Look, my friends, I am NOT one to ever suggest market timing, well not in the context of trying to outguess the market.
However, I am one who is ALWAYS on the prowl for tax saving opportunities.
Remember, taxes and investment fees are your biggest portfolio burdens you’ll face. If you can eliminate the one (fees) and minimize the other (taxes) you’ll be far, FAR ahead of most of your peers in regard to investment performance.
So, let’s focus on the taxes today. We see another day of sell-offs. In the last month or so the SP 500 is down around 10%. Amazon is down about 25% since the end of August. Same with Apple.
Does this mean you should run for the hills, lock up your kids, and get the ammo? Of course not. Stuff like this happens ALL THE TIME! We just haven’t seen it a whole lot in the last decade. But volatility in stocks, while been minimal lately, certainly has not been eliminated.
What, then, can you do? Simple. Take your losses and use those losses to offset gains that are assuredly coming to you by year end via the mutual funds you hold.
I’ve stated many times how mutual funds pay taxes, they don’t. You do! Even when your fund is down in value, less even than what you paid for it, if they have a taxable distribution, guess who pays?
You can’t offset mutual fund capital gain distributions unless you have losses. Now may be a wonderful time to take some losses to offset those 10 years of cooped-up gains mutual funds have been sitting on.
Remember too, a 20% loss requires a 25% increase just to break even. How long is it going to take for your losing position to get back 25% to put you back where you were? I’ve no clue. You have no clue either. Thus, take a calculated gamble and consider selling for a loss to use those losses against future, or current, gains.
Oh, and by the way, you ever heard the term, ride the winners cut the losers? Of course you have, IF you’ve been following my Youtube channel at all. Just because something is down 20% doesn’t mean it’s any more likely to increase 20% than it is to decrease by another 20%. We just don’t know.
Now, be advised, I’m ABSOLUTELY not making any recommendations here. NONE WHATSOEVER. You look over your stuff and decide for yourself.
But I am making suggestions for you to look around, open your eyes at the reality which is a choppy market. Are there ways you can take advantage? If so, well, I’ll leave that up to you.