Investing

Stock Market $100,000 Gain

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  • Sep 23rd, 2020 4:23 am
[OP]
Jr. Member
Oct 21, 2017
157 posts
15 upvotes

Stock Market $100,000 Gain

If you have made over $100,000 in the stock market this year, should you realize the gains and wait for the next downturn/correction before buying again or should you continue with the buy and hold strategy and not time the market? Investing timeline is 10-20yrs.

What got me thinking about realizing the gain is because I was expecting a 10% return or less this year but instead had a gain of 50%+. That gain is similar to 5yrs of gains at 10%, instead it happened over 1yr.
7 replies
Deal Addict
User avatar
May 11, 2014
4011 posts
4245 upvotes
Iqaluit, NU
You are looking actually at two aspects of investments and what seems like making a decision that it has to be an all-or-none transaction

First, whether you should sell an investment or hold it shouldn't be based on the tax implication or not. The main factor should be whether the investment is worth it's merit holding onto.

Now the more complicated second part. What you do here is based on the first point whether it is worth holding onto. If say you actually want to hold onto the investment for future gains, you have the ability to realize some of the gains so that you can even out some of your gains. For instance, why not sell some of the holdings, realize some of the gains, then rebuy the stock?

Say for example you bought 10000 shares of Stock A at $25, and they are currently $35 equaling $100000 in unrealized gains. Say you believe in the long term growth of this stock. In this case, your ACB is $250000. If you were to sell 2000 shares at $35, you realize $20000 and pay income tax on $10000. Then you rebuy the 2000 shares at $35. Your new ACB is $270000. By doing this, you are not triggering too much capital gains at once and generally evening it out over time especially if you still want to invest in the longer term with the stock. Now KEEP IN MIND, if you believe a pullback are significant reduction is imminent, selling will likely be better off.

How you do the above is up to you, but regardless, keeping clear concise records of your ACB is important. And remember the reverse (superficial loss) is not allowed.
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[OP]
Jr. Member
Oct 21, 2017
157 posts
15 upvotes
If this happens again in the future and the investing timeline is 5-10yrs, would you realize the gains or continue with buy and hold?
Deal Addict
User avatar
May 11, 2014
4011 posts
4245 upvotes
Iqaluit, NU
curiousgeorge1000 wrote: If this happens again in the future and the investing timeline is 5-10yrs, would you realize the gains or continue with buy and hold?
You are still looking at the question wrong. Whether to hold it and how much should be based on if the stock is appropriate for your current investment need.

It depends on whether you want to hold onto your investment. How much you want to realize will also depend on your income.

Not sure what province you live in but take Ontario for an example.

https://www.taxtips.ca/taxrates/on.htm

For example, if your annual income is $40k, realizing 100k gets you an additional 50k in taxable income. This can jump you from 20.05% tax bracket to 33.89%.

But say you realize 20-30k per year, this will bump you up to 50-55k in income to around 29.65% with a good chunk at 24.15%. Keep in mind you may need cash in both situations to pay the CRA.

But by taking small realizations every year, you reduce the risk of realizing a huge amount at once at a higher tax bracket. But again, are you so sure that you will realize that much in capital gains?

The real answer is how much and when, we can't answer for you because I dont know anything about your financial situation. You could disclose and we could take a look? Also I usually dont recommend on assumptions of 5-10 years from now. For all you know, there might not be growth. I regularly review my investments and recommend you do so to.

Always ask yourself first whether the investment is still relevant in your portfolio. Then look at tax strategy. You can't make a blanket strategy as it depends on the situation. And regardless what strategy is deployed, depending on your investment outcome may not end up working in your favour.
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Newbie
Jul 22, 2018
68 posts
34 upvotes
I don't think you should look at % return as the factor of pulling money out. If you need the money and see a better use for it ya sure.

If you can read the future by all means go ahead and time the market, or if you feel uncomfortable it is your money in the end of the day.

I wouldn't recommend it if you believe in the long term outlook.
Sr. Member
Oct 21, 2016
759 posts
509 upvotes
Made over 100k this year in gains but some of that has been erroded in the last two weeks , holding longterm in my registered accounts so no point selling.
Jr. Member
Mar 17, 2015
173 posts
48 upvotes
North York, ON
Shaun80 wrote: Made over 100k this year in gains but some of that has been erroded in the last two weeks , holding longterm in my registered accounts so no point selling.
How long have you been investing?

TFSA or RRSP? Stocks or ETFS ? or Mix ?
[OP]
Jr. Member
Oct 21, 2017
157 posts
15 upvotes
Cocoboy1993 wrote: How long have you been investing?

TFSA or RRSP? Stocks or ETFS ? or Mix ?
1yr of ETF investing in TFSA, RRSP, and non-registered accounts.

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