selling shares of a mutual fund over time

I want to sell about half of my RETI mutual fund this year (about 20k
worth). These reit funds fluctuate wildly day by day (like, up 3% one
day, down 3% another day), so I plan to spread the sales over 2 or
more days (just as I do when I BUY funds....I spread the purchase over
a few days, or sometimes over a year or two when I'm DCA'ing). As
far as selling, of course, statistically, the greater number of days
that I spread out the sale, the greater chance that the average value
of the shares sold will be "less extreme" (though i realize there is
a tendency for long-term secular increase in shareprice). Anyway,
is there any down-side or anything else i should know about spreading
the sale over a few days versus just a one day sale? I've never sold a
mutual fund before, so I've never had to handle the tax issues. The
only thing i know is that selling on multiple days will make the tax
forms more complicated. Also, I've been reinvesting dividends, but
I never keep track of the share price at reinvestment (and that's true
for all 20 of my mutual funds, so when I sell, I will be relying on the
average share price provided to me by the MF company). p.s., I'm in
a low tax bracket. thanks.

Re: selling shares of a mutual fund over time

wrote:
> I want to sell about half of my RETI mutual fund this year (about 20k
> worth). These reit funds fluctuate wildly day by day (like, up 3% one
> day, down 3% another day), so I plan to spread the sales over 2 or
> more days (just as I do when I BUY funds....I spread the purchase over
> a few days, or sometimes over a year or two when I'm DCA'ing). As
> far as selling, of course, statistically, the greater number of days
> that I spread out the sale, the greater chance that the average value
> of the shares sold will be "less extreme" (though i realize there is
> a tendency for long-term secular increase in shareprice). Anyway,
> is there any down-side or anything else i should know about spreading
> the sale over a few days versus just a one day sale? I've never sold a
> mutual fund before, so I've never had to handle the tax issues. The
> only thing i know is that selling on multiple days will make the tax
> forms more complicated. Also, I've been reinvesting dividends, but
> I never keep track of the share price at reinvestment (and that's true
> for all 20 of my mutual funds, so when I sell, I will be relying on the
> average share price provided to me by the MF company). p.s., I'm in
> a low tax bracket. thanks.

For tax purpose you can use an average cost basis for mutual funds.
There is no need to match buy and sell for every share.

Re: selling shares of a mutual fund over time

Have you considered checking the largest holdings in this
mutual fund before the market closes, and basing your
decision to sell or not that day on how these top positions
in the fund are doing that day? That might get you down to a
single sale on one day.

Who's your broker? They should have the records showing at
what price shares were bought upon reinvestment of
distributions.

Individual REITs are tricky enough by themselves upon sale,
given that their "dividends" are divided up into typically
four or more categories of taxation. One of those categories
is "Return of Capital," and this reduces the cost basis of
the sale. Maybe your broker computes this for your mutual
fund sales, and it's already included in the average cost
basis it provides.

I don't envy your task, because of the complexity of REITs
in general. If you loathe doing your taxes, using the
strategy I describe in the first paragraph might be the best
way to minimize the burden.

Here is a site that talks about mutual fund sales in
general. Note how it directs the taxpayer to refer back to
previous years' tax payments on mutual fund cap gain
distributions, so s/he isn't doubly taxed.




<> wrote
> I want to sell about half of my RETI mutual fund this year
(about 20k
> worth). These reit funds fluctuate wildly day by day
(like, up 3% one
> day, down 3% another day), so I plan to spread the sales
over 2 or
> more days (just as I do when I BUY funds....I spread the
purchase over
> a few days, or sometimes over a year or two when I'm
DCA'ing). As
> far as selling, of course, statistically, the greater
number of days
> that I spread out the sale, the greater chance that the
average value
> of the shares sold will be "less extreme" (though i
realize there is
> a tendency for long-term secular increase in shareprice).
Anyway,
> is there any down-side or anything else i should know
about spreading
> the sale over a few days versus just a one day sale? I've
never sold a
> mutual fund before, so I've never had to handle the tax
issues. The
> only thing i know is that selling on multiple days will
make the tax
> forms more complicated. Also, I've been reinvesting
dividends, but
> I never keep track of the share price at reinvestment (and
that's true
> for all 20 of my mutual funds, so when I sell, I will be
relying on the
> average share price provided to me by the MF company).
p.s., I'm in
> a low tax bracket. thanks.
>

Re: selling shares of a mutual fund over time

The fund is TRowePrice RealEstate (TTREX). Interesting idea about
checking the largest holding...never thought of that, but if it's like
my other MF's, the largest holding is too small small percentage wise
to be a good predictor overall. So far, I don't see any added
complication of spreading the sale out over a few days.

My mutual fund companies told me, i think last year, that they only
keep those records fot the past 12 months (though I think they said i
could purchase older records at a cost that I probably wouldn't want to
pay). I guess by using the average numbers provided each year by the
MF company I'll be paying more tax than I should, it's probably not
much and probably much much easier. (but i don't REALLY know).

Tess Millay wrote:


> Have you considered checking the largest holdings in this
> mutual fund before the market closes, and basing your
> decision to sell or not that day on how these top positions
> in the fund are doing that day? That might get you down to a
> single sale on one day.
>
> Who's your broker? They should have the records showing at
> what price shares were bought upon reinvestment of
> distributions.
>
> Individual REITs are tricky enough by themselves upon sale,
> given that their "dividends" are divided up into typically
> four or more categories of taxation. One of those categories
> is "Return of Capital," and this reduces the cost basis of
> the sale. Maybe your broker computes this for your mutual
> fund sales, and it's already included in the average cost
> basis it provides.
>
> I don't envy your task, because of the complexity of REITs
> in general. If you loathe doing your taxes, using the
> strategy I describe in the first paragraph might be the best
> way to minimize the burden.
>
> Here is a site that talks about mutual fund sales in
> general. Note how it directs the taxpayer to refer back to
> previous years' tax payments on mutual fund cap gain
> distributions, so s/he isn't doubly taxed.
>
>
>
>
> <> wrote
> > I want to sell about half of my RETI mutual fund this year
> (about 20k
> > worth). These reit funds fluctuate wildly day by day
> (like, up 3% one
> > day, down 3% another day), so I plan to spread the sales
> over 2 or
> > more days (just as I do when I BUY funds....I spread the
> purchase over
> > a few days, or sometimes over a year or two when I'm
> DCA'ing). As
> > far as selling, of course, statistically, the greater
> number of days
> > that I spread out the sale, the greater chance that the
> average value
> > of the shares sold will be "less extreme" (though i
> realize there is
> > a tendency for long-term secular increase in shareprice).
> Anyway,
> > is there any down-side or anything else i should know
> about spreading
> > the sale over a few days versus just a one day sale? I've
> never sold a
> > mutual fund before, so I've never had to handle the tax
> issues. The
> > only thing i know is that selling on multiple days will
> make the tax
> > forms more complicated. Also, I've been reinvesting
> dividends, but
> > I never keep track of the share price at reinvestment (and
> that's true
> > for all 20 of my mutual funds, so when I sell, I will be
> relying on the
> > average share price provided to me by the MF company).
> p.s., I'm in
> > a low tax bracket. thanks.
> >

Re: selling shares of a mutual fund over time

Sell it all in one sale. You still need to know your cost basis.
Cost basis is what you paid for the shares, minus return of capital, if any,
plus any reinvested distributions.
T. Rowe Price sends you quarterly statements, it only takes a few minutes to
figure out.




<> wrote in message
news:
> The fund is TRowePrice RealEstate (TTREX). Interesting idea about
> checking the largest holding...never thought of that, but if it's like
> my other MF's, the largest holding is too small small percentage wise
> to be a good predictor overall. So far, I don't see any added
> complication of spreading the sale out over a few days.
>
> My mutual fund companies told me, i think last year, that they only
> keep those records fot the past 12 months (though I think they said i
> could purchase older records at a cost that I probably wouldn't want to
> pay). I guess by using the average numbers provided each year by the
> MF company I'll be paying more tax than I should, it's probably not
> much and probably much much easier. (but i don't REALLY know).
>
> Tess Millay wrote:
>
>
>> Have you considered checking the largest holdings in this
>> mutual fund before the market closes, and basing your
>> decision to sell or not that day on how these top positions
>> in the fund are doing that day? That might get you down to a
>> single sale on one day.
>>
>> Who's your broker? They should have the records showing at
>> what price shares were bought upon reinvestment of
>> distributions.
>>
>> Individual REITs are tricky enough by themselves upon sale,
>> given that their "dividends" are divided up into typically
>> four or more categories of taxation. One of those categories
>> is "Return of Capital," and this reduces the cost basis of
>> the sale. Maybe your broker computes this for your mutual
>> fund sales, and it's already included in the average cost
>> basis it provides.
>>
>> I don't envy your task, because of the complexity of REITs
>> in general. If you loathe doing your taxes, using the
>> strategy I describe in the first paragraph might be the best
>> way to minimize the burden.
>>
>> Here is a site that talks about mutual fund sales in
>> general. Note how it directs the taxpayer to refer back to
>> previous years' tax payments on mutual fund cap gain
>> distributions, so s/he isn't doubly taxed.
>>
>>
>>
>>
>> <> wrote
>> > I want to sell about half of my RETI mutual fund this year
>> (about 20k
>> > worth). These reit funds fluctuate wildly day by day
>> (like, up 3% one
>> > day, down 3% another day), so I plan to spread the sales
>> over 2 or
>> > more days (just as I do when I BUY funds....I spread the
>> purchase over
>> > a few days, or sometimes over a year or two when I'm
>> DCA'ing). As
>> > far as selling, of course, statistically, the greater
>> number of days
>> > that I spread out the sale, the greater chance that the
>> average value
>> > of the shares sold will be "less extreme" (though i
>> realize there is
>> > a tendency for long-term secular increase in shareprice).
>> Anyway,
>> > is there any down-side or anything else i should know
>> about spreading
>> > the sale over a few days versus just a one day sale? I've
>> never sold a
>> > mutual fund before, so I've never had to handle the tax
>> issues. The
>> > only thing i know is that selling on multiple days will
>> make the tax
>> > forms more complicated. Also, I've been reinvesting
>> dividends, but
>> > I never keep track of the share price at reinvestment (and
>> that's true
>> > for all 20 of my mutual funds, so when I sell, I will be
>> relying on the
>> > average share price provided to me by the MF company).
>> p.s., I'm in
>> > a low tax bracket. thanks.
>> >
>

Re: selling shares of a mutual fund over time

Ed wrote:
> Sell it all in one sale.

Why? (you already know the answer to "why not").

Re: selling shares of a mutual fund over time

I just thought of something funny. I always considered the date that
is 12 months after my last purchase to be the better time so sell any
MF (compared with before 12 months), with respect to tax on cap.
gains. But I just realized that when you reinvest divs and capgains,
which is done quarterly, there's no way to be 12 months after all
purchases...right? For ex., the last time I actively purchased
shares in real estate was around January 5 2005. Now i'm realizing
that with reinvested divs and capgains....etc. etc. not all my shares
will ever be held more than 12 months.

Re: selling shares of a mutual fund over time

It's TRREX, not ...whatever

Re: selling shares of a mutual fund over time

<> wrote in message
news:
>
> Ed wrote:
>> Sell it all in one sale.
>
> Why? (you already know the answer to "why not").

Unless you know what the price will be for each of the next few days just
sell the damn thing.
You have as much chance to make less or more if you hold on. If you have a
place for the proceeds of this sale all lined up then put it to work there.
You either want to be in the fund or you don't.

Re: selling shares of a mutual fund over time

<> wrote in message
news:
>I just thought of something funny. I always considered the date that
> is 12 months after my last purchase to be the better time so sell any
> MF (compared with before 12 months), with respect to tax on cap.
> gains. But I just realized that when you reinvest divs and capgains,
> which is done quarterly, there's no way to be 12 months after all
> purchases...right? For ex., the last time I actively purchased
> shares in real estate was around January 5 2005. Now i'm realizing
> that with reinvested divs and capgains....etc. etc. not all my shares
> will ever be held more than 12 months.

You said you were in a low tax bracket, does it matter if the gains are long
or short term?

Re: selling shares of a mutual fund over time

wrote:
> I want to sell about half of my RETI mutual fund this year (about 20k
> worth). These reit funds fluctuate wildly day by day (like, up 3% one
> day, down 3% another day), so I plan to spread the sales over 2 or
> more days (just as I do when I BUY funds....I spread the purchase over
> a few days, or sometimes over a year or two when I'm DCA'ing). As
> far as selling, of course, statistically, the greater number of days
> that I spread out the sale, the greater chance that the average value
> of the shares sold will be "less extreme" (though i realize there is
> a tendency for long-term secular increase in shareprice). Anyway,
> is there any down-side or anything else i should know about spreading
> the sale over a few days versus just a one day sale? I've never sold a
> mutual fund before, so I've never had to handle the tax issues. The
> only thing i know is that selling on multiple days will make the tax
> forms more complicated. Also, I've been reinvesting dividends, but
> I never keep track of the share price at reinvestment (and that's true
> for all 20 of my mutual funds, so when I sell, I will be relying on the
> average share price provided to me by the MF company). p.s., I'm in
> a low tax bracket. thanks.

There's nothing wild about it. I ran with a couple RE funds - stayed
with this one/closed. My broker keeps meticulous comma-delimited
records, which I go through and arrange before running a printout for
the taxperson, who gives me that second look that says they're thinking
'Damn, I wish more people would do this for me.' I think I know what
you mean, though. After a stint with my first broker's tax/trading
records, I decided to do my own trading "history" for tax purposes, to
which the IRS responded in a letter that effectively said they would
like very much to bury me under a jail.



from 9/03 built up 8k
sold out 5/04 -7k
built back up by 7/5 24k
sold out 9/5 25k

Left in 3.5k profits in time to play some more. Your call.

-"If your head comes away from your neck, it's over!"

Re: selling shares of a mutual fund over time

<> wrote
> The fund is TRowePrice RealEstate [TrREX]. Interesting
idea about
> checking the largest holding...never thought of that, but
if it's like
> my other MF's, the largest holding is too small small
percentage wise
> to be a good predictor overall.

Well, no. TRREX tracks pretty closely it's top two holdings
(according to Yahoo's breakdown of TRREX), SPG and PLD. PLD
is particularly close. See


d

Maybe this is because overall, TRREX fund is predominantly
one particular REIT sector, and PLD is the same sector.
Dunno. Just used yahoo's graphing function to check quickly.
TRREX also tracks VNO pretty closely.

Better to have some guideline, with some statistical
probability, than none, IMO.

> So far, I don't see any added
> complication of spreading the sale out over a few days.

Unless one knows a bit more about what a morass REIT
dividend tax allocation will be, one won't.

If one is adept at using spreadsheets, it might prove not
particularly difficult. Just more difficult.

> My mutual fund companies told me, i think last year, that
they only
> keep those records fot the past 12 months (though I think
they said i
> could purchase older records at a cost that I probably
wouldn't want to
> pay). I guess by using the average numbers provided each
year by the
> MF company I'll be paying more tax than I should, it's
probably not
> much and probably much much easier.

With the key word being "probably," the above is the
conventional wisdom.

> (but i don't REALLY know).

Right. One has to run the numbers.

There are some caveats about designating specific shares be
sold, though, if you're thinking of going this route.

You might want to ask your question (perhaps modified a bit)
at misc.invest.financial-plan . It's moderated and tends to
be frequented by a somewhat higher proportion of serious
posters, as a result. I have worked with individual REITs
and non-REIT mutual funds, but not REIT mutual funds. There
might be some good news (from the financial plan newsgroup)
on the calculations for the REIT mutual funds of which I am
not aware without googling.

> Tess Millay wrote:
>
>
> > Have you considered checking the largest holdings in
this
> > mutual fund before the market closes, and basing your
> > decision to sell or not that day on how these top
positions
> > in the fund are doing that day? That might get you down
to a
> > single sale on one day.
> >
> > Who's your broker? They should have the records showing
at
> > what price shares were bought upon reinvestment of
> > distributions.
> >
> > Individual REITs are tricky enough by themselves upon
sale,
> > given that their "dividends" are divided up into
typically
> > four or more categories of taxation. One of those
categories
> > is "Return of Capital," and this reduces the cost basis
of
> > the sale. Maybe your broker computes this for your
mutual
> > fund sales, and it's already included in the average
cost
> > basis it provides.
> >
> > I don't envy your task, because of the complexity of
REITs
> > in general. If you loathe doing your taxes, using the
> > strategy I describe in the first paragraph might be the
best
> > way to minimize the burden.
> >
> > Here is a site that talks about mutual fund sales in
> > general. Note how it directs the taxpayer to refer back
to
> > previous years' tax payments on mutual fund cap gain
> > distributions, so s/he isn't doubly taxed.
> >
> >
> >
> >
> > <> wrote
> > > I want to sell about half of my RETI mutual fund this
year
> > (about 20k
> > > worth). These reit funds fluctuate wildly day by day
> > (like, up 3% one
> > > day, down 3% another day), so I plan to spread the
sales
> > over 2 or
> > > more days (just as I do when I BUY funds....I spread
the
> > purchase over
> > > a few days, or sometimes over a year or two when I'm
> > DCA'ing). As
> > > far as selling, of course, statistically, the greater
> > number of days
> > > that I spread out the sale, the greater chance that
the
> > average value
> > > of the shares sold will be "less extreme" (though i
> > realize there is
> > > a tendency for long-term secular increase in
shareprice).
> > Anyway,
> > > is there any down-side or anything else i should know
> > about spreading
> > > the sale over a few days versus just a one day sale?
I've
> > never sold a
> > > mutual fund before, so I've never had to handle the
tax
> > issues. The
> > > only thing i know is that selling on multiple days
will
> > make the tax
> > > forms more complicated. Also, I've been
reinvesting
> > dividends, but
> > > I never keep track of the share price at reinvestment
(and
> > that's true
> > > for all 20 of my mutual funds, so when I sell, I will
be
> > relying on the
> > > average share price provided to me by the MF company).
> > p.s., I'm in
> > > a low tax bracket. thanks.
> > >
>

Re: selling shares of a mutual fund over time

wrote:
> I want to sell about half of my RETI mutual fund this year (about 20k
> worth). These reit funds fluctuate wildly day by day (like, up 3% one
> day, down 3% another day), so I plan to spread the sales over 2 or
> more days (just as I do when I BUY funds....I spread the purchase over
> a few days, or sometimes over a year or two when I'm DCA'ing). As
> far as selling, of course, statistically, the greater number of days
> that I spread out the sale, the greater chance that the average value
> of the shares sold will be "less extreme" (though i realize there is
> a tendency for long-term secular increase in shareprice). Anyway,
> is there any down-side or anything else i should know about spreading
> the sale over a few days versus just a one day sale? I've never sold a
> mutual fund before, so I've never had to handle the tax issues. The
> only thing i know is that selling on multiple days will make the tax
> forms more complicated. Also, I've been reinvesting dividends, but
> I never keep track of the share price at reinvestment (and that's true
> for all 20 of my mutual funds, so when I sell, I will be relying on the
> average share price provided to me by the MF company). p.s., I'm in
> a low tax bracket. thanks.

If you want to spread your risks why not do it over a week. Sell an
equal amount everyday for 5 days.

Re: selling shares of a mutual fund over time

"Tess Millay" <> wrote in message
news:m7dvf.5131$M%
> <> wrote
> > The fund is TRowePrice RealEstate [TrREX]. Interesting
> > idea about checking the largest holding...never thought of that,
> > but if it's like my other MF's, the largest holding is too small
> > small percentage wise to be a good predictor overall.
>
> Well, no. TRREX tracks pretty closely it's top two holdings
> (according to Yahoo's breakdown of TRREX), SPG and PLD.
> PLD is particularly close. See
>
>

This is a rather selective choice of data. The OP was asking about short
term fluctuations, not long term trends. Long term, everything goes up
(well, except for some oddballs, like gold :-).

First of all, take a magnifying glass:


This is a three month chart. You'll see huge divergences in early November
and mid-December. Smooth the curves out enough and they appear to track,
but how real is that? People who have read my posts know that I am
skeptical of looking at pretty pictures (graphs) rather than numbers.

Here are some numbers (correlation coefficients):

Past year (Jan 6 2005 - Jan 4 2006):
TRREX and PL: 0.756
TRREX and S&P 500: 0.824

Three month periods over the past year:
TRREX and PL TRREX & S&P500
Oct 5 - Jan 4: 0.853 0.845
Jul 5 - Oct 4: 0.576 0.346
Apr5 - Jul 4: 0.904 0.884
Jan6 - Apr 4: 0.600 0.425

From this we can see a few things:
1) Short term tracking can be exceedingly poor
2) When tracking is better, it may be just as likely that everything is
moving together as it is because TRREX is tracking any particular issue
3) Long term, TRREX doesn't seem to track PL any better than it tracks the
general domestic equity market

For those who still believe a picture is worth a thousand words, take a look
at the scatter plot here, labeled r^2 = 0.493.


This gives a fair picture of what you can expect if you try predicting TRREX
on the basis of PL - the one year correlation coefficient (r) is 0.756, so
the r^2 is 0.572 - a bit better than what is shown in the plot, but not that
much. You can see from the picture that while the general trends are
similar, short term variations appear almost random.

[Side note: in case you are wondering how the correlation with the S&P 500
can be worse that with PL for each quarter, and yet better for the whole
year, here's a simple data set to play with:
A B C
1.0 1.0 1.0
1.1 1.1 1.3
-----------------
2.0 1.0 1.8
2.1 1.05 2.1

If you look at A vs B, and A vs. C, you'll agree that C tracks A more
closely than does B, since A and C are generally trending up, between 1 and
2, while B is pretty flat. But if you look at the correlations by halves
(above or below the dotted line), you'll see A and B correlating perfectly,
while A and C correlate imperfectly.]

> Better to have some guideline, with some statistical
> probability, than none, IMO.

Agreed. That's why it pays to look at the numbers.

> [...]

> > My mutual fund companies told me, i think last year, that
> > they only keep those records fot the past 12 months (though
> > I think they said i could purchase older records at a cost that
> > I probably wouldn't want to pay).

T. Rowe Price online only gives transaction history for the past 12 months,
but it also gives you statements going back into 2004 (and since each of
their statements shows account activities from the beginning of the year,
that gives you all of 2004's activities). Still probably not enough for
you, but it is possible to get 2 years worth of history.

> > I guess by using the average numbers provided each year by the
> > MF company I'll be paying more tax than I should, it's probably not
> > much and probably much much easier.
>
> With the key word being "probably," the above is the
> conventional wisdom.

In a rising market, if you are not selling all your shares (you said that
you're selling only half), you'll actually pay LESS in taxes by using the
average numbers than you would by selling oldest first (FIFO - first in,
first out). That's because, on average, the cost of your shares is higher
than the cost of your oldest shares. So, by using average cost, you are
using a higher basis, and showing less gain.

Here's a simple example:
2003: 100 shares @ $10
2004: 10 shares @ $12 (reinvested dividends)
2005: 10 shares @ $15 (reinvested dividends)

Your average cost = (100 * 10 + 10 * 12 + 10 * 15) / (100 + 10 + 10)
= $11.25

Say that you sell 60 shares (half your holdings) for $16 per share.

Using FIFO, your gain would be: 60 * (16 - 10) = $360
(because you sell oldest shares first, which cost $10/share)

Using average cost, your gain would be: 60 * (16 - 11.25) = $285.

Note that when you sell your later shares, you'll pay more in taxes because
you are using average cost - you don't avoid paying taxes, you just defer
some of them by using average cost.

Note also, that if you are selling all your shares, then in a rising market,
FIFO usually comes out better. (I'll explain that some other time - it has
to do with long term vs. short term gains.)

Finally, note that if you do use average cost, then:
a) You must continue using this so long as you own shares of TRREX in a
taxable account (regardless of whether it is this account or another
account)
b) You are supposed to indicate that you are using average cost method on
your tax return (since the default is FIFO).

--
Mark Freeland

Re: selling shares of a mutual fund over time

wrote:
> they only keep records for the past 12 months, though I think they said i
> could purchase older records at a cost that I probably wouldn't want to
> pay.

May want to drop a note in their customer friendly suggestions box, by
way of a reminder, as their competitors (Scottrade/EBrown) have noted,
that a paperless office and attendant benefits went into effect in
1995;--That a snip to inculcate dealings over a disaffected, abstract
layer of receptors for conceivable tender plausibly touted within a
shroud ignorance traditionally reserves, is outdated, and without
regard or forethought to those whom are acclimated to an age of digital
accessiblity.