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Meta Platforms Inc. (META $735.11)
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NVIDIA Corporation (NVDA $170.78)
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Shopify Inc. Class A Subordinate Voting Shares (SHOP $191.71)
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iShares PHLX SOX Semiconductor Sector Index Fund (SOXX $242.83)
I know that your usual response to selling when capital gains tax is involved is to sell down until you can sleep at night. Well, when I pay taxes I cannot sleep at night? What is the solution? Currently, with Shopify, Nividia, Meta etc, I have very high capital gains. Some are up to 10 or 12 percent of my portfolio. Should I just bite the bullet and sell down to a reasonable holding? or, just sell up through the end of my next tax bracket? I know these are impossible questions to answer. I had a worker going up on my roof the other day and I was surprised to see him having a very lively conversation with himself about how he should or shouldn't place the ladder. At first I thought this odd. But realising the danger of going straight up 30 feet in the air on a bouncy ladder, I thought it maybe not too stupid. Sometimes I feel that these are not the right questions to be asking you, as they are practically impossible to answer. But, maybe we are talking to ourselves like the ladder guy. You always end up having something useful to say, though, none the less.
thanks
Reviewing risk on ladders or stocks is never a bad idea. We can't however, offer much help on the tax issue. Some investors will not sell and just let things ride. We have broken our position size rule a few times. Some will buy puts and just eat the cost on those as protection. Put contracts will still (for a while) be less than payable taxes on big gains. Some will just borrow against positions. Taxes are deferred here but risks are not changed (and in fact increase with debt). Some more complex options might include shorting an index (such as SOXX to hedge an NVDA position). Selling to a the threshhold of a new tax rate is not a bad strategy, nor is selling over two calendar years (some in December, some in January). But, the easiest and less-risky solution is just to to say, 'hey, that was a good ride, I think I will sell 2% or 3% of my position'. Keep in mind if one still likes a stock, a 10% position sold to 8% might easily get back to 10% (if one is right on the stock call direction).
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in META, NVDA.