Reallocate Your Portfolio without a Big Tax Bill
Are you worried about the stock market but don’t want to sell because you’d pay huge taxes? Today I discuss 5 ways to reallocate a stock heavy portfolio without triggering a serious capital gains tax bill.
A conversation with a client inspired this quick video Idea. And it’s timely. You may be heavily in stocks and are worried about a large market correction.
Here’s what you can do to “reallocate” your portfolio more conservatively with LOW tax consequences:
- If you have cash (i.e. money market type funds) in your portfolio right now, don’t buy any new shares with it! This is an obvious one.
- if you are adding to your account on a regular/systematic basis, add to cash not to stocks.
- If you have losers, consider dumping them.
- Reallocate inside a retirement account (e.g. 401k, IRA) where you can sell stocks without tax consequences.
- Trim slightly fund positions that have gained well above expected return – for example if you own a tech fund and it has far outperformed your other US stocks, foreign stock fund etc (chances are they will revert down to a more measured course anyway). This will generate some taxes but it could make sense considering.
I did not talk about strategies for RSUs, options, NUA and other tactics. But you can find those discussed in some articles I’ve written here:
Thanks for dropping by!
Related Topic: The New W4 conundrum – WTH!