Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Thought this could be an interesting discussion here. Hope so.
I’m happy to say I didn’t sell any holdings during the ‘87, ‘00 and ‘08 market slides, and I slept just fine with minimal anxiety (I won’t say none). I even did a little buying but I’ve never held much cash, always all in essentially.
Though it was a conscious decision, I’ll admit the tax hit associated with taking large capital gains has made buy and hold in all markets much easier for me. I have probably let avoiding/deferring/minimizing taxes play too much of a role in my investment decisions. OTOH, I often see discussions about rebalancing on investing forums that rarely recognize taxes as a factor, that could be a mistake too.
I’m NOT talking about taking gains up to the tax bracket threshold you’re already in, or lower brackets where dividends and gains get favorable treatment - that’s pretty straightforward. I am talking about rebalancing that brings taxes in a given year up a couple brackets give or take - I know there are others here in that middle ground, not paupers and not top %ers. And clearly I’m talking taxable accounts, we’re overweight taxable despite taking advantage of 401k’s and IRA’s all along - tax deferred accounts can’t help.
Making a calculation of taxes vs losing fund appreciation isn’t really possible, seems akin to market timing.
So how do others keep accepting tax consequences in proper perspective? What role should taxes play in rebalancing/investing?
I’m happy to say I didn’t sell any holdings during the ‘87, ‘00 and ‘08 market slides, and I slept just fine with minimal anxiety (I won’t say none). I even did a little buying but I’ve never held much cash, always all in essentially.
Though it was a conscious decision, I’ll admit the tax hit associated with taking large capital gains has made buy and hold in all markets much easier for me. I have probably let avoiding/deferring/minimizing taxes play too much of a role in my investment decisions. OTOH, I often see discussions about rebalancing on investing forums that rarely recognize taxes as a factor, that could be a mistake too.
I’m NOT talking about taking gains up to the tax bracket threshold you’re already in, or lower brackets where dividends and gains get favorable treatment - that’s pretty straightforward. I am talking about rebalancing that brings taxes in a given year up a couple brackets give or take - I know there are others here in that middle ground, not paupers and not top %ers. And clearly I’m talking taxable accounts, we’re overweight taxable despite taking advantage of 401k’s and IRA’s all along - tax deferred accounts can’t help.
Making a calculation of taxes vs losing fund appreciation isn’t really possible, seems akin to market timing.
So how do others keep accepting tax consequences in proper perspective? What role should taxes play in rebalancing/investing?
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