5 ms·

So sell some shares. It can be better than a dividend for tax purposes. This is a common topic at the annual meetings, and Buffett has addressed it in detail be

by derf_ 10y ago

So sell some shares. It can be better than a dividend for tax purposes. This is a common topic at the annual meetings, and Buffett has addressed it in detail before: http://www.fool.com/retirement/2016/12/02/warren-buffetts-strategy-to-get-income-from-any-st.aspx http://www.fool.com/retirement/2016/12/02/warren-buffetts-st...

walshemj 10y ago
What about the cost of the trade you don't pay to receive dividends. And in the UK if you have your investments in an ISA or stay under your personal allowance (5k£) - the UK is a little more sensible when it comes to tax on investments.
- derf_ 10y ago
  BRK.B shares currently trade around US$160ish/share. The dividend equivalent to selling even a single share would incur $24 in taxes (15%), and the transaction fee for a discount broker is around $7 or $8. So unless the shares have tripled since you bought them, which would have had to have been in 2003 or prior, you're coming out ahead in the US after only one share (savings on long-term capital gains taxes exceed the transaction fee cost). If you sell two shares at a time, it gets you back to 1997. Yes, tax-advantaged accounts are a different question, but Berkshire can't pay a dividend to just "the people who need money in a tax-advantaged account". If you want a smaller impact from fees, make fewer, larger transactions. It's not like this requires particularly large sums. At 7 shares per transaction you're already under the industry average stock index fund expense ratio (0.76%), and unlike those funds, that's a cost that's incurred once on just the shares you sell, not annually on your whole investment. People pay higher (relative) fees to withdraw cash from an ATM.
  - kristianp 10y ago
    > US$160ish/share. The dividend equivalent to selling even a single share would incur $24 in taxes (15%), You aren't taking the purchase price of that share into consideration. If you bought the share at $140, your profit is only $20, and the tax on the equivalent dividend would only be $3. What's the equivalent CGT on that $20 profit?
- tacostakohashi 10y ago
  Conversely, if you get dividends but do want to keep the money in the market, then you pay for the cost of a trade (or trades, for a portfolio) to buy more shares. Frankly, I think the Berkshire approach, or at least companies that offer a dividend reinvestment plan, makes a lot of sense. For the average investment, dividends are fiddly, modest amounts of income that you just need to do tax paperwork for and then deal with reinvesting. Much more convenient to do nothing during the accunulation phase of your wealth building, then sell shares when you want the money back.
- valuearb 10y ago
  Really, you're worried about paying a $7 transaction fee to unlock a few thousand dollars in equity value?

by derf_ 10y ago

walshemj 10y ago

What about the cost of the trade you don't pay to receive dividends. And in the UK if you have your investments in an ISA or stay under your personal allowance (5k£) - the UK is a little more sensible when it comes to tax on investments.

derf_ 10y ago
BRK.B shares currently trade around US$160ish/share. The dividend equivalent to selling even a single share would incur $24 in taxes (15%), and the transaction fee for a discount broker is around $7 or $8. So unless the shares have tripled since you bought them, which would have had to have been in 2003 or prior, you're coming out ahead in the US after only one share (savings on long-term capital gains taxes exceed the transaction fee cost). If you sell two shares at a time, it gets you back to 1997. Yes, tax-advantaged accounts are a different question, but Berkshire can't pay a dividend to just "the people who need money in a tax-advantaged account". If you want a smaller impact from fees, make fewer, larger transactions. It's not like this requires particularly large sums. At 7 shares per transaction you're already under the industry average stock index fund expense ratio (0.76%), and unlike those funds, that's a cost that's incurred once on just the shares you sell, not annually on your whole investment. People pay higher (relative) fees to withdraw cash from an ATM.
- kristianp 10y ago
  > US$160ish/share. The dividend equivalent to selling even a single share would incur $24 in taxes (15%), You aren't taking the purchase price of that share into consideration. If you bought the share at $140, your profit is only $20, and the tax on the equivalent dividend would only be $3. What's the equivalent CGT on that $20 profit?
tacostakohashi 10y ago
Conversely, if you get dividends but do want to keep the money in the market, then you pay for the cost of a trade (or trades, for a portfolio) to buy more shares. Frankly, I think the Berkshire approach, or at least companies that offer a dividend reinvestment plan, makes a lot of sense. For the average investment, dividends are fiddly, modest amounts of income that you just need to do tax paperwork for and then deal with reinvesting. Much more convenient to do nothing during the accunulation phase of your wealth building, then sell shares when you want the money back.
valuearb 10y ago
Really, you're worried about paying a $7 transaction fee to unlock a few thousand dollars in equity value?