Fidelity Select Fundranker

Fundranker Blog—Gain on Technology Is Almost Long-Term

Gain on Technology Is Almost Long-Term

Fundranker has held Select Technology since 5/4/09, but it has fallen out of the Top Eight Model Portfolio for April and is due to be exchanged on April 5, just one month short of being considered long-term for federal income tax purposes.

If you hold Select Technology in a taxable account, and since we have gained nearly 50% on it to this point, you may want to consider holding it one more month so the gain can become long-term. If you wait until 5/5/10 to exchange your shares, you will have held them more than one year, and you’ll be able to take advantage of the lower, long-term, capital gain tax rates for 2010: 0% for the 10% and 15% brackets and 15% for higher brackets. Take special note that you have to hold your shares more than one year, so if you bought them on Fundranker's 5/4/09 exchange date, you must hold them until at least 5/5/10 to qualify for long-term.

Although one of Fundranker’s basic premises is to move each month without fail into the new set of Top Eight Model Portfolio funds, Select Technology only fell to number 13 in the rankings at the end of March, so you would not be fudging the system by much, and your tax advantages could be considerable. Also, it wouldn’t be much of a stretch for Select Technology to move back into the Top Eight Model Portfolio in May.

If you do decide to wait until May to sell your shares of Select Technology, then you would have three exchanges for April 5 instead of four:

  • Sell Communications Equipment (FSDCX), buy new number four ranked fund
  • Sell Retailing (FSRPX), buy new number five ranked fund
  • Sell Electronics (FSELX), buy new number seven ranked fund

With these exchanges, you would end up holding Select Technology at least another month, and you would not buy the new number eight ranked fund. For the names and symbols of these new top-ranked funds, see the April 2010 newsletter, which was emailed to subscribers on April 1.

Posted 4/2/10 12:15pm ET in Fundranker, Tax Tips