Stocks–Part XXXIV: How to unload your unwanted stocks and funds

If you have come here, read thru the Stock Series and decided the simple low-cost approach described makes sense, you are now faced with the problem of how do you get from where you are to where you want to be. That is, what do you do with all the investments you already have? How, exactly, do you move from point “A” to point “B”?

If you are like many readers, you’ve come to this blog having already spent years, maybe even decades, investing. You very likely have a wide range of stocks and/or funds that seemed like a good idea at the time but now, maybe not so much.

But the first order of business is to get a grasp on exactly what you currently own, what it is costing you in fees and how/if it might fit into your new and future plans.

You may already have this well organized and at your fingertips. If so, well done. If not so much, you might want to read my last post, Tracking your holdings.

How to unload your unwanted stocks and funds

OK, now that you have the tools in place to assess what you own…

…once you do you might not like what you see.

But before dumping everything and moving on to better choices, you’ll want to think about some important considerations, mostly around the tax implications of selling an investment. But also how and where you want your assets invested going forward. Ideally you want to get this set up right and then, other than occasionally rebalancing, leave it alone.

First you’ll want to decide what your asset allocation should be. Selecting your asset allocation discusses ways to approach this and in it I share what we do personally.

When thinking about your allocation, think across all your investments and, if you are married, across all your investments for the both of you. For instance, our personal allocation to bonds is 25% and I hold our bond fund in my IRA. We could just as easily hold it in my wife’s IRA. Either way, it is 25% of our total holdings and keeping it in one place makes rebalancing easier.

Once you’ve decided where you want your investments to be, it is time to figure out how to move them around.



This was Part II of a post that originally included two parts, Part I being a review of Personal Capital now covered in this post: Tracking your holdings. Since they both deserve an update and second look, and since I thought them more useful separated, tax laws have changed and I wanted to make this one part of the Stock Series, here you are. If you are interested, this is the original.


Note 2:

Tax laws change all the time. The specific tax rate details used in this post are for illustrating concepts. While they were current at the time it was written, they may not be current at the time you read it. Check and verify for yourself.



NGPF Podcast: Tim Talks to JL Collins About Financial Independence and Investing

Recently I had a great time talking with Tim Ranzetta on the New Gen Personal Finance Podcast. Good guy and a great interviewer. Thanks, Tim!


FIRE Anthem:

A few years back, my pal Kevin wrote, performed and recorded the awesome Ballad of Chautauqua, which you can find in this post and this one. Now he is back with an anthem to true meaning of FIRE:


Just for fun:


Unrelated, but here’s what I’m currently or have just finished reading and enjoyed*:

First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

How to think more clearly and why the world is not the way you probably think it is.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are three of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

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Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Empower is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.


  1. John says

    Great article, thanks Jim! You’ve written about REITS but have you written about other passive real estate investing (companies like Fundrise, Realtyshares, etc)? Or companies like Peerstreet? Curious about adding a third asset class outside of VTSAX and VBTLX. Thanks!


    Great article Jim!!! I usually wait at least a year and then dump my losers that I haven’t been happy with. This allows me to make sure that I get the full benefit against the capital gains that I occur for the year 🙂

  3. Accidental FIRE says

    Thanks for this post Jim, I have two non-Vanguard mutual funds that I want to sell and move to VTSAX. They’re still index funds so they’ve done okay over the years, but the fees are a bit higher than Vanguard and I just want to consolidate for simplicity sake. I plan to sell one this year and one next year and this was a nice simple guide to confirm what I already looked into.

  4. anonymous says

    “If you are moving from one IRA custodian to another be sure you do this as a “rollover” that goes direct from the one to the other. Vanguard, or any other custodian, will be happy to help you move to them. Just give them a call and they’ll walk you thru the process.”

    !!!! Please consider if this is correct !!!! Its my understanding that you can “transfer” IRA to IRA without consequence, but IRA to IRA roll overs may be limited to once per 12 month period, see Failure to do so may make this a taxable event, also subject to 10% penalty (not sure, but this would be really, really, really bad if so). These roll overs can be tricky so please, please, please get guidance before you just willy nilly do one of these to really be sure its done correctly.

    • jlcollinsnh says

      Your comment is a challenge for me.

      Ordinarily, comments from “anonymous” get trashed as a matter of course.

      However, you make a good point and your link to the IRS chart is a good one. In fact, I will add it to the post.

      Your advice to get guidance on rollovers is sound, but Vanguard and firms like it provide this as a matter of course.

      That said, I deleted the link in your comment to the person/business you touted. I haven’t the time to vet this and, with the alarmist tone of your comment, it feels like sneaky self promotion.

    • dandarc says

      The advice was ‘If you are moving from one IRA custodian to another be sure you do this as a “rollover” that goes direct from the one to the other.’ If you do that, then there is no concern about the 1 rollover per year rule. As of today anyway – laws and regulations can change.

      The 1-year rule only applies if you receive the money yourself, then redeposit it in another IRA within 60 days. That’s not what is being advised.

      Source: Clicked the link in the footnote of the PDF above. “Trustee-to-trustee transfers between IRAs are not limited”.

      • Crossing my fingers says

        Thank you Dandarc for your explanation.
        For a second, I thought I made a huge mistake in moving my IRAs from Fidelity to Vanguard although we just moved them from Schwab to Fidelity earlier this year.
        We realized we’ve been paying too high fees to our financial advisor who moved from Schwab to Fidelity.
        But after reading Jim’s stock series, we decided to move to Vanguard to go a separate way from her.
        I wasn’t sure if I understood correctly by reading the IRS PDF, but your comment assured me that we might be ok. (Crossing my fingers!!) We didn’t take out the money to reinvest into Vanguard. We did the direct transfer from Fidelity to Vanguard.

  5. Kevin Collins says

    Thank you for this post and your series. I found your blog about a year ago and have read all the content and a lot of the comments too. It made so much sense and I had been on a journey for the last 35 years where I had been simplifying into index funds. Your articles and book got be to the next level. I’m checking your comments, I have not been able to find a post or an article about taking a lump sum pension payout versus a monthly pension. Do you have a perspective of that? I’m 55 and will eventually have a monthly social security pension for my wife and self, and this payout along with our 401k assets will give us enough FU money. Should I take the pension payout? Thanks!

    • Clint says

      I’m a pension actuary, so I might be able to add something useful.

      The lump sum (I assume you’ll want to roll it over into an IRA so as to avoid a huge one-time tax payment) is good if you want to self-direct it. As a reader of this site, that can be a good option for you.

      The monthly payment has its upsides. For the layperson (again, I assume you’re not), it be a guard against blowing it all too early. There’s also the idea of having it as a backstop against outliving your assets. You could buy an annuity on the market for this, too, but the pension can provide it much more cheaply since the mortality risk is shared by all plan participants, and the administrative costs are paid by the plan sponsor.

      Personally, I have a not insignificant pension coming at age 65 from a prior job and would turn down a lump sum in favor of keeping the annuity. But then I’m a bit conservative by nature and like the guarantee of it.

    • jlcollinsnh says

      Hi Kevin…

      First, I second Clint’s excellent points.

      I haven’t written a post on pensions and don’t have one planned.

      The one pension I had coming I took as a lump sum, mostly because I wanted the control, wanted to have whatever was left (or it grew to) pass on to my heirs and because I didn’t trust the company.

      On the other hand, my wife has a small pension she takes monthly from the school district where she once worked. That one feels secure enough, and the monthly cash hitting the checking account is fun.

      Plus, she has a long life expectancy and that plays a key role. I, on the other hand, will be lucky to make it till next Tuesday. 😉

      • Stephanie says

        Hello, I am reading your book The Simple Path to Wealth.

        This isn’t exactly the situation in the comment above because it’s a 403(b) and not a pension. Please excuse me if it’s the same answer.

        I plan to work for 23 more years (approximately) and retire early at 55 (my work currently allows this). I have a number of 403(b)s at my non-profit. I noticed you said taxes are due when I withdraw the money (in your book).

        When I retire, do you recommend I roll these over gradually into my Roth IRA to avoid the taxes? I don’t know if that is a good plan, because I believe I have the option to take the funds out as a lifetime retirement income (if I choose two-life, then it includes my spouse’s lifetime as well).

        This means with the 403(b), I could be guaranteed payments for the rest of my life when I retire. If I move the money gradually into my Roth, I believe I lose that option.

        What do you advise? I’m not sure if it is helpful but I think my 403(b)s are managed all by TIAA, but I have the choice to invest in Vanguard or TIAA.

        Half is invested in The CREF Equity Index R3 and the other half is in VIIIX. Please note for a quarter of each of those (half of the half) I am unable to change the allocations.

        Thank you for reading this. Please let me know if you need more information, and I’m sorry this was so long!

      • Kevin Collins says

        Thanks Clint and Jim for your points on the rationale for taking the pension payout. Both my wife and I have a pension coming and are thinking we would take mine as a payout and hers as an annuity to have the best of both. We will combine that with social security for the annuity part of our income and have a more that sufficient sized 401k to handle the rest. The drivers for me are the control and the ability to pass it on, as well as the ability to substantially reduce my spending if needed. Thanks again! Keep the articles coming!

      • Terri says

        “I, on the other hand, will be lucky to make it till next Tuesday. 😉”

        Then let me be the first to plant the seed:

        You’ve carved an incredibly valuable and helpful path for countless others with the “Simple Path to Wealth”.

        But perhaps there’s another path to create?

        Might I suggest:

        “The Simple Path to Health – Your Road Map to Fully Enjoying Your Rich, Free Life”.

        Let’s do this Jim!

  6. MrWow says

    Very timely seeing as how we just transferred everything out of Wealthfront and into Vanguard for our brokerage stuff.

    They had all sorts of stocks and funds, mostly low cost funds, and all the stocks from the sp500. Regardless, now I’m attempting to consolidate them all back into the simple funds to make it easier on my head.

    Slowly but surely, especially once we see a reduction in income to avoid the cap gains.

    Also… should be noted to look at how your state handles cap gains. In our lovely state, CA, cap gains are considered standard income. So that break on the $104k does exist for state income tax. You’ll owe you standard rate which is like 9.8% on income over $45k for us… blah!!!

    So we might try to establish residency elsewhere before we start really moving things around.

    Anyway, great article as always!

    • jlcollinsnh says

      CA is a beautiful state, but the taxes would keep me from ever moving there.

      In addition to high income, sales and property taxes, you guys also pay an inheritance tax too, right?

  7. Steve says

    Great post. I’m still learning as I get closer to early retirement and getting things in order. One suggestion I plan on using as I sell off individual stocks with big capital gains is to donate the appreciated stock to a charity rather then make the donation from my after tax W2 income. With the new standard deduction, we won’t be itemizing. If we stay below the threshold for zero percent capital gains we should still be in the 12% tax bracket If we jump to the 15% capital gains rate, we would also probably jump to the 22% bracket so it seems to be a good move if we were going to make donations anyway. Am I missing something? Thanks

    • jlcollinsnh says

      Thanks Steve…

      …I was hoping someone would bring this up.

      After I hit published, it occurred to me I should have added the charitable contribution angle. It is a great option.

      Your understanding seems spot on to me.

      With the new, higher standard deduction levels, getting the tax break is harder. So the approach I describe in this post might be even more useful:

  8. Garth Sproule says

    Hi Jim. Great post as always. Something else that should be noted as to taxable gains… Your cost base for calculating your gain does not increase with CPI as the years go by. It actually is losing value in “real” terms. This results in an increase in your gain (and therefore more tax payable) even if your investments only increase in value by the rate of inflation (0% real gain). It is a hidden tax due to the time value of money. Perhaps another reason to crystallize gains sooner rather than later?

  9. Karl Withakay says

    One note: If you determine the juice isn’t worth the squeeze to get rid of holdings in a taxable account that no longer fit your investment style, or you chose to get out of those positions over a period of years, one thing you can do is immediately stop any dividend reinvestments for those holdings to stop automatically increasing your exposure to them and allow you to divert the dividends to other investments that currently fit your current investment philosophy.

    This makes the most sense when you can invest the cash from those dividends with no transaction fees or commissions. (Free trades, commission free ETFs, or NTF mutual funds) Otherwise, it might even be best to keep reinvesting the dividends.

    • Thank You says

      This is brilliant, thank you! I have a stinker sold to me by an Edward Jones salesman (uggghhh) when I was 22 (half my life ago, eep!). It doesn’t make sense to sell it at our current income given cap gains tax rate, but I have just set the dividends to go to my settlement fund and will put them into VTSAX instead of back into the stinker.

  10. Tom Erceg says

    Jim, I realize this is probably a minority opinion, and I know you and JD Roth are both fans of the book, but Cold Mountain has quite possibly the worst ending of any book I’ve ever read. I won’t spoil it for folks who haven’t read it yet, but after all of that story it ended like that? Yeesh!

    Other than than, another terrific article. 🙂 Hope you’re doing well my friend!

    • jlcollinsnh says

      Hi Tom…

      Always great to hear from you!

      It has been a while since I read that book and I don’t recall the ending exactly. But, not happy if memory serves. Seemed perfect to me. 🙂

  11. Paul says

    Very timely article. I “retired” at the end of 2017, having been FI for a few years. I’ve been thinking about selling some long term stock holdings. A few have significant capital gains. My wife still works full time and I have a part time gig that generates a few dollars in income. The information re changes in the tax laws, income limits, and long term capital gains is very handy. Thank you!

  12. Rick says

    I have shares of a MLP in a taxable account for that is now tanking due to a recent FERC ruling. I would like to roll them into my Vanguard index fund. Do you know if these losses fall into the capital gain/loss category? The dividends have been tax free so I’m sure I’ll have to account for them someway also.

    • jlcollinsnh says

      Hi Rick…

      I’ve never owned an MLP, so you’ll want to look further than my opinion. Maybe my readers can help.

      My guess is that your losses will be treated as a capital loss. But you might have to account for those dividends. It sounds as if they may have been a return of capital.

      Please keep us posted!

    • Clint says

      Jim’s right. I bought into an MLP last year and have had to learn things on the fly. Any tax pros should correct me if I’m wrong.

      Simplified: for MLP’s, the distributions are basically tax-free at the time of payment, as they are not dividends. They are indeed classified as a return on capital, meaning that amount reduced your cost basis. Upon the sale, that new cost basis is used to calculate any capital gains or losses.


      Bought $10,000 of MLP. Have received $3,000 in distributions since then. Your cost basis is $10,000 – $3,000 = $7,000.

      The shares have declined so they are worth $9,000. Your capital gain is $9,000 – $7,000 = $2,000.

      • Rick says

        Thanks Jim and Clint for the response. The plan when I bought into the MLP was lifelong tax free dividends then transfer to my son when we passed.
        Jim, I found your blog and am loving reading it. It has made me rethink several of my “ brilliant “ ideas.
        I just retired at 59 and in my case, it was in spite of my investing decisions not because of them. Lol. Lucky I found target funds awhile back and stopped the bleeding.
        I am now in the process of rolling my 401k into an ira as well as continue funding a Roth I opened a few years ago. Both are in Vanguard. My plan had been to use the VBIAX fund. I’m now wondering if I should switch to your two fund suggestion.
        What’s is your thoughts on this? How does Vanguard rebalance the VBIAX fund? Once a year or more often? I haven’t read much about VBIAX on your blog and wonder your opinion on it. I don’t see us needing these funds for the next 10 years barring the unexpected. We do plan to transfer as much as we can from our tax deferred IRA to our Roth up to the 12% tax rate limit each year.
        Thanks again for the great site.

        • jlcollinsnh says

          I have no idea how often VBIAX rebalances, and I don’t think it really matters.

          More importantly, it holds ~60/40 stocks/bonds. If that allocation is what you want, it is a fine and simple choice.

          Otherwise, you’ll need to create your own allocation with separate stock & bond funds.

          The ERs for VTSAX (.04%) and VBTLX (.05%) are a bit lower than VBIAX (.07%) but not enough to make that a deciding factor.

  13. Kenneth Caesar Ponce says

    Hi Jim – First of all, I want to say thank you for sharing all these knowledge. I am a 29 year old guy with a small savings and also managing my mom’s savings account who is going to retire soon. I’m a big fan of the investing philosophy that you and MMM advocate. 🙂

    I do would like your comment if I am correct with my understanding below. Here it goes:

    It took 1 year and 5 months for the S&P 500 to dip from the year 2007 highest to the year 2009 lowest.

    It took 4 years from the 2009 lowest to recover from the 2007 highest.

    What I understand from this is that if I have 5 years before I need the money then I should take the chance to invest in the S&P. After 5 years I most likely am be back in my initial investment if there happens to be a massive downturn.

    If I have 4 years, until I need the money then I would probably still take the chance.

    If I have 3 years or less, until I need the money then I shouldn’t even bother going in.

    Is this logic correct? Thank you and much appreciated.

    • jlcollinsnh says

      Would that the market were so easy and consistent, Kenneth. 😉

      No where is it written that the market will recover from the next drop as it did from the last couple. It could take, and sometimes has taken, much longer.

      Also, you are assuming the drop will occur shortly after you invest and recover just before you need the money. It might just as easily bump along doing nothing and then collapse just before you need to sell.

      Stock investing is for the long term. My holding period for VTSAX, other than small withdrawals to live on, is forever.

      • Jonathan says

        In Kenneth’s case, though, wouldn’t he be able to reassess each year? For example – year 0, and he needs the money on year 5. He invests it in the market. Year 2 comes along, the market hasn’t crashed yet, but since he now needs the money in 3 years, he would sell and hold it in cash because he can’t afford to wait for the market to recover.

        Does that sound about right?

        • Jonathan says

          If it crashes after the first or second year, he’d likely have enough time to let it recover. Granted, the benefits of investing money he needs in 5 years would be minimal, and again there’s no guarantee the future will look like the past.

  14. Zent says

    Hello JL,

    Thanks for your amazing blog!!

    I am 42, have about $55,000 for investment. I have been working as a public school teacher for the past 15 years and will work until 65. I am single with no children. If I go for 100% VTSAX (Admiral) for as long as possible, how would re-balancing work in my case?

    Thank you,

    • jlcollinsnh says

      Hi Zent…

      Typically, why you are still working (what I call the Wealth Building Stage) you are setting aside a signifigant part of your income for investing. This new money flowing into your account serves to smooth the ride and takes advantage of drops in the market.

      When you are in the Wealth Preservation Stage (not working and this new money flow stops) you add bonds to the mix and the rebalancing of your stock/bond allocation smooths the ride.

      If, as you seem to suggest, your plan is to invest the 55k but not invest additional money from your earning while you work you’ll have to decide if adding bonds to smooth the ride is worth the lower performance over the next 23 years.

      Personally, if that is the case, I’d drop the 55k into VTSAX and not look at it again until I was 65. But that’s me and my temperament. Only you can decide what works for you and yours.

      • Zent says

        Hello JL,
        Thank for such a quick and helpful reply!

        If you don’t mind, I have a few more details:
        1) I will be adding $55K into VTSAX over the next three months (due to my bank limits)
        2) I will sending $1700 (and more when I can) of my monthly salary towards this fund. Barring any emergency, I should be able to do this for as long as I work.
        3) As stated in my earlier message, I am 42, have been working as a public school teacher for the last 15 years. I intend to work until 65. I have a teacher pension. I am single with no children.
        4)I have emergency fund for 12 months and do not foresee any short/medium term expenditures (3-5 years).
        5) I hope to add bonds as I get closer to retirement

        Two Questions:
        1) In my case, if I understand you correctly, there is no need for re-balancing as long as I am 100% in VTSAX?
        2) I live frugally and do not own or plan on buying a home. Is there any other advice you have for me?

        I cannot thank you enough for your time and advice! Its price-less!


        • Wendy says


          I agree with JL. I would go all-in on the VTSAX. No need to rebalance. For the “bond” portion of your portfolio, your job income is the “bond”. Rebalancing would be saving 15% of that each year and adding to the stock portion (VTSAX).

          As usual, and much more easily said than done, whatever you do, do not sell out if there is a market downturn, but rejoice that your dollar cost averaging from your future income will be buying shares of VTSAX at a cheaper price.

  15. Zent says

    Hello JL,

    One more question:
    Since VTSAX leans heavy on large cap, do you see any role for International stocks and US small/mid cap stocks in the mix?

    Thank you

  16. giacomo says

    Very interesting post. I did not know that capital gains taxes were 0% below a certain income amount. If my 2018 income was, say, $5,000 below the $38,500 limit, would it be worthwhile to realize that amount of gains of funds held in a taxable account? What’s the best way to do this?

    • jlcollinsnh says

      Yep, sounds like you’ve got the concept. This is sometimes called Harvesting Capital Gains.

      As to how, using your example, you would just sell enough of your investment to realize $5000 in gains.

      It can also be used to shift assets from an IRA to a Roth IRA. In this case you would transfer $5000 from the IRA to the Roth.

      • giacomo says

        Thanks for the quick reply. Lots to think about about and strategize before the end of the year!

  17. FIRE walk with me says

    Thanks – great advice, but what if things are more complicated….

    Specifically, we have some mutual funds (outside of retirement accounts) to which we dollar-cost averaged over many years and also reinvested capital gains and dividends. Some of these were established as long ago as the early 2000s, and since we didn’t keep statements from that long ago, we have no idea what our cost basis is for the dozens of different individual purchases.

    Ideally we could sell some shares at a low basis and some at a high basis to minimize the tax consequences, but how could we go about doing this? To complicate matters even more, one of the original mutual funds was absorbed by another fund in the same family.

    On a related note, we would like to use the most appreciated tranche of a mutual fund to establish a donor-advised fund – any advice?

    Thanks – hopefully we’re not the only people who managed to complicated our lives with sub-par funds!

    • jlcollinsnh says

      Establishing a cost basis for your shares is critical. It is my understanding that if you cannot the IRS will treat it as zero and you’ll be paying taxes on the money you put in as well as any gains.

      I’d start by reaching out to your fund company. They should have records. If not, I would seek the advice of a good tax attorney.

      Donating appricated shares to a donor-advised fund is a great idea. Here’s my take:

  18. Drharhar says

    Hey Jim,
    Thanks for this great resource. And thanks for the advice and wading through my questions ( I now see how ridiculous they were). And I’ve been taking it. Got out of debt, got some VTSAX, and even picked up a copy of The Wealthiest Man in Babylon. For those (like me) uninitiated in money it is a must read.

    I see above you have Vanguards total bond market fund in your IRA BUT I’ve heard from others (like the Mad Fientist) to put VTSAX in your IRA for the tax deferment. I probably just misunderstood. Could you clear it up for me?

    • jlcollinsnh says

      I believe MF and I are on the same page with bonds being best held in a tax-advantaged account. The reason is, because they pay interest, they are not tax efficient.

      VTSAX, which pays dividends and at a smaller percentage, in more tax efficient. As an index fund it also avoids capital gains distributions that actively managed funds generate thru trading.

      So I hold VTSAX in my taxable account.

      But, to be clear, I also hold it in my tax-advantaged accounts; and I believe MF does as well.

  19. Sam says

    Hello sir- I recently came across this comment on the internet. Is there any truth to it?

    “Another tip for you: don’t automatically reinvest your dividends in a taxable account. Each of those counts as a tiny buy at a specific price which you’ll need to account for on your taxes some day when you sell. You will essentially have to tell the IRS “I sold 1.274 shares of VFIAX at $40.32, bought at $25.48; 1.424 shares of VFIAX at $40.32, bought at $23.43; etc.” If you instead direct those dividends to an external account, you can lump them into larger monthly purchases of shares which reduces the number of “tax lots” you will one day need to manage.”

    • jlcollinsnh says

      Sounds like nonsense to me, Sam.

      I’ve always reinvested the dividends and on the occasions when I’ve sold Vanguard does the calutlation for me and reports the gain or loss.

      Could be this was an issue back before computers kept track, but I don’t remember.

      • Stephe says

        For over 50 years, I had reinvested dividends from a UGMA taxable stock, purchased shares, endured stock splits, spinoffs, and changing transfer agents. It is a bit of a pre-computer cost basis mess, including pretty physical stock certificates. I can label the stock purchase date as “Various”, but specially as most of the value is capital gains, plan to donate to charity. That will simplify my tax life, and maybe make me a better person.

  20. Mike says

    I currently have all our stock and bond investments with a financial advisor (fee only) that uses Schwab (charges 1% on about $1.5Mil). I want to move everything to three Vanguard funds. Is there any advantage with staying with Schwab and directing the investments to Vanguard, or should I just move everything directly to Vanguard?

    • jlcollinsnh says

      I can see where that would be good for Schwab, but why have the extra layer if you are going with Vanguard?

      I suppose if you had investments with several firms and you wanted to track just thru one, this might make sense. But, I keep things simple.

    • Wendy says

      There is no reason to stay with Schwab. Why pay $15000 to them when you can manage your vanguard “jlcollins” by yourself.

      As long as you don’t panic and sell in a bear market, you should be fine. Take the $15K you would have paid to Schwab, and go on a nice vacation.

      Fees are something that I am passionate about. I know of at least one person who has $10M invested, and is paying over $100K in fees (management plus expense ratio for the mutual funds). They are blissfully unaware of how much they could save by indexing, but are too financially illiterate, or timid, to do it. But, their financial advisor takes them out to a really nice restaurant every quarter, and their advisor is “such a nice young man”.

    • Felipe says

      Schwab has lower fees than Vanguard and also replicates US, Developed International, and Emerging International markets. You’ll use Schwab instead of Vanguard’s funds but Schwab has a much stronger fraud protection policy. Using any aggregator like Personal Capital can null Vanguard’s fraud protection policy. You can let go of the advisor and index with Schwab.

  21. planedoc says

    Good article, Jim.

    I just moved my last “out of Vanguard” account into Vanguard, and as you said, very easy to do.

    Any tips on finding out how much it costs to sell a “dog”? I’ve tried researching via the prospectus (some of the stuff I had makes me gag…underperformed an equivalent index, at ERs of 1%!).

    I don’t want to get hit with a sales fee from the other fund (not the Vanguard brokerage charge, that I understand…)

    • jlcollinsnh says

      The sales fee to sell shares of a fund is called a “back end load”

      Fortunately, relatively few funds have this these days. But to check if yours does, that’s the term you want to look for.

      Personally, I would never buy a fund with such a fee and I wouldn’t let such a fee prevent me from unloading it. 🙂

  22. Kevin says

    I realize I’m a little late in posting a ‘thank you’ to you for putting up the FIRE song. So…even though I read this post a month ago, I realized that I had not said a proper thank you. So….thank you. I am appreciative of all you do with the information on the blog and your book, for putting my songs up for others to hear, and for the friendship.
    On a side note…I have read 3 of the books off of your book recommendations, and I will be adding ‘FACTFULLNESS’ to the list now. Lysh and I love ‘True Grit’ (both movie versions) and I will also be adding that book to the list. As we’ve already discussed, I didn’t realize (until I was in the area) that Cold Mountain is a real place…not just a fictional setting for the book. Some of the names in the book are real family names from the N.C. area.

    Thank you,

    • jlcollinsnh says

      Thanks for writing and recording them, Kevin! 🙂

      The book True Grit is even better than either movie. You are in for a treat.

  23. Felipe says

    Coming back to be honest.

    I’ve thought of many different strategies to beat the market. I bought a fine mutual fund that had 3% outperformance the last every period of time I looked at beyond 3 years. Right when I bought it, it proceeded to underperform the market. Lost a few grand on that decision. Recently switched to dividend investing. A bunch of filters, yada yada. I’m sure you know the drill of screening for companies for better than me. A few nights of sleeping way too late later, I’ve designed my portfolio.

    To be honest, I feel some regret. If I had just stuck to indexing and never switched out, I’d be richer now and owe less taxes.

    I’ll be converting more and more percent of my assets to indexing in the future. Forever waiting for the correction that never came.

    Keep spreading the good word.

  24. Beth says

    This feels like a dumb question, but I can’t seem to wrap my head around how capital gains tax brackets work, so I’ll throw out a hypothetical situation:

    Say I have $10k in long-term cap gains, and this throws me out of the 0% bracket by $1k, so I’d be subject to 15% cap gains taxes. My question is this: is that 15% tax on the entire $10k, or is it only on the $1k over the limit?

    • Jeremy says

      In your example, the tax on the cap gains would be zero.

      You would only be subject to tax if the cap gains pushed you into the 22% tax bracket. Only the amount over the threshold would be taxed (so $1k, not $10k.)

      For lack of a better reference, the charts in this post show how regular income and qualified dividends / long-term capital gains are subject to different tax rates, and how they sum.

  25. Darren says

    Hi Everyone – first time i’ve had a question here. Jim – love what you are doing for the average investor. I am currently with a large well known brokerage firm that charges me over 1% for the pleasure 🙁 I have taxable and non taxable accounts.
    Im in the midst of researching options to move to either Betterment or Vanguard. My question relates to the transition to either of the mentioned companies. I’ve read some bad recent reviews of the customer service at Vanguard where transferring incoming accounts is concerned. I was wondering if anyone has any recent experience or advice, to smooth the transition, in this matter. Thank you in advance.

    • Felipe says

      Schwab and Fidelity have far better service. Vanguard has the best access to Vanguard funds. Fidelity has a new 0 fee index fund. Schwab has lower fees than Vanguard on the broad US stock market.

      Have the new company initiate a pull on the transfer and try to get a bonus for a large amount. Move out asap to minimize fees, 1% is huge.

      • Darren says

        Thank you! Good advice. I”ll be making the move soon. Looking forward to a more simple investing path!

  26. Financially Free says

    Loved the “Coulda. Shoulda. Woulda” video 🙂

    This is what I learned: Instead of beating myselvf up over the opportunities I missed in the past, I need to look for opportunities available right now!

    Many people are not even investing and they’re having the same thoughts – they think they missed out. Truth is, they didn’t miss out. One has to play the game to be able to win it. Get in!

  27. TV says

    Just finished reading your entire ‘stock series’ and got heaps of great info from it. I’m a young investor in my late 20s and looking to retire in my early 40s. I know I’m at the beginning of my journey but blogs like yours keep me motivated to get through the “daily grind” and to stay the course. You’re doing a great job and bettering people’s lives for free … now that’s something money can’t buy.

  28. Brian Jones says

    Hi Jim,

    Always enjoy your posts! I am reading your book now and thoroughly enjoy it. Just wanted to ask a quick question. How much (percentage wise) do you recommend putting into investments and how much into a liquid savings account? So, if you are saving, lets say, 35% of your take home, how much should go into the Index funds and how much should be put in your savings account?

    If you have a post on this, feel free just to send that to save yourself time. Any insights here are humbly appreciated. Thank you!

    Brian Jones

      • Brian Jones says

        Thank you for your kind reply and link. Your piece on asset allocation was extremely helpful.

        I want to add a few quick additional follow up questions.

        1) Is there a difference between the Index Funds of VanGuard or Fidelity? We have ours through Charles Schwab, but I am not sure if there is any difference (except for the amount needed to open an account).

        2) You have mentioned before that the average annual rate of return for index funds between 1975 and 2015 is approx. 11.9%. Where can you check for the last two years (2016 and 2017)?

        3) Perhaps I am still in the denial stage about the serious and stable gains of index funding. (I think I can outsmart the market…but your essays have helped me overcome that!) If we have, say $25,000, in our index funds, then by only adding a small $100/month for the next 40 years, it would be over $1million? You are right that it sounds simple, and I am trying to keep it that way, but want to make sure I have not missed something. I will re-read your “Can Everyone Really be a Millionaire?”

        Thank you,

  29. Kevin L says

    Hi Jim, thanks for all the information you provide freely. I still am confused about one thing. In the chart that shows capital gains brackets for 2018 are those brackets based on adjusted gross income, taxable income, or something else?

    I see from the information you have that the standard deduction is not included in those brackets. How about other tax deferrals such as 404b, IRA, and HSA? Between those three I can lower my taxable rate considerably but I am not sure if that would also lower my capital gains rate.

    Also, why is your chart for long term capital gains rate slightly different than the one published by Marketwatch in April ( Has there been additional changes to the tax code between then or are they just wrong? For example, for filing jointly they transition from the 0% capital gains rate to 15% at $77,201 while you chart lists that transition after $77,400.


    • jlcollinsnh says

      That’s a bit more than “one thing”, Kevin. 🙂

      1. Tax brackets are based on your taxable income which is, I believe, line 43 on your 1040.

      2. Standard deductions and IRA-type deferrals are taken before line 43.

      3. Tax laws change all the time. The specific tax rate details used in this post are for illustrating concepts. While they were current at the time it was written, they may not be current at the time you read it. Check and verify for yourself. See Note 2 in the post.

  30. Renee says

    Hi Jim,
    I have really enjoyed your series and thank you for sharing your wisdom and experiences. I cared more in my 30s and 40s to invest our money ourselves instead of with a financial adviser. The good thing is my husband and I have always been savers and are debt free. After reading your series and taking a look at our portfolio, I am astounded by the fees we have been paying! We still have achieved a good amount of “f-you money” you reference in your book and have used it similarly to you to support our gap years and times of reduced income. We have a plan on unloading our stocks/funds and moving our taxable accounts and IRAs to Vanguard, but am unsure what to do with my variable annuity. I know these are awful now for a multitude of reasons, but I just see the fees and the annuity as sunk costs at this point. Unfortunately, the variable annuity accounts for about 10% of our net worth presently. The annuity has doubled what I put into it and have had the annuity for 10 years so no longer have any surrender fees. The annuity is outside of an IRA. I am 50 so do not want to take the 10% penalty for withdrawal prior to 59-1/2. I am researching whether a 1035 exchange to Vanguard to lower the fees makes sense then start withdrawing funds at 59-1/2 gradually perhaps using the funds withdrawn to contribute to our HSA account or supporting our semi-retirement plan (working less). Please share any thoughts or resources regarding managing out of a variable annuity. Thanks!

    • jlcollinsnh says

      Hi Renee…

      Because I consider annuities to be such a horrible option and would never own one, I have spent zero time figuring out how to unwind them.

      Two suggestions:

      –Reach out to Vanguard about transferring the annuity to them and your options once it is there.

      –My pal Darrow,, has written about them extensively. Check out his posts.

      Good luck!

  31. frank berean says

    Jim, i have 100% of my portfolio in vfiax in a brokerage account at vanguard. Can i trade some of my shares to buy some munisipal bonds without creating a taxable event?

    • jlcollinsnh says

      If your VFIAX is in a tax-advantaged account like an IRA, you can buy or sell with no tax impact. Of course, because muni bonds are already tax advantaged, you wouldn’t want to hold them in a tax-adantaged account.

      If you hold it in a taxable account then you would owe taxes on any capital gains the sale generated, depending on your tax bracket as described in the post above.

  32. Paul C says

    Hello Jim,

    First I would like to say that I LOVE your book “The Simple Path to Wealth” and your website. My favorite all time investment book and website for investment advice!! It has changed the way I think about investing in a big way.

    I was hoping you might be able to answer a question I have. I, like many others, have made my fair share of investment mistakes, (ie) having a financial advisor for many many years, switching financial advisors who put me into 100% loaded funds that gave him an immediate 5.75% commission, and I was way to conservative for many years. I am on my way to a 100% stock portfolio but doing it rather slowly. I was at 40% stocks 35% bonds and 10% cash 15% gold and obviously making horrible returns. BOOOO I am now 48 years old and over the past year am now at 70% stocks, 20% bonds and 10% gold. The difference is mostly due to me contributing new money into the account and a little selling of a few of the following funds. The funds that I am trying to unload are: In my SEP IRA account; BND – Total Bond Fund and BNDX – Total International Bond Market. And in my taxable account is TLT – iShares Barclays 20+ Yr Treas.Bond, SGOL – Physical Swiss Gold and SHV – iShares Short Treasury Bond. I have approx 470k in total among these 5 funds. I want to switch it all over now but I get gun shy when I am about to do it with this amount (big in my eyes) and the market being sooo high. I know and have read numerous times how just do it and forget it. So my questions are 1. If you were me would you sell all these and buy VTSAX now? 2. Is there a big difference in the bond funds BND and TLT? I am still thinking of going to a 80% stock 20% bond portfolio as well but will probably go 100% all in. And 3. Of my 70% stock mix, approx 15% is in VXUS (international funds) would you just keep this 15% in international or sell the VXUS and buy VTSAX?

    Thank you so much for your time Jim, I really appreciate your time and information. You have helped so many people!!!

  33. Brian says

    Hi Jim, thanks for your wisdom and input on this site and in your book. This post is just the info I’ve needed as I’m struggling to grasp exactly what to do with my current Roth. Here’s my situation:

    I have a Roth IRA @ TRowe with some of their funds in it; present value is about $30k. I have some serious (to me) gains in these funds because bought low, like at the bottom low, back when the funds were “on sale”. I’d like to move the IRA to Vanguard and get moving with the VTSAX.

    HOWEVER, I’m not really keen on getting into VTSAX when it is not on sale! I realize I’m describing market timing, but I’m willing to take the risk. I guess my question is essentially: how do I a) offload my funds to lock in the gains to date, b) avoid a penalty, and c) park the money somewhere (a Roth at a bank?) so that when VTSAX goes back on sale, I can get it at a discount.

    What I’m afraid of, and I think rightfully so b/c I’m not contributing to this ROTH right now, is that the market is going to take a nosedive and I’ll have to wait even longer before I can effectively get the funds out of TROWE and into Vanguard.

    I’m 40 BTW. I currently contribute to an age appropriate Vanguard target date fund in my 401k, b/c we don’t have VTSAX.

    Appreciate any input you could provide as to how I could do this (realizing the inherent risk of market timing!). Thanks!

    • jlcollinsnh says

      Hi Brian…

      What you want to do is pretty easy and without tax consequence as long as you follow a simple step: Roll the money directly from one Roth to another.

      Roll your TRPrice Roth directly into a Vanguard Roth. Vanguard can help you with the mechanics of this.

      If you want to step out of the stock market for a while, simply move the money to a money market fund. I use VMMXX.

      If you want to be out of the stock market RIGHT NOW, you can first instruct TRPrice to sell your stock funds and move the money to one of their money market funds, keeping it in your Roth. You can then move to Vanguard later if you like.

      Since all of this will be happening in your Roth IRA “bucket” it is not a taxable event.

  34. A.D says

    Hello sir,

    I completed the stock series today and i would thank you for all that free information you have written on this blog. Even though i am still young(17) i try to gether a lot of information about trading and economics. Your stock series were very helpfull so thank you!

    • jlcollinsnh says

      Thanks A.D…

      ..for the very kind words. Glad you found it useful and congratulations on an early start on the Path!

  35. Tlo says


    Thank you for all the wealth of knowledge. It’s awesome. Question – what are your thoughts on zero fee index funds provided by fidelity? Would you consider using these funds over VTSAX?

    • jlcollinsnh says

      Hi Tio…

      I’ve been getting this question a fair amount recently and plan to address it at the end of my next post. Here’s a preview:

      Fidelity’s new zero ER funds

      Recently Fidelity came out with a couple of index funds touting a zero percent expense ratio (ER). I recognize a loss-leader come-on when I see one and so rolled my eyes and turned the page.

      But then I started getting questions about it in the comments here on the blog. Sometimes it is hard for me to remember what is obvious to one person is not to the next. I have been surprised that anyone would care about these, and I have been wrong about that. Seems this has been a very successful move for them.

      After fielding this a few times, I decided to summarize my take for those of you interested here.

      There is, in my view, zero chance that FZROX or the others will maintain a 0% ER for 60 years (as one reader suggested). Or even six. These are loss leaders and loss leaders are short term hooks to lure in the suckers, er, investors.

      Vanguard is structured to seek ever lower costs for its shareholders.

      Fidelity is structured to seek maximum profits for its owners, which means raising ERs whenever possible.

      Plus, FZROX and the other zero fee funds still have operating expenses. Fidelity is just shifting those expenses to the holders of their other funds. I have an ethical issue with that. Not to mention a practical one if I owned one those other funds.

      One last thing that likely no one but cranky old geezers like me even know or care about:

      Back in the 1970s and early 1980s, when indexing was new and struggling for acceptance, Fidelity led the effort to strangle the concept in its crib. They even ran ads personally attacking Jack Bogle and calling index investing “un-American” which is, of course, the same as saying giving your customers a better product at a lower cost is un-American. That takes some hard bark.

      Bogle, in turn, had the ads framed and mounted on his wall. A badge of honor.

      Clearly, they recognized the threat indexing represented to their very profitable (to them) traditional high fee mutual funds. Those are where their hearts still lie. They’d kick indexing to the curb the moment they thought they could get away with it.

      Something to think about when making a long-term investment.

      This is the post I should have written…

      …but Jim wrote it first, and better.

  36. Chaitanya says

    Hello Sir,

    It’s a late post so I hope I get a reply. I am reading this stock series since last couple of weeks and just completed it today(just read it slow so I wouldn’t miss anything important, and was a bit busy). Thank you for all the information. I absolutely loved this series. I am in my early 20’s and still studying for my masters'(it’s debt-free). I haven’t really worked yet, but I have started investing since a while ago from the savings at the part time work that I do on-campus. I am still a novice with all the investment strategies and pros and cons of various strategies and am trying to learn it bit by bit. I have a strategy in mind as to how I would go about investing in coming years and would like if you would we able to give your opinion on this. Once I graduate and get a job, I’ll try to allot 50% of my income for investing; of which 50% I’ll invest in individual stocks, 30% in index funds(most certainly VTSAX), 10% in international funds, and 10 % in cash or somewhere else as in bonds. I’ll keep allocating funds in this manner till mid-to-late thirties after which I’ll keep whatever I have invested in my individual stocks and won’t contribute to it at all and start allocating this 50% to the index funds so that my allocations would be 80% in index funds, 10% in international, and 10% in cash; which I will change again once I hit my 50’s and it would be like 60% in index, 10% in international funds, 20% in bonds, and 10% in cash.
    Of the other 50% which I won’t invest, I will try to keep 10-20% in hand ready for a black swan scenario, so I can scoop in and make investments if the situation arises. I have read your take on about how we cannot time the market and how one cannot tell for sure whether an individual stock will or will not perform well in the future.
    Off the individual stocks that I will invest in initially, if a failure, I can always show them as capital losses against my gains(I think I remember you said in this series that the losses can be carried forward to coming years).

    Thank you.

    P.S. You once had shared a link on one of your post of this stock series regarding crypto currencies. Would you please share it again?

      • Chaitanya says

        Hello sir,

        I need to re-read the stock series again to fully grasp whats written in it. I was fully expecting that this would be your reply, and I wasn’t shocked by that. I am starting to get the concept of FI bit by bit. This stock series have been a great help for newbies like me and I already have recommended some of my friends about this series. Keep up the work!

        Thank you.

      • Chaitanya says

        Hello sir,

        I was sort of expecting that reply. I’m re-reading the series again and I think the concept of FI is finally dawning on me. This stock series is like a gold-mine of information for newbies like me, and I already have recommended some of my friends to read the stock series. Keep posting!! So happy that I found this series so early before I even have started earning. Thank you for such great information.

  37. Rebecca says

    I’ve been focused on dividend growth investing and have been buying individual stocks. I’m now thinking that I need to make the switch to VTSAX. I’ve done well with some of the individual stocks, but I have two that have tanked – roughly 25% down. Should I hold on to those until they go back up, or just cut my losses and sell so I can invest all that I have into VTSAX? Thanks for all you do.

    • jlcollinsnh says

      When will they go back up?


      There is no way to tell when. Of if. 🙂

      The time to switch is when you’ve done your due diligence and determined investing in VTSAX for the next few decades makes sense for you.

      You can write off the capital loses against any gains or against your ordinary income at $3000 per year, carrying forward any left.

  38. Brian says

    Hi Jim,

    Happy New Year! I am offering my parents financial advice (drawn from yourself and Mr. Money Mustache; let’s hope faithfully). Just wanted to get your brief thoughts on this.

    Lets just simply say that my parents are typically American, and thus, not good with their money. My mother lost her job at 64, but had 12 weeks severence. Thankfully, she is about to be hired full-time (she is a nurse).

    My mother will be making around $85,000-90,000 with this new job. She has around $350,000 in her 401K, and has about $65,000 of non-mortgage debt. I made her sell hers and my step-father’s cars (along with his 3 motorcylces and the ridiculous insurance it costs).

    My step-father brings in $30,000 annually from social security and other pensions. I told my mother to hold off till she is 70 to start withdrawing from social security. Here is my question: should my mother roll her 401K over to a Roth IRA? I ask because I thought she could still contribute to a Roth even at age 70. With her SS being taken out starting in 5 years, there combined income would around $70,000 (and she will be working and still pulling in over $85,000 from her nursing income). I figured that she could have a withdrawal rate from her retirement that is very small, so the principle can keep growing.

    I am certainly open to hearing others chime in as well. Thank you!

  39. Sam says

    Your blog and advice has been immensely beneficial and very much appreciated.
    I was hoping to get your opinion regarding retaining or selling stocks to transfer into the index fund.

    A couple years ago and before I became educated with your teachings, I was lucky enough to sell my company. Some of the profits went into real estate, the majority ( a substantial amount) I split two of the largest tech stocks and the remainder into VOO. Those two individual stocks have doubled in value since I invested.

    After reading your advice it is apparent these were foolish investments but now I wonder, should I continue holding these stocks or should I take my winnings, put them into an index fund and avoid pressing my luck?

    • jlcollinsnh says

      Well, Sam…

      …since you read my blog you very likely already know what I would do:

      Celebrate my wonderful good fortune, let all my friends continue to think it was my sheer genius and roll my holdings into VTSAX.

      But that’s just me 🙂

      • Sam says

        I figured that would be your response. 🙂 I guess I just needed confirmation. One of the stocks happens to be Apple which has become Berkshire’s biggest holding so it got me second guessing if it is the right decision.

        Thanks again!

  40. Chris says

    Hi Jim,
    I just finished reading The Simple Path to Wealth and love simplicity of just having VTSAX and VTBLX.

    I’m 32 and have 20+ mutual funds that were a gift to me in my early 20s. I’ve pretty much ignored them and they’ve grown considerably (though they’ve taken quite a hit since Jan of this year.)

    I don’t even know what half of these are and would like to simplify moving forward.

    One of them is in a Roth IRA so that will be easy enough to sell off but the rest are in a brokerage account.

    Is there a smart way for me to start selling these off and buying VTSAX/VTBLX instead? I’m worried that I’m going to just get hammered tax-wise.

    Thanks in advance!


    • jlcollinsnh says

      Glad you liked it, Chris.

      There is no magic way to move your funds in a taxable account, other than the strategies offered in the post.

      That said, this current bear market is a gift to you. Your capital gains are going to be way down if you sell.

      Plus, as long as you immediately replace those funds with VTSAX, you won’t be locking in the loss. Rather you will be buying in and ready for the next rise at a lower cost basis.

      You also don’t have to worry about timing this, as you will be going immediately from one to the other.

      Good luck!

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