Key insights
- A retail investor recounts accidentally selling their FXAIX shares and buying back fewer shares after a market dip. While they avoided some losses, the capital gains tax liability outweighs the gains, reinforcing the pitfalls of market timing. This highlights the potential negative consequences of impulsive trading decisions, particularly for retail investors.
Earlier this month I made my most popular post ever by far where we all had a good laugh at me for being a dumbass and accidentally selling all of my stock. As we all know, since then the market has been on a downturn. There's probably over a hundred comments (I just got a couple as I'm typing this!) on that post saying something like "wow you must've profited from this mistake, right?" And I wanted to go over the details to say, no, not really. At least, not in a way that matters:
For reference, what I bought and sold was FXAIX, which is just Fidelity’s S&P 500:
I sold 204.659 shares at $239.44 per share for a total of $49,003.55 at market close on March 2. I said “last night,” on the original post which is when it closed, but I had actually placed the sell order earlier in the week and didn’t realize until it went through that day.
I bought 171.429 shares at $232.29 per share for a total of $39,821.24 at market close on March 12. That left me with about $9,182 uninvested. I used $5,000 for house repairs and the rest will sit in a savings account until next year to pay off long-term capital gains.
The difference between my sale price and rebuy price was only $7.15 per share, which worked out to about $1,463 in avoided losses on the shares I originally sold. $1.4k is a lot of money to "save" from a dumb mistake (even if I bought way less than I sold), but I really don't feel like a winner. Definitely not worth the stress of now needing to owe almost four grand in extra taxes next year. Even if I had managed to wait and buy at $228.34 today with the same amount of shares that still only would’ve been $11.10 per share, or $2,272, a little over half of what I now owe in fucking taxes.
No lesson here other than goddamn I'm such a dumbass lol and also don’t try to time the market. Keep yo money in. The dip can keep dipping, but who knows? Probably not you or me. I also want to say no one ripped me too hard or anything which I appreciate, and a lot of you actually gave some good advice. No tax expert has any time to meet with me until after tax season, but I have one on the schedule next month to explore my options. I'll probably just need to pay off the long-term gains, but live and learn I guess.