Sell individual stock, or index fund

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acanthurus
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Sell individual stock, or index fund

Post by acanthurus » Sat Jun 23, 2018 8:57 pm

I have around $12k in harvested ST capital losses this year.

I have $100K cost basis in a fund at VG that is worth about $112k. I could sell the whole lot and buy something similar but not identical. I think I'd swap my Vanguard Developed Markets index for maybe total international or similar.

Alternatively I have several old stocks purchased in 2009 (pre-index days) that are highly appreciated. I could sell $18K of one stock that has a cost basis of $6k to utilize the loss. This would be a partial lot sale of the worst performing individual stock. $18K would be moved into a US total market index.

I am leaning toward the former to establish a higher cost basis on a larger sum of money to give better TLH opportunities in the future.

NW 1.3M, income 175k/yr but not stable, AA is 60/40 for now. No individual stock is >2.5% of my NW and I only have 5 individual stock left in my portfolio.

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LadyGeek
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Re: Sell individual stock, or index fund

Post by LadyGeek » Sat Jun 23, 2018 9:06 pm

This thread is now in the Investing - Help with Personal Investments forum (portfolio help).
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livesoft
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Re: Sell individual stock, or index fund

Post by livesoft » Sat Jun 23, 2018 9:08 pm

Sell the individual stock.
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averagedude
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Re: Sell individual stock, or index fund

Post by averagedude » Sat Jun 23, 2018 10:52 pm

Ive seen several posts about the ten commandments of investing. If i was creating my own list my number one commandment is: Thou shall buy asset classes, not individual stocks.

acanthurus
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Re: Sell individual stock, or index fund

Post by acanthurus » Sat Jun 23, 2018 11:06 pm

My question isn't about buying. I've been selling out of individual stock since 2012. It's about selling something to establish "1X" vs "6X" the amount of capital at a higher cost basis.

Given the historical volatility of the replacement assets (in this case VTI for the single stock replacement and VXUS for the international fund replacement), and my tax rate, I'm not sure selling the single stock is the better choice. Last year I pared down my individual stock holdings to take advantage of the 0% cap gains bracket and I might have been better off to reestablish my basis in my indexed holdings (I'd have to actually go run the numbers on that).

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Re: Sell individual stock, or index fund

Post by Fishing50 » Sun Jun 24, 2018 1:43 am

acanthurus wrote:
Sat Jun 23, 2018 8:57 pm

I have $100K cost basis in a fund at VG that is worth about $112k. I could sell the whole lot and buy something similar but not identical. I think I'd swap my Vanguard Developed Markets index for maybe total international or similar.
In tax gain harvesting, you can buy the same fund. That said, I'd sell the individual stock.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

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LadyGeek
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Re: Sell individual stock, or index fund

Post by LadyGeek » Sun Jun 24, 2018 6:58 am

The wiki has some background info: Tax gain harvesting
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Earl Lemongrab
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Re: Sell individual stock, or index fund

Post by Earl Lemongrab » Sun Jun 24, 2018 2:36 pm

Why do you want to waste those tax losses? Unless you have short term gains to use, then the better approach usually is to take them against ordinary income for the next four years. I would be pretty reluctant to use long-term gains in the situation.
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BL
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Re: Sell individual stock, or index fund

Post by BL » Sun Jun 24, 2018 2:45 pm

Earl Lemongrab wrote:
Sun Jun 24, 2018 2:36 pm
Why do you want to waste those tax losses? Unless you have short term gains to use, then the better approach usually is to take them against ordinary income for the next four years. I would be pretty reluctant to use long-term gains in the situation.
+1
Why not save 24 or more % ordinary income for a few years instead of waste the loss on saving 15% of unnecessary gains?

acanthurus
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Re: Sell individual stock, or index fund

Post by acanthurus » Sun Jun 24, 2018 3:15 pm

Yeah that's probably the correct answer.

It does bring up a question though: If I'm adding large amounts to taxable accounts each year, and aggressively harvesting losses, and can only use 3K per year carried forward against regular income... would there be a point you would say "enough" with accruing the ST losses to carry forward and start harvesting the LT gains?

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Re: Sell individual stock, or index fund

Post by bradpevans » Sun Jun 24, 2018 3:18 pm

acanthurus wrote:
Sun Jun 24, 2018 3:15 pm
Yeah that's probably the correct answer.

It does bring up a question though: If I'm adding large amounts to taxable accounts each year, and aggressively harvesting losses, and can only use 3K per year carried forward against regular income... would there be a point you would say "enough" with accruing the ST losses to carry forward and start harvesting the LT gains?
Why harvest the gains: because you need the money. Or maybe to buy something else

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Re: Sell individual stock, or index fund

Post by grabiner » Sun Jun 24, 2018 9:52 pm

Another thing you could do with the individual stocks is to donate them to charity. You shouldn't do this just for the tax benefit, but if you want to donate $5000 to a charity, donating $5000 of stock which you bought for $2000 is a good way to get rid of $3000 in long-term capital gains and still get the tax deduction.
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Earl Lemongrab
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Re: Sell individual stock, or index fund

Post by Earl Lemongrab » Sun Jun 24, 2018 11:59 pm

grabiner wrote:
Sun Jun 24, 2018 9:52 pm
Another thing you could do with the individual stocks is to donate them to charity. You shouldn't do this just for the tax benefit, but if you want to donate $5000 to a charity, donating $5000 of stock which you bought for $2000 is a good way to get rid of $3000 in long-term capital gains and still get the tax deduction.
It might be a good situation for a Donor Advised Fund too. Use a bunch of the appreciated shares and fund a few year's worth of donations.
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