Scalper1 News
Despite a somewhat volatile year, stocks enter December just about where they rung in the year. However, 2015’s basically flatline performance represents the first year in the last four, where investors collectively won’t have robust gains to cheer about, assuming no massive rally before the ball drops. Even though the S&P 500 hasn’t wavered much until now, it is likely that do-it-yourselfers might be sitting on some substantial losses if they are holding certain stocks. Many marquee-name large-cap companies with household familiarity have taken it on the chin during 2015. Here is a sampling of stocks that have experienced a rather rough year, with their YTD returns as of the last day of November: Whole Foods (NASDAQ: WFM ) – down ~ 40% Wal-Mart (NYSE: WMT ) – down ~ 30% Nordstrom (NYSE: JWN ) – down ~ 30% IBM (NYSE: IBM ) – down ~ 14% Chevron (NYSE: CVX ) – down ~ 20% Procter & Gamble (NYSE: PG ) – down ~ 17% American Express (NYSE: AXP ) – down ~ 22% While now’s a good time to reassess one’s commitment to companies whose market values have tanked, it may also be a good time for those who don’t own them to consider adding them. Let’s look into why. Understanding Tax-Loss Selling As we approach the end of the year, it is common, if not likely, for stocks that have been roughed up during the year to experience even further, artificially inflated inspired, selling. Due to the calendar-year way in which Uncle Sam evaluates our capital gains and losses, most investors will try to balance out gains taken prior in the year with losses. Selling a stock that has depreciated since time of purchase is a sound way of decreasing one’s tax bill come April 15. Since most investors won’t wait until the last minute to do this, it is possible that we are in the midst of tax-loss-inspired selling right now. If I have a $2,000 gain in stock ABC that I sold back in May, but I have a $2,000 loss in IBM, I can sell IBM to offset the gain I took on ABC back in May. Holding period (greater or less than 1 year) will determine specifically how these gains and losses can be offset. And one’s tax bracket will determine the ultimate amount that an investor might have to pay on gains. In any case, taking the time to evaluate your personal capital gains situation is a savvy, necessary move come the end of the year. Tax-Loss Selling Strategies To avoid what’s known as the “wash sale” rule, and keep a position in a stock they like, some investors will “double down” on a losing position in November (or earlier), then sell half the position before the end of the year. The wash-sale rule prohibits the taking of a loss on any security which was purchased 30 days before or after the loss is taken. This strategy enables the investor to lock in the loss and keep the same position heading into the next year. Another strategy may be to agree to part ways with a losing stock, lock-in the loss, but immediately buy shares of another company that does business in the same space or that tends to trade in a similar manner. This is sometimes referred to as a stock swap or stock rotation. One might say, I’m done with Wal-Mart, a mass merchant, but rotate the sale funds over into a stock like Whole Foods, a food-focused retailer. Or the investor might decide retail looks miserable altogether, selling Wal-Mart as a result, then buying into a totally new sector. Whatever the decision, the goal is to minimize calendar year capital gains by December 31, limiting tax liability come April 15. Tax-Loss Buying Strategies Simply put, if a stock is getting hit unnecessarily come the end of the year, it may turn into a real bargain, even if it is experiencing some near-term problems. Alongside your holiday shopping list, make a list of some 2015 “losing” stocks you’d like to own, pick a buy point, set a buy-limit order, and hopefully get your order filled. If the stock looks like a bargain now, don’t wait – the sale may not last! While tax-loss season is generally focused on selling strategies, it’s the buyers that may have the most to gain out of tax-loss season! Original post . Scalper1 News
Scalper1 News