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To sell or to cover??

August 2nd, 2009 at 10:17 pm

Stock market talk - could be boring for some.

I'm just thinking out loud here, just sorting out information in my head.

Few entries back I talked about my share portfolio. It is still doing well and it is now up 31%. The Australian stock market has been going up for 3 weeks up without a decent retracement. SO you know sooner or later this thing will need to go down. Right now there is this urge of selling all or some of my shares, but really I don't want to do this because:
1) I still think they could still go up in the long-run and I don't mind keeping these investments for few years yet.
2) Capital Gains Tax is also an issue - most of them are less than 12 months old therefore here in Australia I will have to pay full tax on them (here if it is more than 12 months you only need to pay CGT on 50% of them).
3) They are all about to pay dividends in the next month or so. That should be another 3-5% increase in the portfolio.

The option that I am leaning at the moment, instead of selling up, is to maybe cover some of it by going short on the Aust index (futures contract). And at the same time just keep moving up those stop loss order.

I got to do more research.

2 Responses to “To sell or to cover??”

  1. Broken Arrow Says:

    Interesting! Please let me know what you decide to do next and why.

  2. shiela Says:

    Hi BA,
    I finally went short on the Aussie 200 Index using my CFD account. I went ultra conservative and only got very little. My main reason to get in was to try out this strategy. I've paper traded this strategy before and thought that this was the great opportunity to try it out with real money. Albeit, with only very small amount of money, so if this does go down I probably don't have enough cover (but I do have those stop loss orders). If I feel that I need more cover I can always short some more, the CFD accout I'm using doesn't have brokerage (but it has a spread), that is also another reason why I didn't want to commit too much. I'm just analysing it a day at a time. My main thing at the moment is to just go "neutral".

    Our unemployment #s will be coming out tomorrow (and I think I heard the US #s is out on Friday??), so that could have an impact in Aust market.

    I wasn't really quite happy with my execution of this but I'm learning from it.

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