This is technically a question specific to Canada but maybe it can be applied to other countries as well.
I have a fixed number of stocks in a regular investment account and in a Tax Free Savings Account (TFSA). For non-Canadians the TFSA is like a personal investment account except there is no capital gains tax. Last year I maxed out my contributions to my TFSA but I wanted to save more money so I put some funds into a personal investment account. This year due to the economy I can’t save as much so I have extra contribution room in my TFSA. So my question is, should I just sell all my shares in my personal investment account, transfer the money to my TFSA account and buy the same stocks there? Are there any downsides to doing this?
The only thing you would really stand to lose from selling then buying from within the TFSA vs. transferring directly (in-kind) is the difference between price when that happens and transactions fees that you pay for each. (If you pay $0 in fees then it’s not that big of a difference). And you would need to have or move in the right amount of cash first, if your broker gives you back your funds back slowly.
The advantages with having stock in TFSA is you pay no tax if it grows, but you get no tax break if it shrinks.