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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Investor2 who wrote (8010)	8/23/1999 12:17:00 PM
From: Alan Bell	Read Replies (2) \| Respond to of 15132

I2, There is no doubt that selling is simpler and will be the only strategy for many people. Selling is right for tax-deferred accounts, holdings with small gains and holdings with very high PEs. But for holdings with large accumulated capital gains, like MSFT, the situations is less clear. If one sells and rebuys at the same level a stock with a 10% basis, after 10 years of growth at 9%, one takes a 17% hit over just holding (or hedging and closing the hedge position at the same value it was entered.) It is easy to believe that the market has little upside. So to me shorting SPY or QQQ has minimal risk. But selling holdings with a negligible cost basis has a much larger risk. Let me propose the following hypothetical scenario - The market treads water at this level for a year or so. Maybe there will be short term corrections that are not buying opportunity. The rate cuts then take effect and slow the economy allowing the market to continue its bull run in a years time. In this case, one would have sold and gotten back in at the same level, thus losing the money paid in taxes. -- Alan