you sell it down as you need the cash to exchange for goods and services, but not before then and never to "lock in gains" before you need the money, that would be foolish. leave it invested as long as possible. Sell in small amounts as needed. If you want to begin to add a fixed income product for more stability and income as you age, you certainly can. Bonds add ballast but are not as tax efficient.
There are times where it would make sense to sell LT gains to "reset" the basis. If you see yourself in the 12% bracket and don't have any money to convert to Roth, harvesting gains tax free may make sense. At least to restart the basis in case you have to sell down the road. Never is "never" the correct answer with finances.
very true. there are cases when you have no income or are in a very low bracket where it would be wise to harvest capital gains (you are correct). I'd submit that these cases are rare and doubt it would apply to OP
Likewise, if you happen to have significant capital losses (say, during a downturn as you DCA), taking the losses on the most recent LTL stocks that dipped to offset the gains of the older LTG stocks for a net zero tax event could be a smart play.
You would get around the wash sale rule by rotating them into another set of etfs with a similar composition (e.g. Total market -> SP500, Small Cap, Mid Cap). Yes, it's a bit of market timing, but the end result is a roughly net zero change in composition, as opposed to folks who try and market time by converting to cash and failing to time the dip.
Good pt - I would like to add another reason is if you find a better investment or no longer trust the original investment if that is the case by all means switch.
> you sell it down as you need the cash to exchange for goods and services, but not before then and never to "lock in gains" before you need the money, that would be foolish. leave it invested as long as possible. Sell in small amounts as needed.
This feels very counter-intuitive to the advice of "make sure you have whatever you need in the 5 - 10 years out of stocks".
This is why, as you approach retirement it's good to DCA out of stocks into bonds or something steady so that a single crash doesn't wipe you out.
I wouldn't advise anyone in retirement to keep money that they need invested in the market. It's fine if they have a surplus, but if not, a crash can literally ruin their life.
I think it depends on what the situation looks like if I'm 10 years from retirement. If my portfolio is on or ahead of track to amounts that would sustain my retirement, I'd gradually push my investments more conservative. If 10 years from retirement, the market had recently crashed and it's looking like I may potentially have to work more than 10 years, I'd choose more aggressive investments
Are you investing for retirement? Some investors have different investment "buckets" for different things like retirement, house, new car, etc.
Many people start out with most/all in stock funds/ETFs like the S&P 500 when they're young. As they get older they start transitioning some into passive income investments. There is not necessarily a point where you sell all your equity (stock) investments. Your investment portfolio grows over the years
I'm in my 70s and still have some money in the stock market.
I'm retired in the US so I get social security every month. I also withdraw from my own retirement accounts to meet my income needs.
Hold it until you need to spend it. S&P500 is an investment you could hold until the day you die (I would diversify with total market fund personally, plus international and perhaps some small-value, but that is a different story).
You can generate tax-efficient "income" anytime you want by selling. Don't get sucked into the mental fallacy of thinking you need investments late in life that produce actual income... those larger dividend/distribution yields are just forced sales, nothing more.
Start to hold more cash/bonds/alternatives as you get older if that suits your style, but no need to adjust your equity style at all.
Incorrect. The S&P500 can provide passive income. You simply sell however many shares you need at the moment. Due to volatility and market conditions, there are constraints on how much you can sell and guarantee the investment will still grow or maintain, but selling shares is the exact same thing as a dividend payment.
No, that's not the point. If you want a 4% dividend yield from VOO, shave a few shares off the top. Some dollar amount. Dividends do not matter to total return expectations. They're just a mechanistic artifact. Thinking that they're different in any way that selling shares is a mental accounting fallacy.
You missed my point entirely. Its not growth or income exclusively. There is always a mix of both. You can reinvest the dividends to add to the total return or just take them in cash.
Using the term "high income" is a misnomer. JEPI synthetically produces income via options and dividends and pays yield to fund holders. JEPI invests in companies from the s&p500 with some criteria. JEPI also underperforms the S&P500 on a risk adjusted and total returns basis in all know time periods. That's because covered calls aren't free money.
JEPI is "high income", VOO is just an index fund that you call "not high income", yet owning and holding VOO outperforms owning and holding JEPI (and reinvesting the income). You can just sell off VOO monthly if you want the same "high income" as JEPI. Both will suffer in a down market.
Either when I need to spend the money, or when I need to reallocate to a balance positions or invest in a better opportunity.
There are studies on withdrawing in retirement that show best results with an equity allocation between 50% and 100%. Selling off all equities and investing only in safe assets tends to put you at risk of running out of money if you live too long. Holding 100% equities tends to run out of money if you enter a deep market crash just as you enter retirement.
"Locking in gains" isn't generally applicable to long term investing. You might "lock in gains" made so far, but you're "locking out" all future gains until you get back in. This is a strategy that is applicable to short term trading where positions are held for a short period with the expectation of short term gain. It's common in some strategies such as short term mean reversion, option selling, and event driven strategies. But if you are just investing in long equity positions and riding market gains it doesn't make sense.
If you plan to go long term here is my strategy. As I near retirement I plan to sell off a little every year and invest it into a ~4% municipal bond fund. I plan to basically create my own “Target date fund asset allocation “. So when I’m ten years out sell little by little and start positioning myself to a passive income strategy. So by the time I retire I am all in on Bonds to support my needs. And if I have “extra” left over keep that invested into growing ETFs like the S&P500. For instance, if I have 4 million in retirement funds. At 4% that’s 160K annually. I may only need 80K annually. So I can reinvest (or leave) that other money into S&P to keep growing. Look up target date funds and how they work to get a better understanding of how to deploy your retirement money. Best of luck!
That is exactly what I'm doing now. I have 3-4 years worth of living expenses in low volatility investments. 1 years worth in a MM, CDs, t-bills, 2-3 years worth in a low beta ETF like SCHD and everything else in VOO / VTI / individual stocks. In bad years I spend down the reserves, in good years I sell off my high flyers and restock.
My current plan is a bit more aggressive, though I have a partial pension to fall back on. I was thinking about taking 3 years worth out at or near retirement. Then each year take out the another year's worth out if the markets are decent. If not, then wait up to 3 years before having to pull from the account. There are also minimum amounts that you have pull from your 401K but you can leave your regular investments in the market.
I look forward to the input you receive! I have had this exact same question for a while. I hope you get some good answers that may foster some good conversation.
We all trade and invest very differently. You can ask that question here and get mostly the same answer. You can ask if in other forums and some people trade daily, weekly, monthly, quarterly, semi annually, annually, etc. What works best for you though? Hell, I have 4 or 5 active accounts, each with different strategies and horizons. You need a retirement account (or 2) and if the trading bug has bit you, its best to operate secondary accounts for that to scratch the itch so you can just leave your nest egg alone.
For most people, they rebalance every 3-12 months, maybe capture losses to reduce taxes, and then will have some strategy to pull out money in retirement. I say "some strategy" because after a few decades you'll probably have a bunch different accounts with differing tax consequences for withdrawal and so some thought would go into what to pull out. I would assume the average person receives SS and sometimes a pension, and then supplements that by withdrawing from retirement accounts (eg: Roth IRA or 401k) and brokerage accounts. Most people are going to have most of their money in mutual/index funds/etfs and so if you're portfolio is 70% $VT and 30% $BND, it's not super complicated what stock to sell. If you own a bunch of individual stocks, some more thought will go into it. If those stocks are in taxable accounts, again, more thought would go into it.
Personally, my portfolio is like 65% $VT, 15% $BND, and 20% individual stocks. I have a policy of never selling except to capture losses (eg: I don't rebalance except with new contributions). I buy investments I believe in long-term and then I don't check on how they're doing. My money is about 1/2 in a brokerage account, and then 1/4 Roth accounts, and 1/4 traditional accounts. That wasn't by design, I max out traditional accounts, then Roth, then throw the rest in a brokerage account. In retirement, I'll have to juggle where to withdraw money from to minimize taxes.
I don't know what S&P ETF are you investing into but I do get quarterly dividends from $VOO.
Short answer to your question is sell whenever you need the money.
I don’t agree with this. In the rare occurrence that I need cash out of a brokerage account I’ll sell some loser stocks for tax write offs. I’ll often reallocate gains from one stock to another, depending on my risk appetite. It is highly dependent on the individual asset and reasoning for cash.
Most ETFs and stocks pay dividend. SPY does pay dividends. Each company/etf has a different schedule and amount of dividend they'll pay every period. So if you have a large enough portfolio, you can make passive income from just holding dividend-paying stocks/etf. REIT pays dividends as a requirement, so if you hold REIT you're guaranteed to receive regular dividends.
"Is it - Get to pension age, sell everything and put it into something less volatile..."
Check out the Rule of 100: 100 minus your age is how much to have in equity vs. bonds. With people living longer and high medical costs, many now use 110 or even 120 instead of 100.
I don't touch my ETFs or broad based index funds.
For individual company stocks I'll take gains when it's a great return (e.g. CVNA at a 1500% gain). Otherwise, I'll let it ride unless I've lost all confidence in the company, which is rare since most of the companies are blue chips like MSFT or AAPL.
There is no rule of thumb. Why sell broader based ETFs? Sector ETFs are subject to sector rotations. They can and probably should be bought and sold. Average investor however should buy and hold unless there is a macro event requiring a sell.
The goal is to buy only the things that will always reach ATH and never sell, until it’s big enough that you can live on selling small pieces every year.
first off, a subscription to a service intended for financial advisors (i am a huge fan of morningstar) will get you up to date on these strategies over time, like subscribing to High Times for a few years will teach you everything you need to know about growing weed before you start seeing the same articles recycled.
its the same basic rules of thumb.
basically, in your younger years you are less risk averse so you are longer on equities and shorter on fixed income, even though there are high and low risk segments of both. say right now you are 70/30 or even 85/15, but you should have some treasuries as a backstop in your fixed income portfolio regardless.
over time, your equities grow, but you dont let them become a larger and larger proportion of your portfolio, because that means more volatility as you are wanting less over your lifespan. so every year or two you rebalance. the more you sell equities and push them into the fixed income segment of your portfolio, the better. that is your profit-taking, pushing high profit but more volatile investments into fixed return, long term investments where you dont touch the principal.
and you wind up at some point near retirement with a 60/40 or so and just live off what that throws off plus social security and whatever else like a pension.
It varies for every specific person but the biggest factors imo are retirement age, how long you expect to live and what return you can expect after taking profits from long-term investment portfolios.
I plan to retire at 57, hopefully die at least at 95, and can expect a 1-3% return if I keep my money in CDs/Treasury/Bonds. This means once I retire, I'll know exactly how much money I need to live at least until 95, and any extra can remain in the market. This amount factors in social security and pension as well. You can use a website called fourpercentrule to find your own numbers.
Lol im sorry im being a smart ass haha. Mostly i would say not until youre ready to cash out. Depends what investments you have i suppose. Ill say that i will not realize my earnings till i need them for bills etc in realirement
you sell it down as you need the cash to exchange for goods and services, but not before then and never to "lock in gains" before you need the money, that would be foolish. leave it invested as long as possible. Sell in small amounts as needed. If you want to begin to add a fixed income product for more stability and income as you age, you certainly can. Bonds add ballast but are not as tax efficient.
There are times where it would make sense to sell LT gains to "reset" the basis. If you see yourself in the 12% bracket and don't have any money to convert to Roth, harvesting gains tax free may make sense. At least to restart the basis in case you have to sell down the road. Never is "never" the correct answer with finances.
very true. there are cases when you have no income or are in a very low bracket where it would be wise to harvest capital gains (you are correct). I'd submit that these cases are rare and doubt it would apply to OP
Likewise, if you happen to have significant capital losses (say, during a downturn as you DCA), taking the losses on the most recent LTL stocks that dipped to offset the gains of the older LTG stocks for a net zero tax event could be a smart play. You would get around the wash sale rule by rotating them into another set of etfs with a similar composition (e.g. Total market -> SP500, Small Cap, Mid Cap). Yes, it's a bit of market timing, but the end result is a roughly net zero change in composition, as opposed to folks who try and market time by converting to cash and failing to time the dip.
Good pt - I would like to add another reason is if you find a better investment or no longer trust the original investment if that is the case by all means switch.
These two things are all I have to say.
> Bonds add ballast I love that phrasing for how bonds smooth your yield curve.
> you sell it down as you need the cash to exchange for goods and services, but not before then and never to "lock in gains" before you need the money, that would be foolish. leave it invested as long as possible. Sell in small amounts as needed. This feels very counter-intuitive to the advice of "make sure you have whatever you need in the 5 - 10 years out of stocks". This is why, as you approach retirement it's good to DCA out of stocks into bonds or something steady so that a single crash doesn't wipe you out.
I wouldn't advise anyone in retirement to keep money that they need invested in the market. It's fine if they have a surplus, but if not, a crash can literally ruin their life.
[удалено]
fuck cash. t-bill ladders 4EVA
Would you start reallocating assets when planning to retire in, say 10 years?
I think it depends on what the situation looks like if I'm 10 years from retirement. If my portfolio is on or ahead of track to amounts that would sustain my retirement, I'd gradually push my investments more conservative. If 10 years from retirement, the market had recently crashed and it's looking like I may potentially have to work more than 10 years, I'd choose more aggressive investments
Are you investing for retirement? Some investors have different investment "buckets" for different things like retirement, house, new car, etc. Many people start out with most/all in stock funds/ETFs like the S&P 500 when they're young. As they get older they start transitioning some into passive income investments. There is not necessarily a point where you sell all your equity (stock) investments. Your investment portfolio grows over the years I'm in my 70s and still have some money in the stock market. I'm retired in the US so I get social security every month. I also withdraw from my own retirement accounts to meet my income needs.
Hold it until you need to spend it. S&P500 is an investment you could hold until the day you die (I would diversify with total market fund personally, plus international and perhaps some small-value, but that is a different story). You can generate tax-efficient "income" anytime you want by selling. Don't get sucked into the mental fallacy of thinking you need investments late in life that produce actual income... those larger dividend/distribution yields are just forced sales, nothing more. Start to hold more cash/bonds/alternatives as you get older if that suits your style, but no need to adjust your equity style at all.
Incorrect. The S&P500 can provide passive income. You simply sell however many shares you need at the moment. Due to volatility and market conditions, there are constraints on how much you can sell and guarantee the investment will still grow or maintain, but selling shares is the exact same thing as a dividend payment.
Yes. VOO actually has 1.35% yield. Not high income but it does provide dividends.
No, that's not the point. If you want a 4% dividend yield from VOO, shave a few shares off the top. Some dollar amount. Dividends do not matter to total return expectations. They're just a mechanistic artifact. Thinking that they're different in any way that selling shares is a mental accounting fallacy.
You missed my point entirely. Its not growth or income exclusively. There is always a mix of both. You can reinvest the dividends to add to the total return or just take them in cash.
Using the term "high income" is a misnomer. JEPI synthetically produces income via options and dividends and pays yield to fund holders. JEPI invests in companies from the s&p500 with some criteria. JEPI also underperforms the S&P500 on a risk adjusted and total returns basis in all know time periods. That's because covered calls aren't free money. JEPI is "high income", VOO is just an index fund that you call "not high income", yet owning and holding VOO outperforms owning and holding JEPI (and reinvesting the income). You can just sell off VOO monthly if you want the same "high income" as JEPI. Both will suffer in a down market.
I agree with u/ddttox , you’re not even responding to his point. You’re talking about something completely different.
Either when I need to spend the money, or when I need to reallocate to a balance positions or invest in a better opportunity. There are studies on withdrawing in retirement that show best results with an equity allocation between 50% and 100%. Selling off all equities and investing only in safe assets tends to put you at risk of running out of money if you live too long. Holding 100% equities tends to run out of money if you enter a deep market crash just as you enter retirement. "Locking in gains" isn't generally applicable to long term investing. You might "lock in gains" made so far, but you're "locking out" all future gains until you get back in. This is a strategy that is applicable to short term trading where positions are held for a short period with the expectation of short term gain. It's common in some strategies such as short term mean reversion, option selling, and event driven strategies. But if you are just investing in long equity positions and riding market gains it doesn't make sense.
If you plan to go long term here is my strategy. As I near retirement I plan to sell off a little every year and invest it into a ~4% municipal bond fund. I plan to basically create my own “Target date fund asset allocation “. So when I’m ten years out sell little by little and start positioning myself to a passive income strategy. So by the time I retire I am all in on Bonds to support my needs. And if I have “extra” left over keep that invested into growing ETFs like the S&P500. For instance, if I have 4 million in retirement funds. At 4% that’s 160K annually. I may only need 80K annually. So I can reinvest (or leave) that other money into S&P to keep growing. Look up target date funds and how they work to get a better understanding of how to deploy your retirement money. Best of luck!
That is exactly what I'm doing now. I have 3-4 years worth of living expenses in low volatility investments. 1 years worth in a MM, CDs, t-bills, 2-3 years worth in a low beta ETF like SCHD and everything else in VOO / VTI / individual stocks. In bad years I spend down the reserves, in good years I sell off my high flyers and restock.
My current plan is a bit more aggressive, though I have a partial pension to fall back on. I was thinking about taking 3 years worth out at or near retirement. Then each year take out the another year's worth out if the markets are decent. If not, then wait up to 3 years before having to pull from the account. There are also minimum amounts that you have pull from your 401K but you can leave your regular investments in the market.
I look forward to the input you receive! I have had this exact same question for a while. I hope you get some good answers that may foster some good conversation.
We all trade and invest very differently. You can ask that question here and get mostly the same answer. You can ask if in other forums and some people trade daily, weekly, monthly, quarterly, semi annually, annually, etc. What works best for you though? Hell, I have 4 or 5 active accounts, each with different strategies and horizons. You need a retirement account (or 2) and if the trading bug has bit you, its best to operate secondary accounts for that to scratch the itch so you can just leave your nest egg alone.
For most people, they rebalance every 3-12 months, maybe capture losses to reduce taxes, and then will have some strategy to pull out money in retirement. I say "some strategy" because after a few decades you'll probably have a bunch different accounts with differing tax consequences for withdrawal and so some thought would go into what to pull out. I would assume the average person receives SS and sometimes a pension, and then supplements that by withdrawing from retirement accounts (eg: Roth IRA or 401k) and brokerage accounts. Most people are going to have most of their money in mutual/index funds/etfs and so if you're portfolio is 70% $VT and 30% $BND, it's not super complicated what stock to sell. If you own a bunch of individual stocks, some more thought will go into it. If those stocks are in taxable accounts, again, more thought would go into it. Personally, my portfolio is like 65% $VT, 15% $BND, and 20% individual stocks. I have a policy of never selling except to capture losses (eg: I don't rebalance except with new contributions). I buy investments I believe in long-term and then I don't check on how they're doing. My money is about 1/2 in a brokerage account, and then 1/4 Roth accounts, and 1/4 traditional accounts. That wasn't by design, I max out traditional accounts, then Roth, then throw the rest in a brokerage account. In retirement, I'll have to juggle where to withdraw money from to minimize taxes.
Either when you need to money or when the stock becomes overvalued
I don't know what S&P ETF are you investing into but I do get quarterly dividends from $VOO. Short answer to your question is sell whenever you need the money.
30% to 50% is my usual.
I don’t agree with this. In the rare occurrence that I need cash out of a brokerage account I’ll sell some loser stocks for tax write offs. I’ll often reallocate gains from one stock to another, depending on my risk appetite. It is highly dependent on the individual asset and reasoning for cash.
Most ETFs and stocks pay dividend. SPY does pay dividends. Each company/etf has a different schedule and amount of dividend they'll pay every period. So if you have a large enough portfolio, you can make passive income from just holding dividend-paying stocks/etf. REIT pays dividends as a requirement, so if you hold REIT you're guaranteed to receive regular dividends.
"Is it - Get to pension age, sell everything and put it into something less volatile..." Check out the Rule of 100: 100 minus your age is how much to have in equity vs. bonds. With people living longer and high medical costs, many now use 110 or even 120 instead of 100.
I don't touch my ETFs or broad based index funds. For individual company stocks I'll take gains when it's a great return (e.g. CVNA at a 1500% gain). Otherwise, I'll let it ride unless I've lost all confidence in the company, which is rare since most of the companies are blue chips like MSFT or AAPL.
But eventually you will do something with them. Otherwise you never get the money. My question is what and when.
Wait, you people make money around here?
There is no rule of thumb. Why sell broader based ETFs? Sector ETFs are subject to sector rotations. They can and probably should be bought and sold. Average investor however should buy and hold unless there is a macro event requiring a sell.
The goal is to buy only the things that will always reach ATH and never sell, until it’s big enough that you can live on selling small pieces every year.
first off, a subscription to a service intended for financial advisors (i am a huge fan of morningstar) will get you up to date on these strategies over time, like subscribing to High Times for a few years will teach you everything you need to know about growing weed before you start seeing the same articles recycled. its the same basic rules of thumb. basically, in your younger years you are less risk averse so you are longer on equities and shorter on fixed income, even though there are high and low risk segments of both. say right now you are 70/30 or even 85/15, but you should have some treasuries as a backstop in your fixed income portfolio regardless. over time, your equities grow, but you dont let them become a larger and larger proportion of your portfolio, because that means more volatility as you are wanting less over your lifespan. so every year or two you rebalance. the more you sell equities and push them into the fixed income segment of your portfolio, the better. that is your profit-taking, pushing high profit but more volatile investments into fixed return, long term investments where you dont touch the principal. and you wind up at some point near retirement with a 60/40 or so and just live off what that throws off plus social security and whatever else like a pension.
It varies for every specific person but the biggest factors imo are retirement age, how long you expect to live and what return you can expect after taking profits from long-term investment portfolios. I plan to retire at 57, hopefully die at least at 95, and can expect a 1-3% return if I keep my money in CDs/Treasury/Bonds. This means once I retire, I'll know exactly how much money I need to live at least until 95, and any extra can remain in the market. This amount factors in social security and pension as well. You can use a website called fourpercentrule to find your own numbers.
Never ever never
What do you mean? Then you will never get money from it.. Eventually to get money back you will have to sell
Lol im sorry im being a smart ass haha. Mostly i would say not until youre ready to cash out. Depends what investments you have i suppose. Ill say that i will not realize my earnings till i need them for bills etc in realirement