It's currently January, and I am looking to make a large purchase some time between April and July.

About 60% of the money I want to use for the purchase is currently held in mutual funds in a brokerage account which can be sold without any commissions or transaction fees.

Suppose that my expectations in the market are more or less normally-distributed, i.e. I place a high probability on small movements and a low probability on large movements, with equal probability for losses and gains.

My unprofessional instinct in this scenario is to sell in chunks at regular time intervals. The idea being that I can average out my gains across random fluctuations, and soften the potential loss of a short-term downward trend at the expense of missing out on gains from a short-term upward trend.

Selling in fixed dollar amounts seems unwise, because then you are selling more shares when the price goes down and fewer shares when the price goes up. That only makes sense to me if I expect each individual movement to turn into a trend, which I do not. But selling in fixed chunks of shares seems like it should meet my goals as stated above.

Is this a sensible approach? If so, is there anything I should know before implementing it? If not, why is it a bad idea, and are there better alternatives?

In case it's relevant, these mutual funds have been accumulating capital gains for many years. The tax bill is going to be substantial at the 15% long-term capital gains rate no matter what I do, and I don't have any opportunities for tax-loss harvesting.

I have seen some discussion of scaling-out on this site (Is there a sell-side version of dollar-cost averaging? and Best way to take profits while still holding position?) but those questions and their answers seem targeted to more specific scenarios: needing to sell all your assets in a week, or having asymmetric market performance expectations.

  • 4
    Don't bother timing the market in the next few months. If you know you need the money - cash out and make sure the money you have is the money you need. Try to make it tax-efficient (tax loss harvesting and rebalancing while at it).
    – littleadv
    Jan 17, 2023 at 1:32
  • @littleadv it's not about timing the market, it's more about mitigating downside; I didn't make that clear in my question. I did some simulations, using a Gaussian random walk for % change in each period. My preliminary conclusion is that scaling-out has a much lower standard deviation and a much higher 5th percentile (i.e. the worst-case scenarios are less bad), which is more or less what I expected. I will post an answer when I have more time to analyze this. Jan 18, 2023 at 15:21
  • Odds are that you're overoptimizing this. What do your simulations say the actual dollar difference is likely to be, and what percentage is that of either your investments or your purchase?
    – keshlam
    Jan 19, 2023 at 2:29
  • @keshlam that simulation started 100 shares at a price of 50, selling 10 shares every 7 periods, and % returns every period were drawn from a Gaussian distribution with mean 0 and standard deviation 2.5. That strategy had a standard deviation of ~676 and a 5th percentile of ~3290, while waiting until the end of that period to sell had a standard deviation of ~1224 and a 5th percentile of ~4001. Of course selling at period 0 has a standard deviation of 0. However I'd like to do more calculations related to inflation & opportunity cost, and test the sensitivity to varying input parameters. Jan 19, 2023 at 14:23
  • If you're selling it all in a week, I'd be very surprised if there's enough price change (on average) to make taking it on one day significantly different from taking it across seven days. Short-term change, as far as I can tell, is statistically noise unless you have information that isn't specified here.
    – keshlam
    Jan 19, 2023 at 14:57

1 Answer 1


My practice when selling or buying mutual fund shares is to first check how my current investments compare to the target mixture I decided upon (with assistance from an independent advisor). I then buy or sell a mixture of shares, from a mixture of funds, that will bring me closer to the target -- basically treating this as a one-sided rebalancing transaction.

Seems to be as good an approach as any, and better than some.

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