January 19, 2022
The problem reminds me of a recent chat with a friend. He didn't want to sell his apartment at a loss.
Of course, he'd need to buy another apartment should he sell. As a result, assuming that the price per square foot is the same for the new and old one, it'd be good to sell at a market low. If one is set on moving.
I.e., a market low allows for selling and then buying an accommodation of similar quality while harvesting a tax-loss (or a lower taxable capital gain).
Selling at a profit would instead, due to capital gains tax, cause my friend not even to afford to buy his current digs.
So it would help if you educated potential sellers that, as long they immediately invest in similar opportunities, selling at market lows is preferable to waiting for a market recovery.
They keep free leverage by recycling more latent capital gains into the next opportunity, postponing the tax impact.
Unfortunately, sellers, who should regain market exposure after a transaction, often want to dollar-cost average back into the market.
"But it's a silly thing to do on just the numbers. For instance, if you were handed the all-equity portfolio you actually ultimately wanted, instead of being handed cash, you would not sell it just to average back in, would you?" - Cliff Asness
Savvy acquirers proactively help identify other uses of capital for hesitant sellers because sellers convert into forced buyers upon a transaction windfall.
So remember, a reluctant seller might be a confused buyer in disguise.
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