# Selling shares to help fund retirement



## lonewolf :) (Sep 13, 2016)

Do not know of any studies regarding dollar cost averaging to sell shares. My guess it is probably best to sell a fix number of shares each month instead of selling x amount of shares each month to be x amount of value . Dollar cost averaging might work when building portfolio though if used when unwinding a portfolio it would work against you.


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## Eder (Feb 16, 2011)

I think tax efficiency considerations should trump all when disposing of shares.


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## OptsyEagle (Nov 29, 2009)

I guess you are referring to the issue of "negative dollar cost averaging" that happens when you periodically withdraw money from a variable portfolio as opposed to the "dollar cost averaging" (DCA) where you are investing money periodically into a variable portfolio.

The more important consideration is that "dollar cost averaging" really doesn't do anything useful at all. It was a slick selling feature used by salespeople who probably didn't really understand it well themselves, to get less knowledgeable people to invest in mutual funds. I agree that dollar cost averaging will increase your rate of return to something higher then what the portfolio's rate of return was. The problem is that the "magnitude" of that out-performance is significantly affected by the size of the periodic investment compared to the size of the portfolio itself. So if you have $1000 invested and you invest another $100 per month, you will realize a reasonable increase in your performance but only on a very small amount invested. If you have $1,000,000 invested and you invest another $100 per month, the increase in performance realized by DCA will be almost unnoticeable.

So with that in mind, let's look at negative dollar cost averaging. It also is only noticeably when the amount you are withdrawing is large in comparison to the portfolio you have. Instead of the world worrying about "negative dollar cost averaging" we have decided to worry about "safe withdrawal rates" (SWR). You may recall experts telling you that 4% withdrawal rates are OK and then other experts telling you it is not OK. Most of the reason 4% withdrawal rates are not OK, would come from "negative dollar cost averaging". However if you had a $1,000,000 and all you wanted to withdrawal was $100 every month, no one would tell you that it would be a problem.

So with that being said, it all depends on how much you want to withdraw compared to how much you have. Yes, selling a percentage of shares or units will get around the negative dollar cost averaging problem but that is also known as a variable withdrawal strategy. There are a slew of strategies that do this, where selling a fixed number of shares of varying value is simply one of them.


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## ian (Jun 18, 2016)

I disagree that tax should trump all when disposing of shares.

I believe that the first consideration should be toward protecting your retirement , understanding the market, and carefully weighting one's personal risk/reward tolerance. We had some great advice. Dump some options and protect your retirement. We did, and it did. That stock went from $54 down to 21, and then 15.

Tax considerations were in the forefront of my mind but had tax considerations remained at the forefront we would have suffered a significant setback. Several of my colleagues failed to do so in a timely manner, because of tax considerations, and it caused them to defer their early retirement. Tax considerations are important, but IMHO they should not be prime driver of your investment decisions.


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## OptsyEagle (Nov 29, 2009)

Investors tend to look at tax considerations because it is known, whereas future investment results are an unknown. That does not make it right but helps explain the bias.


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