Ideally, you should decide which asset classes to sell and buy, then sell the stocks or mutual funds in a way that:
- Minimizes taxes. Buying and selling within your RRSPs or IRAs or 401K's will not generate any taxable income.
- Gets rid of funds and stocks you no longer want, like mutual funds with high expenses or stocks that you no longer favor.
- Keeps your bonds in tax deferred accounts as much as possible and keeps stocks and equity mutual funds in taxable accounts as much as possible to reduce taxes.
Right now I am over my target for small cap domestic and large cap domestic stocks. I will sell a small cap index ETF and some of my large cap holdings. The proceeds will be used for living expenses and to buy bond funds.
Asset Class | Allocation % | Target % | Difference |
Domestic Bonds | 33.5 | 38 | -4.5 |
Large Stocks | 20 | 20 | 0 |
Small Cap Stocks | 9.7 | 6 | 3.7 |
International Stocks | 20.1 | 20 | 0.1 |
International Bonds | 3.5 | 4 | -0.5 |
Cash | 12.3 | 12 | 0.3 |
Other | 0.9 | 0 | 0.9 |
TOTAL | 100 | 100 |
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