Investing 102

[GregWeld]

Originally Posted by billscamaros

A question regarding capital gains ........

In your example of the stock that made huge gains, and now you want to rebalance your portfolio. Let's assume that you've owned this stock a few years. You sell off some shares off and buy shares in a different stock. So you have fees for the buying and selling. But do you pay capital gains now on the money that you made, or do you not have any gains since you have reinvested those dollars?

Excellent question -- with multiple answers - and my answer is going to give you just enough info so that you'll know that you should contact your tax pro BEFORE you sell!

There are three different ways to make a trade for accounting purposes and these ways must be selected at the time of the trade BEFORE the trade is "settled" (check with your brokerage for this info).

FIFO -- First In - First Out

LIFO -- Last In - First Out

Specified Lot

These "methods" can be used PER TRADE - and obviously affect your gain or loss. Because if you've bought shares over time - they're at different costs, thus have different gains/losses.

What I can't answer for you - is - say you bought 10 shares at $100 ($1000) and it's now worth $3000 -- and you just want to take your original $1000 out and leave the "Gain" ------- and that is what I think you're asking...... and I have to tell you I honestly do not know the answer.