Good answers!
This is really tough and I have a solution that I got from windsurfing and watching the action of the waves...
2.Not selling winners because I don't want to pay capital gains tax. Sell them when they're way up, and pay the tax. There's a good chance that within the next 12-24 months they'll be well below where you sold, and you can buy them back cheaper.
3.On the other hand, if a stock has done really well, and seem like it still has a great future, just let it run. Don't sell. Compounding is a wonderful thing. It should NEVER be an "all or nothing" issue.
Sell SOME and let the rest ride. IF there is a big decline after you took some profits, then you can buy the shares back to ride up and sell again. I do this often and it seems to be how I beat the indexes without leverage or extra risk. In fact, the cash reduces portfolio risk.
Others sell covered calls but I don't like tying up the capital in a stock. It is much more tax efficient to sell some that has capital gains, pay the tax and then buy it back if it declines which locks in the lower tax on capital gains rates. Considering I don't see anyone eliminating or lowering taxes "on the rich" which for half the country is anyone not in credit card debt that also owns stocks.... paying SOME of the tax now makes some sense.
Consider if you get Newsom and he brings California's method of treating capital gains as ordinary income to the Federal level... suddenly your taxes due could double.
Some say limit a stock to 4% of your equity portfolio but that can have you taking profits in stocks like GOOGL, MSFT, NVDA, LRCX, AMAT, etc. too soon so I generally pick a handful that I'll let go to 10%... and you really need about 20 stocks. |
