Rebalancing strategy for bonds
Posted: Wed Aug 25, 2010 7:33 am
Half of my Bond allocation is in my Traditional IRA (in the form of TLT where dividends are automatically reinvested tax free). I have about 30 years to retirement age
The other half of my Bond allocation is in 2040 Treasury Bonds (~4.23%) in my regular brokerage account. Proceeds from these bonds are obviously taxed.
All of these bonds were purchased in April and May.
Hypothetically...if LT Bonds go up enough to trigger a rebalance in the next few months, which bonds should I sell?
Since my bonds in the brokerage account could easily be a short-term capital gain, my instinct is to sell the bonds in the IRA first and not have to suffer tax consequences. However, Harry Browne suggested maximizing the compounding power of the income-producing bonds by just leaving them in your IRA. That would mean selling the bonds in the brokerage account and taking a short term tax hit.
So, now I'm confused. Anyone have any thoughts on strategy? I'm leaning towards one of two strategies where either I would sell the bonds from my brokerage account and take the tax hit.... or where I would sell evenly from both accounts to split the difference, but I'm still unsure what the best approach is.
The funny part is that when I bought these bonds, I had no faith in them — clear proof of how uncertain things are. Now, I have the dilemma of how to maximize profits from them.
The other half of my Bond allocation is in 2040 Treasury Bonds (~4.23%) in my regular brokerage account. Proceeds from these bonds are obviously taxed.
All of these bonds were purchased in April and May.
Hypothetically...if LT Bonds go up enough to trigger a rebalance in the next few months, which bonds should I sell?
Since my bonds in the brokerage account could easily be a short-term capital gain, my instinct is to sell the bonds in the IRA first and not have to suffer tax consequences. However, Harry Browne suggested maximizing the compounding power of the income-producing bonds by just leaving them in your IRA. That would mean selling the bonds in the brokerage account and taking a short term tax hit.
So, now I'm confused. Anyone have any thoughts on strategy? I'm leaning towards one of two strategies where either I would sell the bonds from my brokerage account and take the tax hit.... or where I would sell evenly from both accounts to split the difference, but I'm still unsure what the best approach is.
The funny part is that when I bought these bonds, I had no faith in them — clear proof of how uncertain things are. Now, I have the dilemma of how to maximize profits from them.