PP mistake on stocks

[frugal]

Hello,

I had Amundi Index Fund and I closed the position to open ETF's for stocks, instead of the fund.

I had to pay 30% tax 

Stocks was the only asset with profits since I started the PP.

Now the PP is with a loss.

What can you tell me about this?




Tks

[buddtholomew]

You exchanged one fund for an ETF and incurred a capital gain. If its in a taxable account then taxes are due. If you had gains in the PP before you made the trade, then you still have gains after the trade. The only difference is that you have realized a portion of those gains by selling the fund. You tax-gain harvested. Many investors did the exact same thing at the end of 2012.

[frugal]

budd,

sotcks had profit but the other 3 assets NO!

I was taxed so at the end I have a lost.

I feel bad of my bad decision of selling the fund. In one or two months I could be negative on stocks and that would be the right moment to exit wihtout paying taxes. At that time gold or bonds would be performing better.

[buddtholomew]

OK, so you have an overall loss after paying taxes on the capital gains. Thats the teadeoff of rebalancing in a taxable account without offsetting with losses. You may have losses before year end to offset those gains. Why did you choose to sell the fund?

[frugal]

OK, so you have an overall loss after paying taxes on the capital gains. Thats the teadeoff of rebalancing in a taxable account without offsetting with losses. You may have losses before year end to offset those gains. Why did you choose to sell the fund?

hi Budd,

here in europe we don't have those 401k accounts ... all are taxable 28%!

I prefer ETFs to AMUNDI europe index fund.

[TripleB]

Frugal,

You might be able to use a trick that we use in the USA called Tax Loss Harvesting. Basically suppose that later this year, stocks are at a loss. You sell the ETF, "realize" the loss on your taxes this year and immediately repurchase a slightly different ETF.

In the USA, if you sell a stock at a loss and rebuy the same stock within 30 days, you can't write off the loss because it's considered a "wash sale." However, if you buy a different stock, then it's OK.

So for example, if you had an ETF of one index that was at a loss, you could sell it and immediately rebuy an ETF of a very similar index, and it would not be considered a wash sale.

Not sure how it works outside of the USA and I'm also not sure what ETFs you have access to that might qualify as different, but close enough.

[frugal]

TripleB TripleB TripleB


http://www.amundi.com/int/product/?isin ... 612&doc=FP

I had and AMUNDI EUROPEAN INDEX FUND, and Tax was paied with the close of the position.

How is that possible now?



Thank you so much!

[TripleB]

Frugal,

I was responding to your question of "suppose in 2 or 3 months there's a loss on the stocks because gold and bonds are the best asset class and you wasted money by paying taxes on the stocks at a gain, when really in a few months they are a loss."

The answer is you might be able to use the tax-loss harvesting trick I mentioned at that future point, if stocks go down later this year, or if they go down next year, relative to the price you bought them at.

You cannot use this trick to save money on taxes you already paid.

[frugal]

TripleB
TripleB
TripleB

for funds we pay at the moment we close the position.

For ETF's we pay at the end of the fiscal year.

Is something that I don't know much about yet.

Thank you for your opinion.

Regards

[smurff]

@frugal

In the USA we have an opportunity to collect all of the taxable events we have made all year, into one consolidated tax statement as of December 31.  (The actual filing of the statement happens between January 2 and April 15 of the following year.)  So whatever taxes we may have already paid, we can look backward during the year and use the tax rules to our advantage to reclaim pre-paid taxes or to lower the final total taxes due that year. 

Also in the USA we can anticipate ways to pay lower taxes by looking forward and timing our buy-sell transactions in ways that yield lower taxes than they might if transactions are viewed in isolation.  That's what tax-loss harvesting is.

I do not know if this is possible in Portugal or in other countries, since each nation has different tax laws.

[frugal]

I'll check it!