OP, this strategy might save you on dividend taxes, but have you considered, whether on an overall after-tax total return basis this is the right strategy for you? You would be buying stocks that you know little to nothing about or perhaps never have even heard of. How would you know that the price you're paying is a fair one? How would you know what the proper allocation between each position is for a maximum of diversification? How would you know, if a piece of bad news on a company is just temporary and you can ride it out or critical to the future of the company and you should act upon it?Point made/understood on Berkshire. Now, for the other 25-35 stocks?
Even investment professionals who know all these things generally have a hard time matching, let alone beating an index like the S&P500 or Total Stock Market Index. If they can't do it, how can you? And would you be happy to underperform the S&P500 or Total Stock Market Index for a number of years, just to save on a bit of dividend taxes? That would be like setting money on fire.
So I strongly suggest that you don't let the tax tail wag the dog, reconsider this endeavor and go with an ETF that mirrors a broad market index, say VTI, which is a total stock market index fund. The current yield is only 1.09%, so pretty small. Or if you must look for some tax-efficient fund/ETF that may provide even lower distributions. But even those might run the risk of underperforming overall in the process of being tax-efficient.
Statistics: Posted by tangofan — Sat Dec 06, 2025 2:31 am — Replies 47 — Views 10231