buying shares in taxable

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
northstar22
Posts: 69
Joined: Mon Jul 16, 2012 8:30 pm

buying shares in taxable

Post by northstar22 » Sat Aug 02, 2014 10:19 am

I'm about to make my 3rd purchase in my taxable account. In previous purchases I chose a round number of dollars (e.g. $1000) to make the purchase. However, I was wondering if it would make my life easier in the future to buy a whole number of shares. I am going to buy Vanguard Total International. At the current share price of $28.52 (which will be slightly different at the end of the day Monday) I could buy, say, $1000 worth and get 35.0631 shares. I am trying to make things as simple as possible tax-wise when I eventually cash them in (probably in 30 years or so), so I don't re-invest dividends automatically in order to keep the number of tax lots to a minimum. Would it further simply things in this example to buy exactly 35 shares for $998.20? The price will obviously be much different when I cash them in, so using specific identification of shares would it be easier to pick 35 exact shares to sell at that time? Or does it not matter and I'm making things more complicated than they need to be?

livesoft
Posts: 62931
Joined: Thu Mar 01, 2007 8:00 pm

Re: buying shares in taxable

Post by livesoft » Sat Aug 02, 2014 10:27 am

No, it would not make things simpler to buy an integral (whole) number of shares.

When you sell in the future, it is very likely that you will sell a dollar amount anyways. As for identification of shares when you sell, you give a purchase date or purchase dates, or a range of purchase dates. The number of shares doesn't really factor into it.

For instance, suppose you want to sell $1000 worth in the future and the NAV is $51 a share. You would say "Please sell $1000 worth from the shares purchased on June 17, 2014." That will amount to about 19.6 shares which might leave another 15.xxx shares from that lot still in the account. (You won't know exact number of shares sold until after the fact when the NAV for the sale is figured out.)

If you need to sell more shares than purchased on a single date (because you need $50,000 or other amount), then you just pick dates until you have enough shares to sell to reach that amount of dollars.
Last edited by livesoft on Sat Aug 02, 2014 10:29 am, edited 1 time in total.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
Kosmo
Posts: 1285
Joined: Wed Sep 05, 2012 11:54 am
Location: Philadelphia

Re: buying shares in taxable

Post by Kosmo » Sat Aug 02, 2014 10:29 am

Tax lots are tracked for you. Even dividend reinvestment. The only reason to buy even lots is to make it easier if you're tracking tax lots on your own. Keeping things as simple as possible is actually investing the amount you want to on the date you want to and reinvesting dividends. Minimum work on your part.

User avatar
Dale_G
Posts: 3124
Joined: Tue Feb 20, 2007 5:43 pm
Location: Central Florida - on the grown up side of 81

Re: buying shares in taxable

Post by Dale_G » Sat Aug 02, 2014 10:33 am

There is no tax reason to buy whole numbers of shares. If 30 years from now you want to sell 121.456 shares of Total International, you can do so. Vanguard should (hopefully) keep track of each individual purchase.

Dale
Volatility is my friend

sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: buying shares in taxable

Post by sscritic » Sat Aug 02, 2014 10:33 am

It would be a good trick if you can pull it off. This is what I see when I go to Vanguard to buy a mutual fund:

Code: Select all

Fund name	Balance 	Buy in dollars 
What do you see?

I always like questions based on a false premise. I could be wrong this time, but I think not.

northstar22
Posts: 69
Joined: Mon Jul 16, 2012 8:30 pm

Re: buying shares in taxable

Post by northstar22 » Sat Aug 02, 2014 10:45 am

Thanks for the responses. I had a feeling that would be the case. I appreciate the explanations.

sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: buying shares in taxable

Post by sscritic » Sat Aug 02, 2014 10:54 am

Note that while buys are by dollar, sales are by shares.

So, if you want to by 30 shares and the price is roughly $20, buy say $700 worth. Say the NAV is 22.31 so you get 31.376 shares. The next day, sell 1.376 shares leaving you with 30. Voila!

Three caveats: I don't know if there is a minimum sale, but I don't think so. You will be subject to the frequent trading rules once you sell. You will also have a short-term gain or loss on your 1.376 shares.

I guess that is a good trick!

northstar22
Posts: 69
Joined: Mon Jul 16, 2012 8:30 pm

Re: buying shares in taxable

Post by northstar22 » Sat Aug 02, 2014 11:18 am

sscritic wrote:Note that while buys are by dollar, sales are by shares.

So, if you want to by 30 shares and the price is roughly $20, buy say $700 worth. Say the NAV is 22.31 so you get 31.376 shares. The next day, sell 1.376 shares leaving you with 30. Voila!

Three caveats: I don't know if there is a minimum sale, but I don't think so. You will be subject to the frequent trading rules once you sell. You will also have a short-term gain or loss on your 1.376 shares.

I guess that is a good trick!
I think that's where I got the idea, was that when selling I could choose shares. So I guess it turns out it could be an option, just not a very good one. Thanks.

Post Reply