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Portfolios 304: Strategies for Selling

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1.
What is the purpose of tax-loss selling?
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To minimize the amount of tax that you pay on an investment that you have sold for a profit. Tax-loss selling is a tax-management strategy.
2.
What is your basis composed of?
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Both of the above. Your basis is the combination of cash paid plus any dividends reinvested that have already been taxed.
3.
In which situation might you consider waiting to sell an investment?
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A big capital gains tax would hit you hard right now. Consider waiting until you can make up that hit with other tax savings.
4.
When might you consider waiting to sell an investment?
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If you've held the security for less than one year. You must pay ordinary-income taxes--which range from 10% to 35%--on investments you've held for less than a year.
5.
When should you think about selling at least part of an investment immediately?
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If it's throwing your asset allocation of out whack. The more this investment is messing up your asset allocation, the more benefit you'll gain (in terms of risk control) if you sell at least some of your investment.