Key insights
- The post discusses strategies for managing funds to cover capital gains taxes when selling investments for profit. The main concern is how to set aside funds for taxes without missing out on potential investment gains. The discussion includes keeping a percentage of profits in cash or alternative investments like VOO to cover the tax liability at the end of the year. The overall tone suggests a cautious approach to profit-taking due to tax implications.
rookie question: do you always not reinvest a percentage say 20-40% of the proceeds whenever you make a sell for profit?
In other words, should I say at minimum keep 20% of every profit I gain in cash to prepare for taxes at the end of the year? or Are people just buying and selling throughout the year without putting cash aside for taxes?
And if not in cash, how do you keep a cushion for tax? Do you still keep it in VOO or something else?
My main concern is, I hardly ever take profits. At the start of the year I took profits to rebalance my portfolio a bit. Now some of my picks have done really well. I'm thinking about taking some profit but i'm unsure what to do with the profit. If I just take the profit and reinvest in something else, I risk it going down and then still needing to pay taxes on the profit (suppose I don't tax loss harvest later in the year).
I rambled a bit, but hopefully you get my question. How to plan smartly for tax burden at the end of the year.