Author Topic: Switching from DGI to Index Investing..Need Help!  (Read 1318 times)

svndezafrohman

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Switching from DGI to Index Investing..Need Help!
« on: October 26, 2016, 10:23:48 AM »
Hi I am switching from being a DGI to Indexing. I figured I do not have time to keep track of all my stocks and found indexing to be a much better match for me.
I have been selling my individual stocks and buying and index fund through fidelity.

I am planning to dollar cost average into index funds throughout the next 6 months.

My question is regarding some of my oil stock. I have taken a major hit with some of my stocks and lost about 15k in oil stocks.

1. Should i be holding for the oil rally or since now that i am indexing, is it better to take the loss and put my money back into the market with an index fund?

2.

matchewed

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Re: Switching from DGI to Index Investing..Need Help!
« Reply #1 on: October 26, 2016, 10:29:56 AM »
Sunk cost fallacy.

Tyler

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Re: Switching from DGI to Index Investing..Need Help!
« Reply #2 on: October 26, 2016, 10:32:04 AM »
Is this in a taxable account or a tax-deferred account?

You need to carefully plan for the tax impact of selling all of your individual stocks in a taxable account.  It's unintuitive, but taking a loss on your oil stocks now to offset the gains in the rest may actually save you money once you file your taxes. 

Don't take my word for it.  Taxes are complicated, and if you need help this is a situation where a fee-only tax adviser can definitely be worth the money.

svndezafrohman

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Re: Switching from DGI to Index Investing..Need Help!
« Reply #3 on: October 26, 2016, 10:35:13 AM »
Its all in a taxable account.

I think when i last checked, all my gains - losses (oil stock) = like net 1k gain.

So are you saying in order to offset these gains, selling now and investing in index will be better for long term? FYI, i am 29, so I still have a very long time horizon to keep my money in the market.

Tyler

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Re: Switching from DGI to Index Investing..Need Help!
« Reply #4 on: October 26, 2016, 10:42:18 AM »
Its all in a taxable account.

I think when i last checked, all my gains - losses (oil stock) = like net 1k gain.

So are you saying in order to offset these gains, selling now and investing in index will be better for long term? FYI, i am 29, so I still have a very long time horizon to keep my money in the market.

If I'm interpreting your numbers correctly, it sounds like you have a $15k loss in the oil stocks and a $16k gain in everything else.  If you only sell the winners, you will have to pay taxes on the $16k.  If you also sell the oil stocks, you will only pay taxes on $1k.  If you ultimately don't want the oil stocks anyway, that may not be such a bad deal.

That said, I'm not a tax adviser and every situation is different (state laws, long vs short term gains, etc).  I'd recommend consulting with a professional before simply taking my word for it. 
« Last Edit: October 26, 2016, 10:46:31 AM by Tyler »

NoStacheOhio

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Re: Switching from DGI to Index Investing..Need Help!
« Reply #5 on: October 26, 2016, 11:10:14 AM »
Its all in a taxable account.

I think when i last checked, all my gains - losses (oil stock) = like net 1k gain.

So are you saying in order to offset these gains, selling now and investing in index will be better for long term? FYI, i am 29, so I still have a very long time horizon to keep my money in the market.

So you're saying you have about 16K in (non-oil) gains and 15K in losses?

If you sell your winners, you'll be on the hook for taxes on the 16K gains. If you sell your winners AND your losers, you'll only have liability on the 1K net gain.

svndezafrohman

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Re: Switching from DGI to Index Investing..Need Help!
« Reply #6 on: October 26, 2016, 11:14:01 AM »
Yep, i have been leaning towards selling all my stocks to get rid of the headache and just start fresh investing in index funds.