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what to sell after buy-and-hold
Old 11-21-2013, 12:28 PM   #1
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what to sell after buy-and-hold

After decades of buy-and-hold, I don't have much experience selling equities. As year end is a good time for tax-loss harvesting, I figure ridding myself of a loser holding or two might be wise to offset expected cap gains elsewhere. What criteria do you use to choose which loser to sell?

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Old 11-21-2013, 12:49 PM   #2
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Sell the dog with the most fleas!

FIRE'D in July 2009 at 51...Never look back!
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Old 11-21-2013, 12:50 PM   #3
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I don't put too much thought into it, just sell the biggest loser(s) once I've had enough and the biggest gainers which I can buy right back (no wash sale). In my case, I have two bonehead buys: AMD (before Intel released Core processors) and Exelon (at the time the hopes for nuclear were big, but at least the dividend is good and my lots were purchased from around $80 down to $30).

On the flip side, I bought Boeing, Lowes, and Reynolds American, so they will temporarily go.

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Old 11-21-2013, 01:16 PM   #4
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No tax considerations, since most of my stash is in tax deferred, but my intent is to have dividends go to cash once I'm FIREd, then sell whatever is nearest to out-of-spec rebalance band wise.
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Old 11-21-2013, 01:31 PM   #5
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A very good question. I have a number of good dividend yielding stocks which I should probably sell. But they are in good sectors and to me, I don't care if they lose 20% in a correction, I still get the dividends and they will probably go up again.
Wild Bill shoulda taken more out of his IRA when he could have. . . .
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Old 11-21-2013, 02:00 PM   #6
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Whatever rebalances your AA

Whatever gives you the biggest percentage loss

Whatever gives you the biggest absolute loss

Something that will be easy to replace without creating a wash sale. If you sell at a loss, you can't purchase very similar shares for 30 days after the sale (or in the 30 days prior to the sale) or the tax loss is disallowed. If the purchase is in a tax advantaged retirement account, you will never recover your tax loss. This can be very tricky if you reinvest dividends, since that is a purchase. And that makes the end of the year a minefield as well. This is your most dangerous potential problem.

Something you don't really want or want less of anyway.

Something that you can sell before it generates a giant taxable distribution at the end of the year. Many estimates are now available. Looks like I have one fund that is distributing 17% or so. I'll see if I can't shift it into an IRA before then.

Something that is currently reaching 52-week highs, even though you still have a loss.

Something with short-term losses, which can at times be more valuable or allow you a bit more flexibility later.

Something that does not incur a fund redemption fee (or a retroactive transaction fee), either due to a short holding period or fund load structure. This may be your second biggest problem if you are selling funds or commission-free ETF's instead of individual stocks or normal ETF's.

If there are transaction costs, something with enough size such that those costs are small relative to your tax loss. Though it will add to the loss...
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Old 11-21-2013, 06:50 PM   #7
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What loser to sell? ALL of them if held in a taxable account. It really is that simple. If one likes the asset class, then just buy replacement shares of something that would not create a wash sale.

Do this every year or with every position that is still a loser that is about to go long-term. Basically, one should not have any losers to worry about on January 1st.

But with stocks up 30% this year, tell us what your losers are.
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Old 11-21-2013, 07:22 PM   #8
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I agree with LOL! Sell all the losers. If you're in mutual funds, should be simple to find a similar fund to prevent a wash sale.

If you're offsetting with gains, see if the 0% cap gains bracket applies to you. See if the $3000 in losses that you can take against your income helps too.
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Old 11-21-2013, 07:39 PM   #9
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I haven't had to rebalance much, but I sell the winners. If you are selling index/mutual funds you probably want to sell the ones that have appreciated the most and are at the highest valuations.

Rebalancing according to an AA will tend to do this naturally.

If you are an active investor with individual stocks then the obvious thing to do is to sell the ones that will go down the most in the future.

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