How should I switch from active to passive management in a taxable account?

I would like to switch my taxable account from active to passive management. I plan on utilizing a long-term buy and hold strategy with combination of diversified bond and equity index funds. I have about $230,000 to move. How can I reduce my tax burden while shifting assets between mutual fund companies?

Investing, Mutual Funds, Taxes
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December 2017

Even with a stock and bond combination, have you stress tested the allocation to see how much you can lose in a bear market? Look back to 2000 - 2002 and 2007 - 2009 and see how your projected allocation did. Does it hold up well enough to go with, and stick to a buy and hold strategy?

As far as repositioning any portfolio from one strategy to another. Timing is everything. Moving to a buy and hold immediately prior to a major market sell off could be devasting. By following the steps below you will spread out your sells and buys, and lower the risk of changing course at a bad time.

In investing it is said that fundamental analysis tells you what to buy or sell, technical analysis tells you when to buy or sell. In other words I would not just sell everything at one time and rush into your new strategy. You are now looking at realatively short term trading strategy. First let your winners run, no reason to rush out and sell. You can follow the the stock price up with a stop loss order that should trigger with a set back. For example if a stock is at $80 per share, set a stop loss at $75. That way if the stock continues up you continue to gain, and lock in a $75 price if the market reverses. If the stock goes to $85 raise your stop loss to $80. (Understand stop loss orders - they are not guarantees that you will get your stop price.)

Go to any number of web sites and compare a chart of your holdings one at a time to the security you will buy with the proceeds when it sells. This doesn't need to be rocket science, but if what you own is doing better than what you'll be buying, don't switch. When its momentum falls below the new candidate sell and switch.

Sell everything now that has a loss to offset the gains from your other holdings.

Taxes aren't the main issue, its maximizing your gains. No one has ever gone broke taking a profit.

December 2017
December 2017
December 2017
December 2017