Most financial advisors recommend that you rebalance your portfolio every few years. This may be bad advice. I purchased Netflix many years ago and have a huge gain. I am also in the 23.9% tax bracket. If I sell any Netflix stock I will end up paying over 20% in long-term capital gains tax. The only way that selling makes sense is if I believe that the stock will go down by more than what I have to pay in taxes. What is wrong with keeping your winners and selling your losers each year? Eventually, you will die and your winners will get a new stepped-up basis and your relatives will not have to pay any tax on this huge gain – unless your net worth is high enough for estate taxes come into play. Also, if you sell your losers each year, you get short-term capital loses – much more valuable tax-wise.
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