Enthusiasm for investing in an overpriced (?) equity fund

Pincher

:A

Glen_Clark wrote: »

But don't you have to forgo your CGT allowance for that year before you can build up a reserve of losses.?
I just switch from one ETF to a similar (costs £5.95 x 2 with x-o, very low spreads and no stamp duty)

Yes. you have to actually have a loss that year, but once you started carrying the loss forward, you can elect to use some of it or not for later years. I nursed £30k of losses for over fifteen years, and used it to good effect last year, when I sold a BTL.

In the OP's example, if the unit price drops, to say 200.00, he can harvest the loss in the subsequent tax years, if he wants to.

The same goes for gains. You don't take gains willy nilly. You structure your profit take to maximise the tax allowances. I could sell my HSBC shares now, and pay higher rate tax this year, but why would I want to? Am I a masochist?

Anticipating 2018 to be a massacre, and might be a loss generating year.
It's mainly the dead beat shares that you think will go nowhere, and pays no worthwhile dividend. Clear them out in years you think will be lousy.

Even in death, their sacrifice shall not be in vain. :A

bigadaj

Pincher, are you Donald trump?

Pincher

bigadaj wrote: »

Pincher, are you Donald trump?

No, I pay taxes. Damn it.

http://www.independent.co.uk/news/world/americas/us-elections/donald-trump-tax-return-1995-losses-avoid-paying-leak-times-a7341196.html

That's carrying over your losses on a GRAND SCALE.

Glen_Clark

Pincher wrote: »

:A

Yes. you have to actually have a loss that year, but once you started carrying the loss forward, you can elect to use some of it or not for later years. I nursed £30k of losses for over fifteen years, and used it to good effect last year, when I sold a BTL.

In the OP's example, if the unit price drops, to say 200.00, he can harvest the loss in the subsequent tax years, if he wants to.

The same goes for gains. You don't take gains willy nilly. You structure your profit take to maximise the tax allowances. I could sell my HSBC shares now, and pay higher rate tax this year, but why would I want to? Am I a masochist?

Anticipating 2018 to be a massacre, and might be a loss generating year.
It's mainly the dead beat shares that you think will go nowhere, and pays no worthwhile dividend. Clear them out in years you think will be lousy.

Even in death, their sacrifice shall not be in vain. :A

Yes I realise that. But, say you have £20k of losses and £40k of gains, with CGT allowance of £10k. If you just sell the £20K of losses and book it you lose your £10k CGT allowance.?

Pincher

Glen_Clark wrote: »

Yes I realise that. But, say you have £20k of losses and £40k of gains, with CGT allowance of £10k. If you just sell the £20K of losses and book it you lose your £10k CGT allowance.?

Yes.

You have the choice of crystallising a gain this year, or not.
You also have the choice of crystallising a loss this year, or not.

You will have to decide a particular year is for harvesting your losses.

I had a really bad year around 2001, so it was a easy decision.

If I had crystallised a gain of £20k, and then lost £50k, that would have been really annoying. As it was, I just lost £30k.

If you are indeed a long term investor, it is entirely possible to postpone profit taking by a year, and dispose of some deadbeat shares in a designated loss year.

Once the loss is carried forward, you can just carry it forward forever. Next year, you will use the £10k allowance first, and dip into the loss reserve only if it's advantageous.

I could simply not sell a deadbeat share, and sell at a loss to reduce my gains in a particular year, but the money would be stuck in that share, not generating dividend, and might even lose more value.

Just another tool in your bag of tricks.

Glen_Clark

As I understand it in the case of £20k of losses and £10k of gains you can't sell £20k of losses and carry it forward if you are selling £10k of gains to use your CGT allowance. You could only carry forward your overall loss of £10k so you would lose your £10k CGT allowance
Is that correct?

bigfreddiel

AnotherJoe wrote: »

If you genuinely think it's overpriced, then why haven't you sold all your current units? If you believe the fund will drop significantly in price and that's putting you off buying, its illogical not to sell what you already have and then buy back later when it's cheaper.

If your argument is "but that would be market timing" , well exactly, and so is not buying now.

Sorry you are wrong on two counts

1 you miss out on dividends if you sell and wait to buy back.

2 research has shown that lump sum investments at the peak of a market, just before a crash still does better over the long term than your sell and buy strategy.

Cheers fj

Pincher

Glen_Clark wrote: »

As I understand it in the case of £20k of losses and £10k of gains you can't sell £20k of losses and carry it forward if you are selling £10k of gains to use your CGT allowance. You could only carry forward your overall loss of £10k so you would lose your £10k CGT allowance
Is that correct?

I am saying don't crystallise the £10k gain, by choice, in the year you decide to harvest losses. Yes, you lose the £11,100 CGT allowance for the loss harvesting year.

I have already crystallised gains of ~£25k, outside ISAs, in 2016/17, so I will not be using 2016/17 for loss harvesting. I had no trades worth speaking of about three years ago, so I cleared out a little dead weight, and added to my loss carried forward.

I did all this, because I was expecting a big capital gains bill, AT HIGHER RATE, when I eventually sold my Buy To Let: and it was a doozy. Property improvement cost is also deductible, so 18 years worth of effort in terms of record keeping and carry forward finally paid off. I was paying 28% higher rate on the capital gains. So, every £1,000 of deductible, I was saving £280 in tax.

Amusingly, from April 2016, higher rate for capital gains is only 20%, unless it's property, so I used the (~£33k) deductible loss at a very good time.



If you are saying you are in a very good set up, and you are always getting £10k+ of gains every year, and never a bummer year, so you need to use the annual £11,100 allowance, EVERY YEAR, then there is no slack in your schedule for a loss year I'm describing.

AnotherJoe

bigfreddiel wrote: »

Sorry you are wrong on two counts

1 you miss out on dividends if you sell and wait to buy back.

2 research has shown that lump sum investments at the peak of a market, just before a crash still does better over the long term than your sell and buy strategy.

Cheers fj

Oh, I agree Freddie.

I was just pointing out that if you were of a mind NOT to invest (in effect your scenario 2) then you should also sell what you already had as its the same logic.