Taxable account investing over the long haul

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coldman
Posts: 79
Joined: Sun Mar 21, 2010 3:31 am

Taxable account investing over the long haul

Post by coldman »

If you are investing over the long haul say 20 years, what is the best way to invest? Yes, this is a very general question. If all other things are taken care of how would you invest in a taxable account. My thought is to buy index funds every 4 months or so and try to keep things simple. I am not sure of the best way to invest in taxable accounts. Please share your compete philosophy on the matter. Thank you!
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: Taxable account investing over the long haul

Post by stan1 »

My approach can be summarized by:

- Buy only low cost funds/ETFs you plan to hold forever (like Total Stock Market or Total International Stock Market). An additional benefit is that these two holdings seem to be positioned right now to avoid paying capital gains distributions under current tax laws.
- Minimize the number of lots I purchase (although this is less of an issue now that your broker is required to track your cost basis and report it to the IRS when you sell). I do this by not reinvesting dividends and buying at most 3-4 times per year.
- Rebalance to meet your asset allocation with new money invested in your taxable account, rebalancing in tax deferred accounts, or selling shares in the taxable account after retirement.
- Harvest capital losses when you can (I used some of my carryover losses from 2008 to cover the capital gains taxes I'll owe this year because I sold some holdings in my taxable account to pay off my mortgage)
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
Sidney
Posts: 6784
Joined: Thu Mar 08, 2007 5:06 pm

Re: Taxable account investing over the long haul

Post by Sidney »

The best way is whatever method makes it easiest for you to keep on investing per your plan. If waiting and lumping does that, great. If monthly investing, great.
I always wanted to be a procrastinator.
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DiscoBunny1979
Posts: 2054
Joined: Sun Oct 21, 2007 10:59 am

Re: Taxable account investing over the long haul

Post by DiscoBunny1979 »

This response might be contrary to the Boglehead strict philosophy, but here goes. . .
Besides the usual purchase of Index Stock Funds/ETFs and the rebalancing if necessary, I'd add that investing in I-Bonds whereas you would buy I-Bonds every month or quarter so that in 20 or 30 years (whenever you cash them in), there would be a steady form of income for the next 20 or 30 years. Also, buying Gold or Silver, while most recommend as an IRA investment, I believe makes a good taxable investment as that you are never taxed on any gain until you sell. I think that everyone should have some Gold or Silver on hand as protection or insurance if there is a failure of major consequence.
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