If no capital gains tax, will you change investing?

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acegolfer
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If no capital gains tax, will you change investing?

Post by acegolfer » Thu Jan 01, 2015 8:32 am

I think many BH are long term buy and hold type investors. I think one of many reasons is because we pay capital gains tax and transaction costs.

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iceport
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Re: [Poll] If no capital gains tax, will you change investin

Post by iceport » Thu Jan 01, 2015 11:04 am

My biggest trading event is an annual re-balancing when I deploy the year's Roth IRA contribution. Even with 37.5% of the portfolio in a taxable account, capital gains taxes and transaction costs (already zero) are absolutely not one of the reasons why I am a buy-and-hold investor.

The only thing I would do differently is re-balance out of Total Stock Market, which has been bouncing back and forth over my re-balancing band for a while. I'll put up with a reasonable overweight rather than trigger cap gains while I'm working.

—Peter
"Discipline matters more than allocation.” ─William Bernstein

livesoft
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Re: [Poll] If no capital gains tax, will you change investin

Post by livesoft » Thu Jan 01, 2015 11:06 am

I already don't pay capital gains taxes and have no transaction costs, so I would not change a thing.
Last edited by livesoft on Thu Jan 01, 2015 1:48 pm, edited 1 time in total.
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BlueEars
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Re: [Poll] If no capital gains tax, will you change investin

Post by BlueEars » Thu Jan 01, 2015 12:16 pm

I don't have tax consequences with my holdings. Transaction costs are minimal, just bid-ask spreads.

I can say confidently that tax consequences have had a major impact on my investment strategy. I was quite a different investor before tax consequences went away.

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grabiner
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Re: [Poll] If no capital gains tax, will you change investin

Post by grabiner » Thu Jan 01, 2015 5:09 pm

I would rebalance fully if there were no capital-gains tax. I would still prefer index investing and a stable allocation, and the elimination of capital-gains tax would actually improve that.

For example, when I bought my home in 2013, I sold stock only from Emerging Markets Index to make the down payment; this was the taxable stock fund in which I could sell with the lowest capital gain. I was thus slightly underweighted in emerging markets until I made new investments into that fund. With no capital-gains tax, I could have sold from multiple taxable funds to keep the same allocation.

(And I actually paid capital-gains tax; I have capital-loss carryovers, but I lived in NJ at the time, and NJ does not allow carryovers.)
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asset_chaos
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Re: [Poll] If no capital gains tax, will you change investin

Post by asset_chaos » Thu Jan 01, 2015 5:20 pm

My investment strategy would not change. But cost-free transactions would put my rebalancing bands to zero. Instead of having a rebalancing event every couple of years, I might rebalance a couple of times a year. Although, I could not say with certainty that I'd be better off.
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Texas hold em71
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Re: [Poll] If no capital gains tax, will you change investin

Post by Texas hold em71 » Thu Jan 01, 2015 5:38 pm

I would not become an active trading, market timer. No taxes or transaction costs would not suddenly mean I would become an expert market timer. So far (because I did not have taxable investments in 2009), I have been able to rebalance with new investments and by changing my 401(k) allocation. In a severe correction, I doubt that would be possible and then I would have to consider taxes for rebalancing but then I would have a lot of capital losses not gains.

I might keep a smaller emergency fund if I knew I could sell taxable without incurring taxes.

chaz
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Re: [Poll] If no capital gains tax, will you change investin

Post by chaz » Thu Jan 01, 2015 5:44 pm

No change.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

Johno
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Re: [Poll] If no capital gains tax, will you change investin

Post by Johno » Thu Jan 01, 2015 10:44 pm

If there *really* weren't any cg taxes, the right answer would probably be 'yes' unless you had very little in non-IRA or expected a very low tax bracket when withdrawing from the IRA. What you'd want to do is earn the tax deduction to put money in an IRA/401k, but then leverage your stock position in 'taxable' (now *not* taxable, for cg's) and go short stocks in your IRA. If you believed 'stocks are best for the long haul' that would mean gradually draining the IRA with losses on the short position, and turning it into non-taxable gains in 'taxable'. It wouldn't be a different stock allocation, just the previous allocation+X (perhaps using leverage) in 'taxable', with minus X in the IRA. This would be affected somewhat by dividends (still taxable) but probably the way to go in many situations, in the rather implausible IMO case of *no* capital gains tax (in the US anyway, some other countries don't have one)

That's already the way I am. My IRA's are pretty small, and it's not likely I'll ever liquidate most of the unrealized gains in my taxable. So any cg's I recognize wouldn't be recognized at all by my heirs (via basis step up), not just a timing issue. Thus I strongly resist recognizing cg's and to keep within my desired stock allocation I'm currently short stocks in my IRA (via stock index futures and selling call options on futures). The rub is non-US stocks where it's harder to trade futures in an IRA (can't with my broker) and inverse ETF's on foreign stocks are more costly, not necessarily worth it if you have to hold them a long time.

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joe8d
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Re: [Poll] If no capital gains tax, will you change investin

Post by joe8d » Thu Jan 01, 2015 10:56 pm

I would favor some kind of "Capital Gains Holiday" that would allow movement from one fund to another,within a certain time frame,without taxation.
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rob
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Re: [Poll] If no capital gains tax, will you change investin

Post by rob » Thu Jan 01, 2015 11:00 pm

Sure it would... I would force cap gains to be realized each year in prep for when the rules changed again :-). I would probably move some savings from tax deferred to taxable rather than paying tax later..... zero is hard to beat :-)
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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CABob
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Re: [Poll] If no capital gains tax, will you change investin

Post by CABob » Thu Jan 01, 2015 11:34 pm

I'm not sure how to put this into the poll response, but, I have some ( non-BH) individual stocks that are long term holdings with unrealized capital gains and if there were no cap gain tax I might be more inclined to sell them which would make my answer "yes". But after I sold them I expect that I would be back to 100% BH portfolio and would expect that I would again be my boring self.
Bob

Alex Frakt
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Re: If no capital gains tax, will you change investing?

Post by Alex Frakt » Thu Jan 01, 2015 11:39 pm

Locked. Speculating on tax policy is off topic (trolling).

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