How to know when to take a profit

I usually fund the new year in January. New year, new funding, adjusted for new year plans. Sorta, kinda, based on last year, say 80%. Not many surprises tax wise.
 
RobbieB said:
I usually fund the new year in January. New year, new funding, adjusted for new year plans. Sorta, kinda, based on last year, say 80%. Not many surprises tax wise.
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I have been funding the new year in Dec of the previous year since 2019. So I'm recently starting to calculate how much I will need. 2022 will be my last year to fund high tuition, but only one payment, I'll have about 5 months of rent payments for the kid. I want to fund the other kid's Roth and have my living expenses. On the income side, I have $10k of dividends/interest and I'm using $19k of saved up HSA receipts. So now I need to figure out how how much to remove from taxed funds and IRA to fund expenses and to fund my Roth IRA Conversion. And whether to stay in the 12% bracket or go to 22%, I don't think I can Roth Convert much and stay in the 12% bracket, so I may just take the big plunge and go to the top of the 22% bracket.



I don't want to pay taxes out of IRA funds, so I need to figure out if it make any difference to get some funds from LTCGs to pay the taxes. ??
 
I agree with several others who stated they are not good at selling. I am the same way. In hindsight, what I could have gained by not selling far surpassed what i lost by holding on for "too long". So my approach is to rarely sell. And even then my "greed" has "cost me. My last individual stock sale was 10% of my MSFT stake in 2019, as a retirement "gift" to myself to blow that dough. I had bought the shares at the split-adjusted price of $4 in the 1990s, so why not sell some at $138 and have fun with some of it. Of course, the shares are now around $336. At least the gain has more than made up for what I sold :).

So at this point, I am not selling. I will rebalance, but not automatically. I lucked out and rebalanced mutual funds in April last year, no so much because stock sere down, but to generate some some capital losses. I reinvested what I sold, and it was the right time to reinvest.

I have come to the point that with pension income, investment income, a large amount of cash, and SS not yet taken (and I will receive the maximum payment), I have no real need to sell. Any gains are for my estate. Any losses by holding are also for my estate, but my heirs will still be left with a lot of money. So, while I "never say never", I am just not thinking of selling these days.
 
jollystomper said:
I agree with several others who stated they are not good at selling. I am the same way. In hindsight, what I could have gained by not selling far surpassed what i lost by holding on for "too long".
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Your not alone in noticing that. Some of the academic papers have pointed out that selling early is very costly. There's some interesting meat to chew on in the article below.

https://humbledollar.com/2021/09/the-cardinal-sin/

But let’s say you’re really smart (or lucky) and happen to pick a fair share of the winners. You face another big hurdle. You must hold on to your winners and not sell them prematurely. Unfortunately, this is easier said than done. Most investors display a strong tendency to sell their winners and ride their losers. This has been termed the disposition effect, first described by behavioral economists Hersh Shefrin and Meir Statman.

The disposition effect can be explained by mental accounting and loss aversion. When an investor buys a stock, a mental account is subconsciously created. The initial investment or cost basis is recorded in this account. If the position is subsequently sold for less than its cost basis, the mental account is closed at a loss. Since losses are painful—particularly to our egos—investors do everything in their power to avoid this from happening, hence the tendency for investors to cling to their losers and even double down on them.
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well some of you know that I have all ways liked the Ford Corporate Bond issue that pays 9.98% .... well it seems its now time to let those go...
On Friday last week I got an email from Fidelity that I had a Important Voluntary Corporate Action... what ??
So I called them up and asked what the deal was and was told that Ford wanted to buy me out of my bond holdings... yep... the very same ones that I have held for years... they paid almost 10% every single year...
So I said OK so whats the deal...
if you take the deal before 11/17 you get an incentive of $50 per $1000 bond.. and add 3% on 11/19 plus the market value... so thats 8% right off the bat and the market value of those bonds just so happen to be at an all time high... $1708 per bond...
so it wasn't like I was planning on taking the profits as I did like that 9.98% coupon for so many years... so thats 78% profit added onto the ~10% coupon payments over the years ... the buyout is just too good to pass up...
 
I sell if I am underperforming the market longer than 3 months...

Said differently, I sell after the anchor has been dragging in the muck, about to hit the coral reef ahead. But I don't do much individual equity trading these days and am in the accumulation stage. FWIW, YMMV.
 
I am seriously thinking about cashing out all investments and staying away from investing going forward...
you can get to a point where your investments are putting too much at risk for your own good....
right now the medicare IRMAA is $182K for couples.. and I don't plan on going over that amount yearly and what they adjust for in the future... so thats my target draw from my retirement funding instruments...
So you just take your accumulated fundings and divide that number by the $182K IRMAA and that tells you pretty much how long your funds are going to last... if the number comes up that its way past any date you or the spouse would live to .. then why put your funds at risk in an investment when you have more than enough... just a thought right now... but it sure is an option to take seriously, it may be time for the ultimate cash out
 
dixter said:
I am seriously thinking about cashing out all investments and staying away from investing going forward...
you can get to a point where your investments are putting too much at risk for your own good....
right now the medicare IRMAA is $182K for couples.. and I don't plan on going over that amount yearly and what they adjust for in the future... so thats my target draw from my retirement funding instruments...
So you just take your accumulated fundings and divide that number by the $182K IRMAA and that tells you pretty much how long your funds are going to last... if the number comes up that its way past any date you or the spouse would live to .. then why put your funds at risk in an investment when you have more than enough... just a thought right now... but it sure is an option to take seriously, it may be time for the ultimate cash out
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Yes, but that also assumes your investments keep up with inflation, and that has historically required some equities over the long run.

-ERD50
 
ERD50 said:
Yes, but that also assumes your investments keep up with inflation, and that has historically required some equities over the long run.

-ERD50
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I'm sure when you take inflation into consideration then the medicare irmma limit will go up with inflation... so during those times I guess I get a raise :LOL:
 
dixter said:
I'm sure when you take inflation into consideration then the medicare irmma limit will go up with inflation... so during those times I guess I get a raise :LOL:
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I don't understand why your goal is to stay under IRMAA penalty. I just looked at the charts yesterday and figure that my husband will be in tier 3 and tier 4 for the next couple of years. Higher tier means we are having higher income. We hate to pay the IRMAA penalty but we won't say no to more money. :)
 
RetiredHappy said:
I don't understand why your goal is to stay under IRMAA penalty. I just looked at the charts yesterday and figure that my husband will be in tier 3 and tier 4 for the next couple of years. Higher tier means we are having higher income. We hate to pay the IRMAA penalty but we won't say no to more money. :)
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One year I had forgotten about the fact that medicare looks at your income starting when you turn 63 and then when they put you on medicare at 65 you get to pay those extra monthly fee's.... so my first year on medicare my monthly bill went from $148.45 to over $544 per month/ per person.... so when you retire and take funds out from your retirement instruments you get to pay income taxes on those draws... you also get to pay taxes on your SS check up to 85%... so when you end up paying extra for medicare you also pay extra taxes out of the SS checks and of course the taxes on income.... yep, you can take out as much money as you want... but the more you take out the more you end up giving them. to the point your giving your SS back to them... and as you know medicare is a single person healthcare option... so when you add in two people paying the extra medicare costs then it adds up pretty quick for a year of premiums... I just did the math... its like your just throwing away $9500 per year for nothing in return... I like more money too but I'm not going to just give away $9500 every year for nothing... :greetings10:
not to mention that the extra $9500 to pay for all of this needs to come out of your retirement funds and so that adds even more income taxes... so its actually more than you just throwing away $9500... its probably more to the tune of giving away $12,000 might as well just burn $100 every morning when you wake up... its only money
 
dixter said:
One year I had forgotten about the fact that medicare looks at your income starting when you turn 63 and then when they put you on medicare at 65 you get to pay those extra monthly fee's.... so my first year on medicare my monthly bill went from $148.45 to over $544 per month/ per person.... so when you retire and take funds out from your retirement instruments you get to pay income taxes on those draws... you also get to pay taxes on your SS check up to 85%... so when you end up paying extra for medicare you also pay extra taxes out of the SS checks and of course the taxes on income.... yep, you can take out as much money as you want... but the more you take out the more you end up giving them. to the point your giving your SS back to them... and as you know medicare is a single person healthcare option... so when you add in two people paying the extra medicare costs then it adds up pretty quick for a year of premiums... I just did the math... its like your just throwing away $9500 per year for nothing in return... I like more money too but I'm not going to just give away $9500 every year for nothing... :greetings10:
not to mention that the extra $9500 to pay for all of this needs to come out of your retirement funds and so that adds even more income taxes... so its actually more than you just throwing away $9500... its probably more to the tune of giving away $12,000 might as well just burn $100 every morning when you wake up... its only money
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I think I am reading that you are pulling money out of IRA? When we were still working, my husband was hit with the highest IRMAA tier. Right now, my husband is only taking RMD starting at the age of 70. Not a dime more than required. We are "screwed" over capital gains (bad wealth/investment management). We just took back our investments and will avoid the unnecessary realized capital gains in the future. We are well funded with taxable accounts as well so those incur less of a taxable event when we do sell positions.
 
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Yep... Taxes are a bad kind of evil... I wouldn't mind paying taxes if the money I gave them was used properly..
 
Tracer said:
“Market timing is speculating and it rarely, if ever, pays off.” - Peter Lynch
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See? Now that is why I hang out here. I learn something new every day.
 
Tracer said:
“Market timing is speculating and it rarely, if ever, pays off.” - Peter Lynch
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Yet, Peter Lynch was a stock picker, not an indexer. This means that he had to sell and buy stocks. Obviously, he had a system to decide when and what to buy and sell.

Even somebody like Buffett who said that he preferred to hold a stock forever still sold a stock and moved on when he no longer liked its prospect.

So, is selling a stock that may be on a catastrophic decline "market timing"?

How about a stock that has been bid up sky high? Do you hold, waiting for it to go even higher to the moon, like the Reddit crowd cheering one another to do with their meme stock?
 
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It's surprising that so many posters think that to sell something to take profit is gambling.

Do they realize that the act of buying anything initially is also a speculative move, in anticipation of a future profit? Is there ever any guarantee that something will always go up? If so, once you buy, no matter what it is, you HODL it forever.

If you happen to own Gamestop or other meme stocks before the Reddit crowd bid it way up, do you sell it? Can a stock ever get overvalued?

I guess many people believe in Fama, who does not believe that anyone can tell if something is overvalued or undervalued. It is what it is, he said.
 
NW-Bound said:
Yet, Peter Lynch was a stock picker, not an indexer. This means that he had to sell and buy stocks. Obviously, he had a system to decide when and what to buy and sell.

Even somebody like Buffett who said that he preferred to hold a stock forever still sold a stock and moved on when he no longer liked its prospect.

So, is selling a stock that may be on a catastrophic decline "market timing"?

How about a stock that has been bid up sky high? Do you hold, waiting for it to go even higher to the moon, like the Reddit crowd cheering one another to do with their meme stock?
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Those are good points and I agree with you. I view market timing as kind of taking all or most of your assets (stocks, mutual funds) etc out of the market all at once and then trying to decide when to put all or most of them back in. Stock picking is just as you say. When the fundamentals get cuckoo or there is some crazy sky high evaluation etc. , I see no reason not to trade in or out of an individual equity when appropriate. I do not consider that market timing, more as you say, stock picking.
I have some stocks I have had for a long time but am not married to them in a "hold forever" kind of way.
 
CatinKS said:
Thanks for everyone's input. I exchanged Pacific Index for a Energy Fund.
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Vanguard Energy Index Fund Admiral Shares (VENAX) has a 10 year performance of less than 1%/year.

I'm guessing you are instead buying it for the +118% performance in the past 1 year (from Vanguard's website, "as of 10/31/2021"). That return represents a recovery from a deep loss - not normal performance. Look back 2 years, and you'll see the mutual fund's price is just recovering to it's previous levels.
 
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