Prove Your Worth, Diversify My Portfolio

When I was getting started I did a lot of reading athttp://www.bogleheads.org/wiki/Lazy_PortfoliosThey're really big on the super low cost Vanguard index funds someone mentioned above, although several alternatives like Schwab, etc. exist.

The goal is avoiding attempts to time the stock market...the basic philosophy states that the market has never failed over any meaningful measure of time and that it's pointless for a mainstream retirement investor or whatever to try and be smarter. Maybe not for a hardcore day trader or someone employed in investing, but I've been a fan at any rate.

Does anyone actually save records of all their transactions, or do you trust your brokerage to do it right? Scottrade lets me set my tax strategy (e.g. minimize taxes, sell shares bought first...) - I just figured they'd handle this stuff for me. Wrong assumption?

I print out quarterly statements that have my trading activity, and everything's entered in to Quicken as well. I figure that's good enough record keeping. My transactions are fairly minimal really. I receive dividends quarterly from the 6-8 ETF's I own (actually I guess monthly from a couple bond funds) and generally I dump my contribution limits in to my registered tax free accounts in January and top up/rebalance things then.

Wait, your brokerages don't send you a receipt for each trade? I do all my trading in-house to avoid commissions, but I get a detailed receipt of each trade by e-mail and can have back office print a periodical summary no problem. I assume our regular customers get the same service, but I guess it can be harder if you use multiple brokerages.

Also, does "sell shares bought first" make a difference in the US tax system? Over here you average out your entry price whenever you buy new shares, and taxes on realization are calculated based on that average.

What other tax optimization can your brokerage do for you on trades? The only thing I can think of (in the Norwegian system) would be realizing losses (and then rebuying) at end of year if the time value of accounting that loss asap exceeds the commission.

Elerion_sl said:

Wait, your brokerages don't send you a receipt for each trade? I do all my trading in-house to avoid commissions, but I get a detailed receipt of each trade by e-mail and can have back office print a periodical summary no problem. I assume our regular customers get the same service, but I guess it can be harder if you use multiple brokerages.

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Yeah, they send out a receipt that I promptly delete. It's also in the online system, I just never bothered to really look at it.

Also, does "sell shares bought first" make a difference in the US tax system? Over here you average out your entry price whenever you buy new shares, and taxes on realization are calculated based on that average.

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Yes, each share you buy comes with its own tax base. So if you have 100 shares at $5 and 100 shares at $10, then sell when the stock price is $7.50 you could either realize a profit or a loss. Which happens depends on which shares you sell. So the brokerage gives you an option to either sell the cheapest shares, the ones that minimize your taxes, the ones that let you "harvest" a loss (so you can balance it with some other gains), or just sell whichever stocks you bought first/last.

I think that's the only tax optimization they do. But I rarely sell stocks - I mostly just buy.