2007-02-16 09:56:05 · 3 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Depositing money into an investment account doesn't trigger anything for tax purposes. The "tax event" is when you sell from the fund or stock.
2007-02-16 09:59:40 · answer #1 · answered by SuzeY 5 · 1⤊ 0⤋
Dollar Cost will only trigger a buy...not a sell. What you are doing is buying low so that you can sell high. However, you are not trying to tine the nmarket you just want to smooth your risk out so you DCA. Every month every year,etc regardless of what the price is. Prices go up, down and sideways, but never do they stay the same. Hopefully you get more shares versus the number that you would get if you bought them outright in a lump sum.
2007-02-16 18:10:42 · answer #2 · answered by Sports Maven 1 · 1⤊ 0⤋
Like the other responders have said, dollar cost averaging is a purchasing strategy--you buy the same dollar amount of an investment on a regular interval. This strategy is aimed at lowering your average cost per unit of the investment. Since it does not involve selling, it does not generate tax consequences.
You might be thinking, also, about reallocating your portfolio. This involves having a planned percentage of each type of investment in your portfolio. This strategy can involve selling investments when that type of investment is greater than the percentage you would like. Since you are selling an investment, taxable gains may result. (They frequently do result because you are often selling investments that have done well--that is often why their percentage is higher than the planned percentage.)
2007-02-17 14:02:41 · answer #3 · answered by Take Responsibility 2 · 0⤊ 0⤋