Taking profits

[sanfanciscotreat]

Talked with my tax man a couple of weeks ago.
I can take $100K in capital gains and pay $4500 federal tax since I have so little earned income and the income will be put into the IRA. Reinvesting in moderately high yielding equities for more consistent income.

[Nords]

Quote:

Originally Posted by photoguy Nords -- this is an interesting approach. Was your two year cash bucket sufficient (along with dividends) to ride out 2008-present without selling at a loss? Are you focusing on a dividend portfolio, stocks with less volatility, or are you closer to TSM?

We topped off the cash stash late in 2007 (by selling out of a bunch of individual stocks) to about 8% and managed to make it last for two years.

Our ER portfolio is three ETFs and one stock: ~23% each of Berkshire Hathaway, an international ETF (EFV), a Dow dividend ETF (DVY), and a small-cap value ETF (IJS). We try to let each one oscillate +/- five percentage points around that level, but we've been gradually selling off the IJS.

When you say "selling at a loss", we've held some of our Berkshire Hathaway shares since 2001 with a split-adjusted cost basis of about $42/share. We'd held some of the others since 2003, so we were sitting on a ton of unrealized cap gains. We managed to wipe out the cap gains for DVY, IJS, and EFV through tax-loss swap selling during 2008-09. But otherwise we wouldn't have been selling anything at a loss.

[pb4uski]

Quote:

Originally Posted by FinanceGeek Another factor you may want to consider is that your MAGI for 2012 will determine your eligibility for the ACA health insurance subsidy in 2014.

Actually, we got some new information recently that make this less of a concern.

While the 2014 subsidies will be provisionally based on 2012 tax return information (which is the most current tax return information available when the subsidies begin on 1/1/2014), when you file your 2014 tax return (in early 2015) you will calculate the subsidy that you were entitled to based on your actual 2014 income and then compare that amount to the subsidies that you actually received in 2014 and pay or receive the difference to/from the IRS.

Also see pages 2 and 3 of http://www.early-retirement.org/foru...r-63122-3.html

[photoguy]

Quote:

Originally Posted by Nords When you say "selling at a loss", we've held some of our Berkshire Hathaway shares since 2001 with a split-adjusted cost basis of about $42/share. We'd held some of the others since 2003, so we were sitting on a ton of unrealized cap gains. We managed to wipe out the cap gains for DVY, IJS, and EFV through tax-loss swap selling during 2008-09. But otherwise we wouldn't have been selling anything at a loss.

Thanks for your response. By "selling at a loss" I just meant selling your equities during a market crash in order to meet cash spending needs (not tax loss harvesting). It sounds like you rode out the recession without ill effects.

[bondi688]

Not knowing when to take profits had been, and still is, my problem. I was thinking about putting stop loss orders on my holdings, but worry that I'll be stopped out from normal market movements, especially when I am holding the stocks for dividend income. But I have looked with dismay at a few of my stocks that peaked and then took a dive.

[haha]

Quote:

Originally Posted by bondi688 Not knowing when to take profits had been, and still is, my problem. I was thinking about putting stop loss orders on my holdings, but worry that I'll be stopped out from normal market movements, especially when I am holding the stocks for dividend income. But I have looked with dismay at a few of my stocks that peaked and then took a dive.

These stop loss orders can work out very badly in the infrequent but not unkown situation of a quick market downdraft, which then gets restored equally quickly. In this case, you can lose big with stop loss orders.

In my view it is better to keep these sell points in your head, and act deliberately if you decide to act. Probably better yet is to give up dreams of moon rockets, and buy and sell based on the value you perceive relative to the price quoted, or use a programmed rebalancing technique.

Ha