Is there a broad stock market index fund that doesn't pay dividends?

[dualstow]

On another forum someone suggested holding Vanguard growth in taxable and Vanguard value in tax-deferred. Not perfect, of course.

Nothing is

Except Gemma Chan.

[economicsjunkie]

I did have to look her up but won't disagree with you on that!

[mathjak107]

the best results when investing long term  are generally going to be  from keeping equities in the deferred accounts and bonds and cash in the taxable accounts.

even the slightest stock turnover in a fund can destroy any tax benefit to be had by doing the reverse .

depending on the length of time you will be invested and the funds turnover rate  you can do more tax damage having the equities in the taxable account even with those special capital gains rates.

as little as a 1% spin off a year can negate any tax benefit over the long term.

for a long time the industry never looked under the hood and just assumed because you get a lower tax rate that equities should be advantaged in a taxable account.

but  once michael kitces looked under the hood that certainly was not the case . having those equity's in the deferred accounts won almost every time . especially because with rates so low what are you really going to compound tax deferred anyway ?

near zero real return is what you are compounding by following the old wives tale. while even at a 1% distribution rate in dividends and capital gains you can kiss a lot of money good bye in taxes  that is no longer their for compounding over the long term growing more money in the taxable account . .


the financial industry has lots of what amounts to old wives tales that no one ever looked at under the hood in detail that are turning out to be more myth and mis-information  than fact

[MachineGhost]

So how about a solution for those that can't use a Roth or retirement accounts?  I haven't come up with anything better than a discounted variable annuity yet.  And the fees on that still aren't that cheap.

[mathjak107]

only choices are index funds or tax managed funds unless you turn to insurance products.

but keep in mind tax efficiency is double edged.

making portfolio changes down the road and having to deal with 30 years of pent up capital gains can make for some horrible tax situations later.

I toned down my growth model to go more conservative about 7 years before I retired. 

I used all  managed funds so I was paying some taxes yearly for decades.

I was able to do it quickly and painlessly.

had they been all index funds I would have had to do the selling over multiple tax years.

if I did I would have run right in to 2008-2009 and lost 30% or so  in the process.

[Sam Brazil]

Use an index ETN...there are several. But of course then you're taking on counter party risk because it's essentially like a loan product, from what I understand. But you could minimize the risk with several ETNs or maybe just reduce taxes by mixing in an ETN.

[4x4]

So is there a group consensus on specific funds that would be superior to VTI? And if so, superior in what way/for what reason?
Thank you

[mathjak107]

i like VIG

[l82start]

i like VIG

who doesn't..  it pays back with high interest..... or we will break your legs.

[Reub]

One could always use baby Berkshire Hathaway class B shares. I believe that they are very tax efficient and you also get Warren's expertise.

[4x4]

i like VIG

who doesn't..  it pays back with high interest..... or we will break your legs.

"if you put up a three to four thousand dollar investment, you can make fifty thousand distributing, ...?"

One could always use baby Berkshire Hathaway class B shares. I believe that they are very tax efficient and you also get Warren's expertise.

Interesting alternative to an index fund although WB with his Cheeseburger and Cherry Coke habit, can't live forever....

Thanks for the thoughts and suggestions!

[MachineGhost]

Buffett has already delegated his "expertise" to two new Berkshire CEO's.  I don't expect Berkshire to do as well going forward and it is better to invest in Merkel which has a much younger CEO and a lot less capital, but similar philosophy.  A lot of Berkshire's initial capital growth was during the time they were a hedge fund and trading as such.  That can't be repeated.

[economicsjunkie]

the best results when investing long term  are generally going to be  from keeping equities in the deferred accounts and bonds and cash in the taxable accounts.

This is interesting, I was thinking along the same lines, although I thought the order should be bonds first, then stocks, then cash, because the interest on bonds is higher than the dividends on stocks usually, no?

[mathjak107]

no , the total return on stocks easily eclipses the returns on bonds usually . as little as 1% in dividends in the taxable account or a fair amount of turnover in a fund generating distributions wipes out any tax savings from lower capital gains rates .

equity's grow better when everything is deferred and taking up the space in a deferred account with cash at 1$% and bonds under 3% does not work out as well .

if you are anything but in the 15% bracket and cn benefit from zero capital gains then the deferred account are where you want equity's .

[4x4]

Interesting twist on the usual advice on stocks in taxable bonds in tax deferred, in general.

This is an interesting article on AA as well
http://beta.morningstar.com/articles/73 ... s-of-.html

[4x4]

After tax returns for 10 years:

VTCLX: 8.14%
VTSMX: 8.08%

I think the deciding factor comes down to what tax bracket, VTSMX being generally considered superior except for the top tax brackets, I forget the cross over point.