I’m curious how others here go about investing in their personal non-retirement accounts, specifically with respect to selling positions and paying capital gains. Do you trade those accounts just as you do your retirement accounts, and accept the taxes because you figure you’re well ahead of a buy and hold strategy, or do you “coffee can” some or most of your investments and trade less frequently?
I realize that the answer may depend in part not only on one’s investment results but also whether they pay state taxes, and/or their tax bracket, etc. No wrong answers here, I’m simply curious how you think about this. Thanks in advance for your input.
If your cash account has many of the same holdings as your retirement accounts, then follow this rule of thumb. Every time you resize a position downward, check to see if it's in the cash account or not. If it is, and if it has lost money since you bought it there, sell it in the cash account. If it has gained, sell it in your retirement accounts. A few years ago I was able to realize quite a large capital loss this way.
Another tip: any time you want to donate to a charity or contribute to an IRA, donate/contribute the stocks that have appreciated the most instead of selling some stocks and donating/contributing the cash.
Yuval, I’m familiar with donating stocks to charity but I didn’t think it was possible to contribute stocks from a cash account into an IRA. Is there some method for doing this?
You're right. I was misremembering. I contributed appreciated shares to my private foundation, to my DAF, and to other charities, but not to a retirement account. I apologize for the error.