Consider Taking Tax Losses Now – Beat The Year-End Bounce Rush
Recent stock market volatility has resulted in portfolio losers. NOW is the time to consider tax-loss selling to beat the year-end bounce rush. There are several questions to ask when considering taking a stock tax loss. With all the volatility in the stock market this year, many investors probably find themselves holding some stocks in which they have sizable losses. By selling those losers and realizing those losses, you can use the losses to offset taxable gains that you may have realized during the year. Most individual investors think about this strategy in December, which means that this tax-loss selling could push the price of some of these stocks even lower. This means that you probably don’t want to be selling your losers then, and may in fact want to consider buying some of these beaten down stocks to take advantage of this tax-generated downward pressure that goes away on January first. I’ll discuss this in more detail in the December issue of my investment newsletter . Moreover, under the U.S. tax code you can buy a stock back 31 days or more after selling and still recognize the loss. (If you sell in 30 days or less, the IRS will not allow the loss). This way you can take the tax loss and still participate if the stock eventually rebounds. When considering taking a tax loss in a particular stock, there are several questions you need to ask yourself: “Do I really want to own this stock anymore?” If not, you should just sell it and move on to other stocks with better gain potential. If you do want to own the stock for the long haul, there are other considerations: “How likely it is to rebound sharply in the next 30 days?” If you think the likelihood is high, you probably should not take the tax loss. Similarly, if you have a sizable position, you need to consider whether there is enough trading volume in the stock to get out and then back in 31 days later without significantly affecting the stock price. If you are concerned about the volume in the stock, it may be better to look elsewhere for your losses. Read more of my most recent investing advice and turnaround stock picks . Share this article with a colleague