Tax benefits to buying stocks on Dec 31 vs. one day later?
For a long term gain you must hold the stock a year and a day, so, the long term hold period will fall into 2015 regardless. This is the only tax related issue that occurs to me, did you have something else in mind?  Welcome to Money.SE.
Yes timing does matter. Using a simple Rate of Change indicator over the past 100 days and smoothed out with a 50 day Moving Average, I have plotted the S&P 500 since the start of 2007.  The idea is to buy when the ROC indicator crosses above the zero line and sell when the ROC indicator crosses below the zero line. I have compared the results below of timing the markets from the start of 2007 to dollar cost averaging starting from the start of 2007 and investing every 6 months. $80k is invested in both cases.  For the timing the market option $80k was invested at the start of 2007, then the total figure was sold out when a sell signal was given, then the total amount reinvested when a new buy signal was given. For the DCA option $5000 was invested every 6 months starting from the start of 2007 until the last investment at the start of July 2014. The results are below:  Timing the markets results in more than double the returns (not including dividends and brokerage). Edit It has been brought up that I haven't considered tax in my Timing the Market option. So I have updated my timing the market spread-sheet to take into account both long-term and short-term CGT in the USA for someone on the highest tax bracket. The results are below:  The result is still almost a 2x higher returns for the timing the markets option.  Also note that even with the DCA option you will have to sell one day and pay CGT on any profits there. However, the real danger with the DCA option is if you need to sell during a market downturn and not make any profits at all. If you do this, you own a stock worth $1, with a basis of $2. The loss doesn't get realized until the shares are sold. Of course, we hope you see the stock increase above that price, else, why do this? I think what you're asking is,  Can I buy 1000 shares of the stock at $1.  For $1000.   it goes up to $2, then sell 500 shares of the stock with proceeds of $1000, now   having my original $1000 out of it, and still owning 500 shares.    And that not create a taxable event. Since all I   did was take my cost basis back out, and didn't collect any gains.   And then I want to repeat that over and over. Nope, not in the USA anyway.   Each sale is a separate taxable event. The first sale will have proceeds of $1000 and a cost basis of $500, with $500 of capital gains, and taxes owed at the time of that sale. The remaining stock will have a cost basis of $500 and proceeds of whatever you sell it for in the future. The next batch of stock will have a cost basis of whatever you pay for it.   The only thing that works anything like the way you're thinking, is a Roth IRA...   You can put your cost basis in, pull it back out, and put it back in again, all tax free.   But every time your cost basis cycles in, that counts towed your contribution limits unless you do it fast enough to call it a rollover. The principle behind the advice to not throw good money after bad is better restated in economics terms: sunk costs are sunk and irrelevant to today's decisions.   Money lost on a stock is sunk and should not affect our decisions today, one way or the other.  Similarly, the stock going up should not affect our decisions today, one way or the other.  Any advice other than this is assuming some kind of mispricing or predictability in the market.  Mispricings in general cannot be reliably identified and stock returns are not normally predictable. The only valid (efficient markets) reason I know of to allow money you have lost or made on a stock to affect your decision today is the tax implications (you may want to lock in gains if your tax rate is temporarily low or vice versa). From the IRS Section 1091. Loss from Wash Sales of Stock or Securities  Section 1091(a) provides that in the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law),or has entered into a contract or option so to acquire, substantially identical stock or 3 securities, then no deduction shall be allowed under § 165 The document is not long, 4 pages, and should be read to see the intent. It's tough to choose the one snippet, but the conclusion is this is the definitive response to that question.  A purchase within an IRA or other retirement account can create a wash sale if such a purchase would be a wash sale otherwise, i.e. the fact that it's a retirement account doesn't avoid wash rules. Two reasons why I think that's irrelevant: First, if it was on 3/31/2012 (two other sources say it was actually 4/3/2012), why the big jump two trading days later? Second, the stock popped up from $3.10 to $4.11, then over the next several trading days fell right back to $3.12. If this were about the intrinsic value of the company, I'd expect the stock to retain some value. "Scenario 1 - When you sell the shares in a margin account, you will see your buying power go up, but your ""amount available to withdraw"" stays the same until settlement. Yes, you can reallocate the same day, no need to wait until settlement. There is no margin interest for this scenario.  Scenario 2 -  If that stock is marginable to 50%, and all you have is $10,000 in that stock, you can buy another $10,000. Once done, you are at 50% margin, exactly." "This question and your other one indicate you're a bit unclear on how capital gains taxes work, so here's the deal: you buy an asset (like shares of stock or a mutual fund).  You later sell it for more than you bought it for.  You pay taxes on your profit: the difference between what you sold it for and what you bought it for.  What matters is not the amount of money you ""withdraw"", but the prices at which assets are bought and sold. In fact, often you will be able to choose which individual shares you sell, which means you have some control over the tax you pay.  For a simple example, suppose you buy 10 shares of stock for $100 each in January (an investment of $1000); we'll call these the ""early"" shares.  The stock goes up to $200 in July, and you buy 10 more shares (investing an additional $2000); we'll call these the ""late"" shares.  Then the stock drops to $150.  Suppose you want $1500 in cash, so you are going to sell 10 shares. The 10 early shares you bought have increased in value, because you bought then for $100 but can now sell them for $150.  The 10 late shares have decreased in value, because you bought them for $200 but can now only sell them for $150.  If you choose to sell the early shares, you will have a capital gain of $500 ($1500 sale price minus $1000 purchase price), on which you may owe taxes.  If you sell the late shares, you will have a capital loss of $500 ($1500 sale price minus $2000 purchase price is -$500), which you can potentially use to reduce your taxes.  Or you could sell 5 of each and have no gain or loss (selling five early shares for $150 gives you a gain of $250, but selling five late shares for $150 gives you a loss of $250, and they cancel out). The point of all this is to say that the tax is not determined by the amount of cash you get, but by the difference between the sale price and the price you purchased for (known as the ""cost basis""), and this in turn depends on which specific assets you sell.  It is not enough to know the total amount you invested and the total gain.  You need to know the specific cost basis (i.e., original purchase price) of the specific shares you're selling.  (This is also the answer to your question about long-term versus short-term gains.  It doesn't matter how much money you make on the sale.  What matters is how long you hold the asset before selling it.) That said, many brokers will automatically sell your shares in a certain order unless you tell them otherwise (and some won't let you tell them otherwise).  Often they will use the ""first in, first out"" rule, which means they will always sell the earliest-purchased shares first. To finally get to your specific question about Betterment, they have a page here that says they use a different method.  Essentially, they try to sell your shares in a way that minimizes taxes.  They do this by first selling shares that have a loss, and only then selling shares that have a gain.  This basically means that if you want to cash out $X, and it is possible to do it in a way that incurs no tax liability, they will do that. What gets me very confused is if I continue to invest random amounts of money each month using Betterment, then I need to withdraw some cash, what are the tax implications.  As my long answer above should indicate, there is no simple answer to this.  The answer is ""it depends"".  It depends on exactly when you bought the shares, exactly how much you paid for them, exactly when and how much the price rose or fell, and exactly how much you sell them for.  Betterment is more or less saying ""Don't worry about any of this, trust us, we will handle everything so that your tax is minimized."" A final note: if you really do want to track the details of your cost basis, Betterment may not be for you, because it is an automated platform that may do a lot of individual trades that a human wouldn't do, and that can make tracking the cost basis yourself very difficult.  Almost the whole point of something like Betterment is that you are supposed to give them your money and forget about these details." With a tax-sheltered account like an IRA, timing is irrelevant with respect to taxes. So enjoy your vacation. When you get back, don't invest in one lump sum -- break up your purchases over a period of weeks if possible. If you are investing in ETFs for your index funds, many brokers have no transaction fee ETF options now. You might have to pay a premium for the stocks on the dividend tax–free exchanges. For example, HSBC on the NYSE yields 4.71% versus HSBC on the LSE which yields only 4.56%. Assuming the shares are truly identical, the only reason for this (aside from market fluctuations) is if the taxes are more favorable in the UK versus the US, thus increasing demand for HSBC on the LSE, raising the price, and reducing the yield. A difference of 0.15% in yield is pretty insignificant relative to a 30% versus 0% dividend tax. But a key question is, does your country have a foreign tax credit like the US does? If so you (usually) end up getting that 30% back, just delayed until you get your tax return, and the question of which exchange to buy on becomes not so clear cut. If your country doesn't have such a tax credit, then yes, you'll want to buy on an exchange where you won't get hit with the dividend tax. Note that I got this information from a great article I read several months back (site requires free registration to see it all unfortunately). They discuss the case of UN versus UL--both on the NYSE but ADRs for Unilever in the Netherlands and the UK, respectively. The logic is very similar to your situation. The Paragraph talks about dividends given by Mutual Funds. Say a fund has NAV of $ 10, as the value of the underlying security grows, the value of the fund would also grow, lets say it becomes $ 12 in 2 months. Now if the Mutual Fund decides to pay out a dividend of $ 1 to all unit holder, then post the distribution of dividend, the value of the Fund would become to $ 11. Thus if you are say investing on 1-April and know that dividends of $1 would be paid on 5-April [the divided distribution date is published typically weeks in advance], if you are hoping to make $1 in 5 days, that is not going to happen. On 6-April you would get $1, but the value of the fund would now be $11 from the earlier $12. This may not be wise as in some countries you would ending up paying tax on $1. Even in shares, the concept is similar, however the price may get corrected immediately and one may not actually see it going down by $1 due to market dynamics. "The wash sale rule only applies when the sale in question is at a loss.  So the rule does not apply at all to your cases 3, 4, 7, 8, 11, 12, 15, and 16, which all start with a gain.  You get a capital gain at the first sale and then a separately computed gain / loss at the second sale, depending on the case, BUT any gain or loss in the IRA is not a taxable event due to the usual tax-advantaged rules for the IRA. The wash sale does not apply to ""first"" sales in your IRA because there is no taxable gain or loss in that case.  That means that you wouldn't be seeking a deduction anyway, and there is nothing to get rolled into the repurchase. This means that the rule does not apply to 1-8.  For 5-8, where the second sale is in your brokerage account, you have a ""usual"" capital gain / loss as if the sale in the IRA didn't happen. (For 1-4, again, the second sale is in the IRA, so that sale is not taxable.) What's left are 9-10 (Brokerage -> IRA) and 13-14 (Brokerage -> Brokerage).   The easier two are 13-14.  In this case, you cannot take a capital loss deduction for the first sale at a loss.  The loss gets added to the basis of the repurchase instead.  When you ultimately close the position with the second sale, then you compute your gain or loss based on the modified basis.  Note that this means you need to be careful about what you mean by ""gain"" or ""loss"" at the second sale, because you need to be careful about when you account for the basis adjustment due to the wash sale. Example 1: All buys and sells are in your brokerage account.  You buy initially at $10 and sell at $8, creating a $2 loss.  But you buy again within the wash sale window at $9 and sell that at $12.  You get no deduction after the first sale because it's wash.  You have a $1 capital gain at the second sale because your basis is $11 = $9 + $2 due to the $2 basis adjustment from wash sale. Example 2: Same as Example 1, except that final sale is at $8 instead of at $12.  In this case you appear to have taken a $2 loss on the first buy-sell and another $1 loss on the second buy-sell.  For taxes however, you cannot claim the loss at the first sale due to the wash.  At the second sale, your basis is still $11 (as in Example 1), so your overall capital loss is the $3 dollars that you might expect, computed as the $8 final sale price minus the $11 (wash-adjusted) basis. Now for 9-10 (Brokerage->IRA), things are a little more complicated.  In the IRA, you don't worry about the basis of individual stocks that you hold because of the way that tax advantages of those accounts work.  You do need to worry about the basis of the IRA account as a whole, however, in some cases.  The most common case would be if you have non-deductable contributions to your traditional IRA.  When you eventually withdraw, you don't pay tax on any distributions that are attributable to those nondeductible contributions (because you already paid tax on that part).  There are other cases where basis of your account matters, but that's a whole question in itself - It's enough for now to understand 1. Basis in your IRA as a whole is a well-defined concept with tax implications, and 2. Basis in individual holdings within your account don't matter. So with the brokerage-IRA wash sale, there are two questions:  1. Can you take the capital loss on the brokerage side?  2. If no because of the wash sale, does this increase the basis of your IRA account (as a whole)?  The answer to both is ""no,"" although the reason is not obvious. The IRS actually put out a Special Bulletin to answer the question specifically because it was unclear in the law. Bottom line for 9-10 is that you apparently are losing your tax deduction completely in that case. In addition, if you were counting on an increase in the basis of your IRA to avoid early distribution penalties, you don't get that either, which will result in yet more tax if you actually take the early distribution. In addition to the Special Bulletin noted above, Publication 550, which talks about wash sale rules for individuals, may also help some." Assuming you bought the stocks with after-tax money, you only pay tax on the difference. Had you bought he shares in a pretax retirement account, such as an IRA or 401(k), the taxation waits until you withdraw, at which point, it's all taxed as ordinary income. "I was told by the lawyers there was no tax consequence because the two   numbers were the same. That is correct. However, a tax professional tells me that since the start-up stock was   ""realized"" there invokes a taxable event now. That is correct. I'm now led to believe I owe cap-gains tax on the entire 4 year vest   this year That is incorrect. You owe capital gains tax on the sale of your startup stock. Which is accidentally the exact same amount you ""paid"" for the new unvested stocks. There's no taxable event with regards to the new stocks because the amount you paid for them was the amount you got for the old stocks. But you did sell the old stocks, and that is a taxable event." The stock tends to drop by the amount of the dividend -- or if you prefer to think of it this way, the stock price has been pushed up by the amount of the dividend before it was paid out. Really, all this shift does is factor out the impending dividend's effect on the real purchase cost of the stock. As such it's pretty much irrelevant except that, of course, the dividend is short-term gain that you have to pay taxes on almost immediately. Which also tends to get figured into the price folks are willing to pay for the stock. Conclusion: no, there's no real opportunity here. There's a slight tax reason to avoid buying right before dividends are paid, but that's about it. Basic principle: If it's simple and obvious,the market has already accounted for it.