No. of Recommendations: 4
Get real. Any account less than tens of millions is going to get a cookie-cutter portfolio, ...
Yes, the fees are low and offset partially by not having to pay a fee that the index fund will charge. Very partially, given how low the fees are on index funds. We are looking at Vanguard, which assesses a 0.2% fee, which while higher than an ETF, not by much. This is computerized, not so much run by a person, so the low fees are not surprising. You may of course pay an advisor 1-2% of your assets to have the computer run the system for you, but Vanguard will do it for you as well for much less. No doubt their desire to provide this service has less to do with the 0.2% annual fee, and more about keeping large clients. From the research I have done, it's not a new opportunity nor one without competition, and they likely saw enough outflows to realize they needed to provide this service, as does Fidelity, Schwaab, and many smaller independents.
And for small losses, pfft, who cares? Not enough to make a difference.
From what I have read, it should give you 1-2% after tax return over the index you chose. Small losses, harvested daily, while remaining fully invested have been shown to add up, just as low interest compounded daily does. Given the uncertainty in the market, I lean towards an approach that lets me benefit from the volatility.
Over roughly 5-10 years, if an account is static and receives no new money, your ability to tax loss harvest will decline. This has happened to our portfolio in positions that were taken pre-ETF availability, that we wish to unwind, as they repeatedly throw off significant taxable capital gains and dividends without notice. We want control back over our taxable events. That, along with future SS and RMDs will be a source of continuing contributions to retain TLH benefits, and at worst our kids will inherit the stock with a step up in basis on our death. This is not a strategy for everyone, but if you have the right financial conditions, it looks to have potential over a simple ETF.
It was noted on the macroeconomics board that single stock dispersion within an index is high, even while the index itself does well. This seems to me to be a great condition for daily TLH within an index. If at some point we feel the fee is not worth it, we can simply move the stocks we own, along with their cost basis to our brokerage account, which while more complicated than I wish to deal with, will allow for income by sale of stock at LT CG taxes, or charitable gifting, either of which would be better than what we have now. It seems to me that the big downside risk is a messy and complicated brokerage statement.
We have not yet talked directly to Vanguard about it, but with our situation are very interested in doing so. Since this is not a new strategy, I was wondering if anyone had actual experience they could share. For me one of the weaknesses is the ability to track actual returns of the strategy itself, given unlike an ETF, each person's account will be different based on their exclusions and timing of purchases and sales.
IP
