How should I switch from active to passive management in a taxable account?

I would like to switch my taxable account from active to passive management. I plan on utilizing a long-term buy and hold strategy with combination of diversified bond and equity index funds. I have about $230,000 to move. How can I reduce my tax burden while shifting assets between mutual fund companies?

Investing, Mutual Funds, Taxes
Sort By:
Most Helpful
4 weeks ago
50% of people found this answer helpful

It is going to be difficult to do if not impossible without incurring significant capital gains given the overall market strength, but in the long run you still may come out ahead. To spread your tax liability out you could liquidate half now (2017) and then the other half in 2018 so it is spread over two years. Also, you might be able to generate some tax losses next year to offset the gains. Why you may still come out ahead is the fact tha passive funds can have expenses a tenth of an active manager and over time that discounted fee might make up for the tax hit. It is impossible to know for sure without more details like your expected holding periord and individual tax situaiton, but definately consider those two factors.

As a general rule don't let a tax liability keep you in a investment you are not happy with. I hope this helps. Good luck.

4 weeks ago
3 weeks ago
4 weeks ago
4 weeks ago