Tax loss harvesting.

Discussion in 'Share Investing Strategies, Theories & Education' started by sfdoddsy, 9th Apr, 2020.

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  1. sfdoddsy

    sfdoddsy Well-Known Member

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    More by accident than anything else, I sold a bunch of shares during the year for significant capital gains. I hadn't held on to them long enough to qualify for the CGT discount.

    So I'm looking a hefty CGT bill.

    At the same time I've obviously had significant capital losses.

    So I'm doing some tax loss harvesting and have sold a portion of the portfolio I feel least confident about going forward.

    I pondered just holding the loss in cash to offset the CGT, but fairly obviously a smarter thing to do is buy straight away when everything is down.

    I'm curious how others approach this. Do you buy the thing doing well (knowing it has already gone up), or buy the thing doing badly (hoping mean reversion will work).

    So in the current situation, do you buy VAS (still down 28%), VGS (now down 12%), IOO (now only down 7%).

    I've chosen VDHG as it is somewhere inbetween.
     
  2. Islay

    Islay Well-Known Member

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    I buy according to my plan @sfdoddsy. So if my plan was to buy 50% VAS and 50% VGS then that is what I would buy. Always follow my plan. I think VDHG as a long term passive holding is hard to beat. All just my opinion of course:)
     
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  3. Zenith Chaos

    Zenith Chaos Well-Known Member

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    It makes sense to sell what has fallen the least to buy what has fallen the most. However, you should be constrained by your asset allocation.

    For these reasons I sold VGS to buy VGAD (I now have currency heading, which isn't free and is a risk if AUD falls further) and sold less loved LICs at premiums (that hadn't fallen as far as VAS), to buy VAS. My AUD / international allocation remains the same

    You can safely tax loss harvest via the following:
    VAS <-> A200 <-> STW <-> IOZ
    VGS <-> IWLD
    VGAD <-> IHLD

    You could also sell everything and buy something like VDHG if you want to outsource rebalancing and asset allocation.

    To a lesser degree, as they are slightly different, you could sell / buy:
    MLT <> BKI <> ARG <> AFI
    PMC <> PGF <> MFF

    I would NOT tax loss harvest to buy an instrument you Do NOT want to own.
     
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