Great Timing (Accidentally)

In investing, it is often better to be lucky than right. I was very lucky with some predictions that I made this exact week last year and doubly lucky that the market didn’t behave the way I thought it would!

Simply put, I predicted that Biden would win the Presidency, that there was a good chance the Democrats would take Congress, and they would work together to raise taxes on folks like me. I was dead on.

Related: Cashing In Before The Election

My prediction caused me to accelerate exercising a big chunk of MegaCorp stock options. I figured that if correct, it meant a stock market dip and a big tax bill to pay. I was dead wrong on this prediction. Lucky me.

Instead of declining, the stock market (S&P 500) shot up an amazing +28% in the last year, but MegaCorp fell about 7%. I was lucky to sell those leveraged MegaCorp stock options – and reinvest them in an S&P 500 fund. My original plan was to keep extra cash, but I was already sitting on enough. I timed the MegaCorp sale & S&P purchase perfectly and still took advantage of the lower 2020 tax rates.

Now that I’m ahead, I need to get clever about when to realize the gains on the S&P 500 fund appreciation. The money is invested for the long term, so I guess I can wait for power (and tax rates) to shift again in Washington DC. I’m smart enough to wait if they are dumb enough to keep changing the rates up & down!

Have a great weekend!

2 thoughts on “Great Timing (Accidentally)

  1. As the Biden proposal stands know, I don’t think the capital gains should be much of an issue since it sounds like you disposed of all (or nearly all) of your options last year, thus eliminating a very large bucket of unrealized income. Since the new cap gains tax rate kicks in over $1M income, I assume you won’t be hitting that going forward with just a pension and investment income.

    To be honest, I had feared the cap gains changes would be (much) worse, such as treating cap gains as ordinary income at all income levels. I’m fairly relieved that they seem so benign (for me, at least).

    Liked by 1 person

    1. You are right … Cap Gains tax increases seem to have fallen out of the headlines. Glad to see that. The progressive side of the party (Bernie, AOC, and Warren) will keep pushing though.


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