Calculation on Whether to Exit Investment?

[controlledmonkey1]

Hi all,

I took over from my wealth advisor a couple years ago and have remained in a few investments still that I eventually want to exit. However, I want to make sure I am thinking about the calculation correctly of when is optimal time to exit with taxes.

I am trying to get down to 3 simple vanguard ETF's eventually, so know I need to get out of these at some point.

In the 3 funds I am trying to get out of (that have high expense ratios), I have current aggregate gains of $8,836,which would imply at 20% corporate gains tax I would have to pay $1,767.

Alternatively, b/w the expense ratio and tax cost of holding these funds I pay $453 to keep holding.

Obviously it would be ideal to sell these at a loss, but I do not know when they will go back down.

It would take ~4 years for the annual cost to outweigh the current capital gains tax amount. But even after 4 years I could still be in the green and up.

Should I just sell them now and bite the tax payment? It is rather inconsequential to my overall financial picture and would like to have my portfolio simplified (Age 31, net worth b/w all accounts of ~$1mm).

Thanks.

[jebmke]

I used "runts" like this to fund charitable donations so I didn't have to eat the gain & tax. Just another option to consider.

[retired@50]

Obviously it would be ideal to sell these at a loss, but I do not know when they will go back down.

Huh?

Making money, and thus, paying capital gains taxes, is sort of the point, isn't it?

Take the win. Sell the positions, pay Uncle Sam, and in a few years you'll have forgotten all about it. Move on with life.

If you want to read more about it, see the wiki.
https://www.bogleheads.org/wiki/Paying_ ... itch_funds

Regards,

[Mullins]

In the 3 funds I am trying to get out of (that have high expense ratios), I have current aggregate gains of $8,836,which would imply at 20% corporate gains tax I would have to pay $1,767.

Assuming the 8836.00 capital gain when added to your ordinary income has you in the 20% cap gains tax bracket.

Obviously it would be ideal to sell these at a loss, but I do not know when they will go back down.

The reason this doesn't make sense is because you'd need to lose all your profit and cut into your cost. Maybe if you've reinvested dividends there are some lots which may have losses. To that extent it would offset your gains. You'd need to review your unrealized losses.

Should I just sell them now and bite the tax payment? It is rather inconsequential to my overall financial picture and would like to have my portfolio simplified (Age 31, net worth b/w all accounts of ~$1mm).

Judging from what you've written, sure. Cap gains of 8836.00 probably isn't going to affect you much.

[watchnerd]

Hi all,

I took over from my wealth advisor a couple years ago and have remained in a few investments still that I eventually want to exit. However, I want to make sure I am thinking about the calculation correctly of when is optimal time to exit with taxes.

I am trying to get down to 3 simple vanguard ETF's eventually, so know I need to get out of these at some point.

In the 3 funds I am trying to get out of (that have high expense ratios), I have current aggregate gains of $8,836,which would imply at 20% corporate gains tax I would have to pay $1,767.

Alternatively, b/w the expense ratio and tax cost of holding these funds I pay $453 to keep holding.

Obviously it would be ideal to sell these at a loss, but I do not know when they will go back down.

It would take ~4 years for the annual cost to outweigh the current capital gains tax amount. But even after 4 years I could still be in the green and up.

Should I just sell them now and bite the tax payment? It is rather inconsequential to my overall financial picture and would like to have my portfolio simplified (Age 31, net worth b/w all accounts of ~$1mm).

Thanks.

Sell, take profit, pay tax, re-allocate, move on with life.

[dcabler]

Is the account set up such that individual lots are tracked for tax purposes?

What I've done in the past to get out of what I didn't want anymore.
1. Immediately stop automatically reinvesting dividends/capital gains.
2. Pair up all lots that have losses with lots with gains such that the sale of both results in a net $0 tax
3. See what's left over and wait for the next correction to complete the deal, repeating #2
4. Otherwise, take the $3K loss carry over till it's done..

Cheers.