Updated: Aug 15
One man's trash is another man's treasure as the saying goes. This is also the case when it comes to investments. If you happen to have a loss in your accounts, a good strategy might be to sell it to harvest the loss. Why? Simple, you can offset $3000 of loss against your earned income and you can carry forward the rest of the losses indefinitely to pair against future gains. That way you can prevent large taxable gains over the long term.
What happens if I really like the stock long-term? You can use one of two strategies:
I - Double up your position in the short term and after you avoid the wash sale rule (30 days), sell the first lot.
II - Sell the first position, buy a correlated position and switch back after 30 days. For instance, sell Coke and buy Pepsi, after 30 days you can switch back.
The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss, and within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so. (Source: Investopedia)
Our advisors would be happy to help you with similar strategies to help you manage your losses.
DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. THE INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.