When to pay capital gains for greater diversification

[ladelfina]

This is a great topic. I got to you guys after looking into some sites about Retirement Investing and ETFs.. I have put some of my (then-too-big) cash cushion into Gov. bond ETFs and a small-cap ETF to round things out, but am unsure about whether to sell some big performers like TMX/AMX.. I mean, my income is low so I can groove with the 5% CG but still.. 5% is 5%. I don't need to sell for income now.

OTOH, if I'm looking at a 100k gain, the difference between 5k and 15k of CG is not insignificant...

I'm asking myself whether the diversification into a strictly structured ETF plan is worth that extra 5% off the top, if everything else is considered equal.. Strangely, the sites promoting ETF theory say "sell all your stock" without even mentioning the CG issue.. maybe they are focusing on IRA assets?

In a very general way, the stocks I have now are relatively diversified; they just aren't as fully-diversified as an ETF plan would be...

Still unsure what to do as someone who is not an investment junkie or tax maven. I like watching the stocks in my taxable account go up.. but what goes up must come down (or out!). Am I too emotionally wedded to a winning stock to do the rational thing?

[Nords]

Quote:

Originally Posted by DanTien Now, I'm worried for Nords.*

Well, clearly I'm better at plugging through worksheets than I am at understanding their theory. Thanks for pointing out my "conceptual error", Martha, and I apologize if I got anyone else salivating about something that turned to be too good to be true. Luckily I didn't have to understand what I was doing to plug through the worksheet and put the numbers into TurboTax. They calculated the results correctly even through I was blissfully ignorant.

Getting back to Whitestick's original point:
- At a time in our lives when spouse & I have very low earned income, I wouldn't hesitate to take huge cap gains to reallocate a portfolio. I'd be even more motivated to do so if I could pay cap gains tax (at 5% & 15%) instead of paying full earned-income tax rates on RMDs.
- If I ended up holding an undiversified hairball of stocks, I'd have two choices:
-- spend my time getting to know them as intimately as Warren Buffett, and spend a considerable portion of my life managing them, or
-- immediately diversify risk for which I am not being adequately compensated.