letsgobobby wrote:For those of you who have all or most of your stocks in taxable accounts, how do you rebalance out of stocks? Do you rely on carry forward losses, set broader rebalancing bands, eat the taxes?
The "correct" answer is, in my opinion:
A. Sweep all distributions into a cash account, use that cash to rebalance. (Do not automatically reinvest distributions.)
B. Direct new investments so they help to rebalance.
C. If you are making net withdrawals from your investments, take distributions so they help to rebalance, but make sure that you keep your asset allocation (like diversification across stock classes).
Last year, I came up with a different answer.
I realized that where I was was just too complicated and unsustainable. My funds had high costs, there were too many of them, and I needed to simplify. Then, I discovered Bogleheads.
So, I liquidated everything and transferred it to Vanguard, into something like the three-fund portfolio. Suck it up, pay the taxes, get into something that is much more tax-efficient and much simpler than I had before.
Think about it: A "Reset" button on all my record keeping to establish the cost basis for investments that go back 20 years or more. I was able to shred and recycle mountains of paper records.
Sure, I am about to pay a lot of taxes, but in the long run I owe them anyway. Since I pulled the trigger, I have a lot less to worry about what future tax rates may be. That translates into much more freedom about investment and spending choices.