3 ms·

Exactly. It's far from obvious whether it's better to be 25% poorer with diversification.

• sokoloff 10y ago
  But you're not 25% poorer, because your basis is now stepped up. In order to access the value of your current shares, you're going to pay the taxes. You either have $100 on paper and owe $25 on it, or you have $75 on paper and owe $0 tax on it. Unless you think the tax rate is going to be lower in the future, once you've hit the long-term capital gains threshold, I don't see a reason to believe that paying taxes now and switching investments is worse than holding investments and paying all the taxes later.
  • harryh 10y ago
    The longer you can put off paying taxes the longer you can keep that portion of the money and earn a return on it.
    • redcalx 10y ago
      There's also an annual allowance (in the UK anyway), so you can sell enough to make 11k (approx.) profit a year before capital gains tax kicks in.
    • ChuckMcM 10y ago
      Yes and no. If you hold a stock you avoid paying taxes on it and if that exact stock goes up, you "win" because you get more for it later. However there is no way to get a "return" on the capital that is tied up in the stock in some other way without some shenanigans. One dubious way was taking a loan out at the full value of the stock (stock is collateral) and then using the proceeds from the loan to invest in other funds. Back when day trading was "the thing to do" I met a guy who was full of these schemes and like the mortgage crisis later, when the crash came I'm not sure how they unwound, even if they did.