis and start the 5-year period. Would want to really crunch the numbers there to see if it's worth lowering the rate by only 2%, especially since 5 years is a long time and there could well be changes to the Code in the interim.
BTW -- For those in the 15% marginal bracket, the lower 5-year holding period rate is 8% WITHOUT regard to acquisition date.
-- posted by Rande
» dewam - Re: Home Equity Loans
In response to message posted by Bdavidson:Brad, I don't know if you have checked with your original provider. A close friend refinanced her loan in 20 minutes, over the phone, for very low fees by going to her original provider yesterday. Because they didn't need to get another survey, flood cert, etc, it kept the costs down. While listening to her story I kept waiting for the punch line, expecting a high rate. Even that was good, she went from a 30 year @ 7.5% to a 15 @ 5.75. Den
-- posted by dewam
» Rande - Re: refi question
In response to message posted by smile_1:
smile,
My understanding is that it is indeed the rule these days and not the exception. In fact, in the secondary market the loan itself is typically split into two products: the interest-earning asset, backed by the trust deed and what is known as the servicing right, which provides fee income for the collection and distribution of the monthly loan payments. The original servicer could sell the interest-earning portion and continue to service the loan, or just sell off the whole thing to another or even two different parties. Get's confusing, but I wouldn't be concerned personally so long as you keep making the payments and continue to get proper credit for it.
-- posted by Rande
» Moonlight - taxes
Rande,I have 58,000 long term capital losses this year, I sold a T note for 5.000 premium, also have 18,000 appreciation in a GNMA Should I sell the GNMA to offset the gains . Then put the GNMA money in some safe bonds for 31 days. Does that make sense. selling only the GNMA bonds I have held a full year. Thank you, ML
-- posted by Moonlight
» Rande - Re: taxes
In response to message posted by Moonlight:
Moonlight,
If you have no other current use for the losses you've already booked and don't anticipate that you will be able to use them for the forseable future, you might want to be proactive and take some gains you otherwise might not have taken in order to step up the basis. Otherwise, you could still offset any existing gains, up to $3,000 in ordinary income and have the rest carry over into future years where it may or may not be utilized. BTW, there is no wash sale rule with respect to taking gains. If you decide to sell the GNMA fund for a capital gain you can buy it right back the same day.
Main thing is to not get carried away with the tax aspects here. Focus first on what makes sense from an investment standpoint. The $58K in losses can offset the $5K gain on the T-note already recognized plus up to $3K ordinary income with a $50K carry over to next and future years. If you sell and buy back the GNMA you will be tax neutral, but will only have a $32K carry over for future years. Good luck.
-- posted by Rande
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