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Author: Go2Glenn Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19314  
Subject: Getting out of mutual funds Date: 1/16/2000 10:09 AM
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I am about to take an early retirement and have decided to move some of my investments to areas of less risk. For years, at the advice of a few money managers, I have invested heavily in a diverse group of mutual funds (this is outside my retirement fund). Now I have suddenly realized that all the good advice I have recieved over the years did not contain a strategy to get out of the funds. Here I sit looking at mountains of monthly statements and with no clue on how to get out of the funds in a tax friendly way. There must be something written on this subject. Could someone point me in the right direction? Thanks!
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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1596 of 19314
Subject: Re: Getting out of mutual funds Date: 1/16/2000 11:08 AM
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I am about to take an early retirement and have decided to move some of my investments to areas of less risk. For
years, at the advice of a few money managers, I have invested heavily in a diverse group of mutual funds (this is outside
my retirement fund). Now I have suddenly realized that all the good advice I have recieved over the years did not
contain a strategy to get out of the funds. Here I sit looking at mountains of monthly statements and with no clue on
how to get out of the funds in a tax friendly way. There must be something written on this subject. Could someone point
me in the right direction? Thanks!


Read the instructions on IRS Sch D for form 1040 to determin the basis of your shares. You have several choices. Remember that when you reinvested dividends this was a new purchase and the dividends add to your cost.



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Author: middlearth Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1599 of 19314
Subject: Re: Getting out of mutual funds Date: 1/16/2000 2:17 PM
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>>>>how to get out of
the funds in a tax friendly way.<<<<

I've heard of something called "last-in-first-out" strategy. Not quite sure of its details, but I think it refers to the fact that your latest investment purchases don't have VERY heavy tax implications, as those prices will not have appreciated as much as your earliest ones. As you get older and may possibly get into a lower tax bracket due to lower expenses(therefore less need for income), your tax burden on the oldest money in the funds will not be as big when you take THEM out. I hope this helps.
Regards,
Eddie

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Author: materus Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1617 of 19314
Subject: Re: Getting out of mutual funds Date: 1/17/2000 4:03 PM
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There is no good way to get out of mutual funds without paying the capital gains taxes unless you never had any. It is possible that over all the years you owned your funds the net asset value for all shares is lower than you'll sell them. Highly unlikely though or you would have sold the fund(s) earlier. There are several ways to figure your cost basis per share one being the first in, first out. Essentially you sell each share bought first before selling any bought later. That way you sell long term holdings first versus short term holdings. This way you save on taxes by not selling short term holdings first and being taxed at the ordinary tax rate for you. Long term taxes are down to 20% not the 28% or higher most investers pay for ordinary income. The easiest is to just average the cost basis of all shares purchased and reinvested. Yes you may have a somewhat higher cost basis, but not enough to worry about. Also your computer program, let's say Quicken, figures this average cost basis first, even though it will let you do it by lot. The main thing to keep in mind is which ever method you use with a fund, you must use that method for figuring cost basis until fund is liquidated completely. Good luck.

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