ETF Income Investing: Should You Take A Short-Term Gain?

Yesterday, one of my readers posed an interesting question:

“I own both IIC and EVM (Muni CEFs) in my taxable Scottade account. This week, I noticed a large price spike about mid week followed by a price drop today and yesterday. I believe it had to do with some news of dividend payout dates. Here is my question for you. Is it alright to sell these when a spike occurs and then buy them back in a day or two? I do want to continue to own these for the long haul but could have made a few bucks trading them this week!”

Turns out that the price spike happened because of market conditions and it raised the NAV by a little over 1%. If you could turn back the clock to that point in time, I still don’t think it’s a good idea to sell those positions for the following reasons:

1. The increase/spike is fairly small and considering the buy/sell spread and the trading fee, it’s simply not worth the effort.

2. Since this transaction would have happened in a taxable account, the capital gains would have caused a taxable event; not just for this small gain but all gains accumulated to this point.

Income investing requires a different mind set. If that’s your investment objective, you might want to read my article called “10 Rules For Successful Tax-Free Income Investing” at:

http://www.successful-investment.com/articles31.htm

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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