Vanguard Target Date funds (in taxable accounts) --- WHAT IS GOING ON?
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Anonymous
I posted earlier about not holding TDFs in a taxable account, but I agree 100% that Vanguard screwed individual investors. They do say in the fine print these are meant for tax-advantaged accounts, but they should (and will be) sued and pay a hefty settlement for this. I would talk with an advisor stat about putting your assets into a better format for your situation - if you have over $1MM liquid you really should have that. |
Anonymous
| Is this only something that happens with target date funds? I have some money in a total stock market index and there is nothing like this in my tax form |
Anonymous
It can happen in any mutual fund. But not all mutual funds act in the same way. You need to find funds with low churn. i.e. they do not buy/sell during the course of a year. That's why index funds are a good choice for your after tax investing. They mirror and index and don't make a lot trades. |
Anonymous
It has almost nothing to with an investor being educated and everything to do with Vanguard screwing over small investors. You could go a lifetime investing and not have this happen or it seems like the exact same problem could occur if Vanguard did the same thing for a different index fund. |
Anonymous
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This might be interesting. SEC next? Suspect class actions will follow--
https://www.financial-planning.com/news/massachusetts-investigating-sales-of-vanguard-fidelity-target-date-funds-to-retail-investors-after-word-of-surprise-tax-bills |
Anonymous
Isn’t TSP a taxable investment? What about those lifecycle funds? |
Anonymous
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https://personal.vanguard.com/pdf/FADIVDAT_2021.pdf Ya’ll just keep doing it yourselves, and bashing advisors, it’s going so well. |
Anonymous
The dividends weren't the problem. Those were on par with past dividends. The problem was the capital gains distribution due to Vanguard allowing a huge group of investors to leave the regular target date fund and move over to the institutional funds. That left the investors with less than $5mil. holding the bag for the taxes in the regular target date fund. |
Anonymous
| I love how everyone complains about capital gains. Would you rather they lose money? And I bet the majority of the posters here think capital gain tax rates to increase. |
Anonymous
It's not like the "capital gains" means that the funds made money. Vanguard SOLD a huge portion of its assets, triggering a huge capital gain, then re-invested the cash in the slimmed-down portfolio. The only reason Vanguard did that is because it lured a majority of the investors out of the Target Date funds and into the "Institutional Target Date Funds." We're not talking about a small adjustment of investors moving from one to the other. Vanguard dropped the entry ticket for the institutional funds from $100million to $5million! That means the regular target date fund USED TO serve investors with $100million or less. NOW, the regular target date fund ONLY serves investors with $5million or less! When all those investors left, Vanguard needed to sell off assets --- and the little guys with $5million or less got stuck with an astronomical tax bill. |
Anonymous
| again, you get what you pay for..doesn't make it right, but it's true |
Anonymous
TSP is not a taxable investment and there is no comparable issue that could arise where institutional investors cause problems for individuals (because they are no institutional investors in TSP funds) |
Anonymous
| I just think it's ridiculous OP and other are using the terms average and small investor when they have $6m. What Vanguard did is unfortunate, but chalk it up and pay your taxes, OP. |
Anonymous
Op here....you aren't reading this right. I don't have $6million. In fact, these target date funds are now for people with $5million or less. But, I'm talking about $1million....and yes, that does make me a "small investor" to Vanguard. |
Anonymous
| Who does target funds in a taxable account . Only clowns |