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So here is the dilemma, I have 17.7% intermediate bonds which I want to reduce to 7% bonds and the rest put it domestic equities.
I have gains in my bond holdings now which are still short term. They will become long term on July 5th 2019 since I acquired them as part of a TLH on July 5, 2018. So here are the options:
Motivation to sell bonds now is that rates may increase later and bonds may start sliding again.
1. Sell bonds, pay short term gains (33.3% marginal rate) and buy equities now
2. Sell bonds, pay taxes, but wait for a better opportunity to buy equities since they are again at all time highs, there may be a dip coming soon
3. Wait until July, sell bonds then, pay taxes @ 24.3% (LTCG 15% + CA state 9.3%) and buy equities then. This may or may not workout since July is still a ways away and bonds may have gone down, equities may be higher... who knows.
4. Do nothing, wait long term for a major recession and the eventual crash, bonds will rally strongly and equities will drop precipitously, reallocate then.
However, I also want to move out of bonds because I am getting absolutely destroyed on the bond interest since my marginal rate is 33.3%. After taxes the bonds are not even keeping up with inflation and my bond allocation at 17.7% is in the six figures so that is a huge amount of capital blocked by an essentially non performing asset.
That couple of hundred in tax savings differential can easily be wiped out. I have no problem paying taxes on the gains
Not to mention you may have an opportunity later this year to tax-loss harvest to offset the short term gains. Paying taxes on a gain is preferable (to me) to sitting for months with an allocation I am uncomfortable with.
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