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Anything to lose by reallocating now?
Old 12-22-2015, 10:05 AM   #1
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Anything to lose by reallocating now?

I we reallocate our portfolio now, as opposed to Jan 1, do we stand to lose anything with year end capital gains/dividends that have not yet been paid out? I am thinking the "date of record" determines payout and not account balance- correct?

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Old 12-22-2015, 10:13 AM   #2
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Unless there is an urgency, I would probably wait. The 1099s might get confused or ??... There are many year end processes that go on in a financial institution.

You are correct. The date of record/distribution makes the income, not account balance.

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Old 12-22-2015, 12:43 PM   #3
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I'd wait, unless you want to try to avoid dividends to lower your taxes a bit. I have had a few opportunities to do that while rebalancing.

The first problem would be with any distributions you still haven't received. If you take them in cash you might not know your exact fund/ETF balances. An extreme example is an active fund that distributes 30% of the NAV as capital gains on Dec 31. Oops, have to rebalance again.

The second problem is if you automatically reinvest, your fund balance won't change much, but if you sold shares at a loss as part of rebalancing (which is good tax practice) you might be in danger of a wash sale if the reinvestment buys shares for you. Now your taxes are a bit messy, and higher.

The third problem is if you buy shares and then the distribution is made. You just bought yourself a big tax bill. Even worse if you sell a fund just after a distribution and buy a new fund that has yet to distribute.

Plenty of land mines at this time of year. Not that that stops me, but it probably will in a few years.
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Old 12-22-2015, 03:34 PM   #4
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Animorph listed some good problems.

Why are you trying to balance now instead of Jan - its just around the corner.

I have started rebalancing, but all my funds (except the bond funds that have monthly dividends) have paid already out their year-end dividends.
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