Talked to a buddy yesterday and he said that he’s selling a bunch of his stocks for tax reasons.
Yikes. Hold on, wait a minute.
I’m sure he meant to say because the stocks were duds, weren’t going to get any better, and at least he could take the capital loss to offset against any gains.
Well… at least I hope that’s what he meant.
Sure, I can see why the average investor would be tempted to dump their dog stocks. All the hype on the financial sites and tv channels and even the radio recommend to do so (which is why I’m once again buying).
But it often doesn’t make sense. If you expect the stock to rebound, then selling it now simply to lock in tax savings could end up costing you (in lost profits, not to mention the transaction fees).
Remember that you don’t get the ENTIRE loss back, you only get your tax rate’s percentage of the loss. No loss is better than loss with tax savings any day.
Suze Orman (now don’t groan, she does have some great tips, won’t make you a millionaire but still…) has some other tax tips to offer.