Hello, I ran two types of tax circumstances: case 1: start with 1000 earn 10% return pay 15% capital gains tax at end of year keep doing this for five years case 2: start with 1000 earn 10% annual return, but don't sell each year after five years, pay the 15% capital gains tax I thought case two would be a lot better. But it wasn't that different: 1518.93 vs. 1503 Even running it for 10 years, not much different: 2354 vs. 2260.98 (4 percent more) After 20 years, it makes a difference (14.8 percent more): 5868 vs. 5112 But I think if you insist on never selling, you could hold on to stocks that no longer are that great. Or you could get your portfolio imbalanced, setting you up for unwanted risks (like having all your money in stocks and never selling any to convert to fixed income instruments). So I think annual rebalancing is key.. the big benefit is being able to pay 15% instead of ordinary income tax rates. It's probably more important to keep your portfolio in tune than trying to never sell anything for 20 years. What do you guys think?
20 years is a very long time now when it comes to stocks, these days. Longer than it was 20 years ago. 20 years is a very long time now, compared to 20 years ago. Did I already type that? And how do you know what your tax situation will be in 20 years? Things (you, and the markets) change much these days, quickly and often. See the leaders of the world right now, those whom implement tax policies? They won't be there in 20 years. And neither might be the policies implemented this year. Don't try to nickel-and-dime your way out of tax. Just go with the flow. Speak with a CPA.
Another thought: Do your inv in a self directed Roth to begin with and make sure you live in a state that is less apt to get tax grabby later because of some emergency they run into like unfunded bureaucrat retirement plans. Good luck.