Quote:
Originally Posted by Boomer
As you probably know, nobody knows.
My only advice has nothing to do with that rocket ride investment of your dreams……..
When you decide what you want to buy, just be sure to keep a moat of cash around the stocks. With money markets and CDs being better than they have for many years, that has been much easier to tolerate in 2023. But even when that “safe” ROI drops, hold on to some of that cash……..
Maintaining a moat of cash makes sure you will not find yourself in the position of having to sell stocks to pay taxes.
In fact, if you do not already know how taxes can affect you, especially if now retired, learn the basics, so you are, at least, aware and know how to move those chess pieces. You might need to know about cap gains, IRMAA, conversions to Roth, RMDs, QCDs, and more.
My favorite CPA retired a very long time ago, but we used to talk about what he called, “Trying to Free Your Money from Its Prison.” (That was when I was doing conversions to Roth.)
That “Prison Effect” also happens with highly appreciated stocks held outside of retirement accounts. There those fat stocks sit, sometimes having been growing for decades, albeit rather slowly sometimes……..
For buy-and-hold dividend investors, such stocks can be taunting and daunting behind those prison bars because the minute you sell, their cost basis kicks in and cap gains takes its money and runs. Such investors often have been consoling themselves with dividends though — still taxable but not as bad as watching the profit on a sell dwindle significantly due to the cap gain.
Oh well, here I am, going on and on about being aware of taxable events when it comes to making money in the market when you did not even ask about that. I could write a bunch more on the topic but I need to get on with my real life today.
Anyway, my point is (finally) to look at the big picture when it comes to your investment decisions. If you do not know, at least, a little about the vocabulary of taxes, look up some things in preparation for a discussion with a CPA….
CPAs are paid for their time and not for how much of your money they can keep under their management. There are “advisors” out there (lots of them) who will never bring up taxes, saying they do not give tax advice.
And, if you are doing your own investing, and saving that 1% “advisors” can get — whether you are up or down — please do not forget to learn everything you can about taxable events and hire a CPA to make sure you have it right. Don’t be penny-wise and pound-foolish when it comes to hiring tax advice…….
There is more to the ROI than just the face value of a ,portfolio.
I wish you well — and I am liking this discussion, futile though it may be…….still fun to read.
Boomer
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When I wrote this, it wasn’t a guess, it was a fact. Months ago, the writing was on the wall but I wouldn’t want to make that prediction online. Now, today, if you didn’t make the move a while back, you missed out on some huge gains, but it’s not over. Every day, money market yields are dropping while certain sectors are booming. If you are comfortable making 3-4% off your money market funds, then stay and don’t look at the rest of the market.
Does this market have legs to continue expanding? Good question. If I feel that the tide has turned and the future has issues brewing, it takes me 5 seconds to sell and put my money into something else.
Your point about taxes is a good one. That’s why I never buy managed funds, always buy index funds. Managed funds over time never do as well as index funds and they managed funds have much higher expenses as well as a bigger tax bite. Check out a managed funds turnover rate. Working with friends, I’ve seen some of their managed funds have turnover rates over 400%, which every year, you will be paying taxes on this overhead. When investigating managed funds, there are hidden costs that are above the quoted expense cost, most real costs are over 2x the quoted expenses cost.
All of my daily/monthly purchases/selling goes on in my non-taxable accounts that have no bearing on my yearly taxes, and my taxable accounts have been invested in index funds for almost 2 decades without selling a share, just living off the dividends.