Okay "newbs" --- time to start to put on your YEAR END REBALANCING hats.
What is that? It's a review of your portfolio with an eye to tax efficient trades IF -- BIG IF - your accounts are taxable. Tax trades inside a IRA shouldn't be concerned as all those trades are tax deferred. This is about people that will pay taxes on their gains (or taking tax losses) for 2014.
#1 --- Assets should be looked at as a "whole". If you invested 10,000 and you now have 12,000 you are AHEAD. Don't be afraid to sell something at a "loss" when overall you're way ahead!
#2 --- It is nearly impossible to have "everything" working well. When you look there are probably a couple "employees" (stocks) pulling most of the wagon... and one or two that are sitting on their ass.
#3 --- Rebalancing in taxable accounts is merely a look to see where you have gains (and maybe want to pare that down) and offset those gains with sales of losers. That way you offset the gains with loses and then have no or minimal taxes due.
#4 --- Don't forget to check the dividend EX dates before selling anything. It's stupid to hold something for months only to sell it a few days or weeks before it pays it's dividend.
#5 --- Don't SELL anything just because you have a nice gain in it... or to offset a loss. DO examine every holding with the thought process of where it's going long term. Just because I have a 20% gain in Altria (MO) doesn't mean I'm looking to capture that. I have to really like the shares long term -- and if I sold to lock in a gain in this name -- where else would I invest that money to make an even better gain going forward.
#6 --- Year end rebalancing accounts (TAXABLE) can be a chance to prune gains - offset losses - and expand your diversification.
#7 --- BEWARE the long term cap gain vs the short term cap gain!!! Long term is ONE YEAR AND ONE DAY.... short term is anything less than that! The tax rate difference can be huge. In my case the difference is 40% vs 20% (on LTCG)
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