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I have $2.5k in a mutual fund that has a 30 minimum holding period - to avoid fees. It's been 30 days and I've netted about $150 on the position. I understand that the purpose of mutual funds is for long term investments. And I am interested in the long term investment.

However, if I wanted to sell and secure the $150 and immediately buy back $2.5k at a higher basis, would that be less effective than continuing to hold the position given the same scenario? Or does the higher cost-basis have far less effect than holding the original position?

Fueled By Coffee
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2 Answers2

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The difference between selling and rebuying vs holding is that selling now means you will have to pay taxes on the gain at the short-term capital gain rate, while if you hold more than one year you pay the lower long-term rate when you sell.

RaskaRuby
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It is my understanding the CGT in the US is much lower on long term holdings - here "long term" means more than one year.

If you keep resetting the cost basis like this you run the risk of falling into the higher rate when you finally sell. Why not simply sell $150 worth of the units and leave the remainder at the original purchase date and cost basis.

$150/2500 = 6%. Without further details, you are making a capital gain of approximately 6% on $150, which is about $9. A $9 declared capital gain is hardly going to break the bank. Once you have passed the one year threshold for long-term capital gains, then you can consider the benefits of rebasing the costs.

not-nick
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