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You'll get more fine grained tax management, e.g., tax-loss harvesting if using something like Wealthfront. You can't pass along these individual losses (and ne
by prdonahue 10y ago
You'll get more fine grained tax management, e.g., tax-loss harvesting if using something like Wealthfront. You can't pass along these individual losses (and net against other gains/carry over to future years) with a target date fund.
I actually use Vanguard target date for my tax-advantaged accounts, but I use Wealthfront for taxable account.
- simo7 10y agoTax loss harvesting only makes sense if you keep on buying and selling multiple funds/products. Hold only one index fund, hold it long-term and the problem vanishes: all the gains are not taxed until you sell the fund and they are always net of losses. Not to mention the massive benefit of deferring taxes in a compounding context.
- mrkurt 10y agoWealthfront buys the individual shares that track an index. When shares lose value, they'll sell those and buy other shares that are equivalent. It worked pretty well for me in 2016. I was up ~11% total and about to deduct about 6% in losses.
- pscsbs 10y agoHowever, that 6% is capped by the IRS at $3,000 per year.