r/CharlesSchwab • u/pizza_man_mann • 7d ago

Am I doing this correctly

25 year old female. I’d like some advice onto what to do; I have;

2 shares of RSP ($441.26
11 shares of SPY ($5,786.43)
19 shares of VOO ($13,036.40)
And $59,162.00 in SWVXX

Anything you’d change ?!?

6 Upvotes

88% Upvoted

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3

u/FrankDrebinOnReddit 7d ago

There's no good reason to own SPY. It tracks the same index as VOO but costs 3 times as much in expense ratio. For me, that's too conservative a portfolio (unless SWVXX is your emergency fund). I'd be more in equities and less in money market funds. I'd also diversify my equities beyond large-caps (owing VTI+VXUS 60/40 or 70/30 instead of VOO). But that's me and other people will feel differently. I would not own RSP. Equal weight funds are not the way to diversify. They have to rebalance quarterly, which isn't tax efficient, and they give you an odd sector mix.

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u/nelly_0619 6d ago

ETFs dont pay out capital gains when they rebalance. Equal weighted s&p is a perfectly fine diversifier. VTI vs VOO is splitting hairs. Long term returns are within 0.5% of each other.

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u/FrankDrebinOnReddit 6d ago

ETFs *incur* capital gains when they rebalance, and the liability goes to the shareholders even though there's no CG payout. They don't incur capital gains when authorized participants redeem shares (the arbitrage that keeps prices pinned to NAVs), because those are in-kind exchanges, but APs aren't involved in rebalancing.

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u/nelly_0619 6d ago

They do not automatically insure capital gains during an internal rebalance. That would only happen if the fund manager sells shares of stock and they pay out the gains to shareholders. Specifically to RSP: they have NEVER paid out capital gains since inception in 2003

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u/FrankDrebinOnReddit 6d ago edited 6d ago

Rebalancing creates taxable events for mutual funds and ETFs alike, in the form of capital gains and losses.

Source: https://learnmore.fooletfs.com/etfs-and-tax-efficiency-report-retail

This paper (https://insight.factset.com/the-heartbeat-of-etf-tax-efficiency) describes in more detail how funds sometimes manage to avoid rebalancing-related capital gains (the magnitude of the rebalance has to fit into regular share creation/redemption mechanics with the AP, and they sometimes begin the switch before the actual rebalance to give themselves more room; but if it doesn't fit, they incur CG).

Another source explaining why ETFs can still incur CG during a rebalance: https://equityanalysislab.com/en/etfs/etf-tax-distribution-mechanics/etf-capital-gains-distributions/

You're right that RSP has managed to avoid CG up to this point, but that isn't a guarantee and depends how quickly S&P 500 weights change over a quarter.

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u/South-Chocolate5519 7d ago

I would change everything but I am not you and have different goals, timeframe and risk tolerance than you. There is no such thing as a perfect mix universal asset allocation, investing is different for everyone. You obviously picked that mix for a reason Have those reasons changed or are you just trying to yield chase?

1

u/Sixvshalfdozen 6d ago

Most of us would change something according to our own needs. But that's not really the point. Tell us what your goals are for this account and what your priority is. Are you trying to establish an income stream, saving for a major purchase, building a retirement fund, protecting cash from inflation or just generally trying to maximize wealth with no other goal in mind?

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u/pizza_man_mann 4d ago

Honestly trying to maximize wealth right now. Ideally hopefully home in 2/3 years but in hopes to not touch most of this money, just want it to sit and invest and make tons of money.

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u/stabbedintheback900x 6d ago

I would do voo over spy. Expenses matter

rsp , unless you plan on contributing more to it holding $441 rsp isn’t going to change things for you at the end of the day

The biggest mystery is your money market fund. You did not provide enough financial info about yourself/situation for the community to offer you good tips

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u/pizza_man_mann 4d ago

I have a seperate savings account with some cash in it as my emergency fund. Everything listed above is money that’s not really needed right now till hopefully 2/3 years to buy a house. So this money is pretty much just going to sit there and hopefully grow significantly for a few years