Completion Portfolios

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kellyc319

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Can someone clarify what these things are?
I know it is…
1. actively managed using derivatives?
2. slow to implement
3. You need to find other people with the same stock position
Not understanding the overall concept of how these things work.
 
completion potfolio in IPS is while you have other financial assets beside current holding , construct a portfolio preforms like an index . It requires you have enough liquidity and it cost more time to complete.
 
I’ll summarise my understanding here:
In order to have a completely diversified portfolio under the “completion portfolio” method
– the low basis stock will slowly be liquidated
– as liquidation will result in tax consequences, other assets will be necessary to offset the high profits – essentially, you’ll have to offset tax effects
– liquidation will take time to achieve, so its slow
– not sure whether it’s actively managed – the low basis is liquidated for a diversified
portfolio, so don’t think its “actively managed” in the sense that the completion will have unsystematic risk exposures
– you don’t need other people for the same stock, that arises in a private exchange fund if I remember correctly
 
Thank you, that helped alot steven. I think the actively mgmt part and other people for the same stock is for private exchange fund (vs. public)…i got confused.
 
I don’t believe that the low basis stock is required to be liquidated. I thought it works by utilising the investors other liquid assets to purchase other stocks to diversify the position of the low basis stock and also reinvest dividends into other stocks to gain further diversification. Thus the strategy is not really helpful for investors who don’t have other liquid assets.
 
two method to manage completion , 1 reinvest dividend 2 more active use loss tax harvesting
 
Kwonyboy Wrote:
——————————————————-
> I don’t believe that the low basis stock is
> required to be liquidated. I thought it works by
> utilising the investors other liquid assets to
> purchase other stocks to diversify the position of
> the low basis stock and also reinvest dividends
> into other stocks to gain further diversification.
> Thus the strategy is not really helpful for
> investors who don’t have other liquid assets.
As losses are made in the completion portfolio you sell the illiquid holding and diversify it that is one of the keys.
 
Of course. If the other stocks in ur portfolio have unrealised Losses you can offset them against the gains on the low basis stock. Thanks for the clarification.
 
IMO, the main purpose is diversification rather than loss harvesting. Am I right ?
 
AMA Wrote:
——————————————————-
> IMO, the main purpose is diversification rather
> than loss harvesting. Am I right ?
Yes, but generally there is not enough money to diversify quickly so you must tax loss harvest over a long period of time. If he already had the money to be diversified from the start the concentrated position would not exist.
 
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