Here’s my question:
Let’s say I buy $50 worth of VOO and after 5 years, my shares are worth $60. If I sell and then immediately rebuy VOO with that $60, and hold it for another 5 years, would I end up with the same amount as if I had just held onto the original $50 investment for the full 10 years?
Or does compounding only work if I buy and hold long-term without selling? Let’s ignore taxes and fees to keep it simple.
Can you clarify what you think compound interest means?
If you’re in a retirement account, then holding is essentially the same as selling and rebuying right away. If your $50 grows to $60, and you sell and buy back in at $60, nothing really changes since it’s still $60.
But if it’s in a taxable account, selling triggers a taxable event. You’d have to pay taxes on the gains, which would reduce the amount you could reinvest. Unless you have a tax strategy in mind, selling for no reason might hurt you.
Are you planning to rebuy instantly? If you’re repeatedly buying and selling, your taxes will add up.
If you sell at $60 and then buy again at $60, you haven’t actually changed anything, other than creating a taxable event (which you’re saying to ignore here).
Yeah, what’s the goal here? Selling means you’d have taxes, so it’s not really compounding.
Honestly, focus more on long-term investing, not short-term trading. You’d likely do better just holding and adding over time than selling and rebuying for small gains. The work and risks aren’t worth it.
There’s not really “compound interest” here, just growth over time. So yes, it would be the same amount except for taxes if it’s not in a tax-advantaged account.
No.
Nope, you won’t end up with the same amount as if you’d just left it to grow for 10 years.