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YOUR ANNUAL TAX-LOSS HARVESTING REMINDER

By Robert Rapier • October 29, 2024 • Stocks to Watch

Printable PDF

Editor’s Note: October is typically the worst month for investors, and stocks
that are already down often see further declines. This is partly because many
mutual funds, with fiscal years ending in October, unload underperformers to
clean up their portfolios.

However, November historically brings a brighter outlook. As the best-performing
month on record, November provides an opportunity to sell off weaker stocks that
may temporarily bounce, enabling you to engage in some tax-loss harvesting for
the year’s end.

Though year-end tax planning can be done through December, it’s wise for
investors to begin planning early to have time to develop and execute a solid
tax strategy. Below, I explain how to do it.

--------------------------------------------------------------------------------

TAKING SOME PROFITS

This year’s big sector winners are utilities and real estate investment trusts
(REITs). The only sector in negative territory year-to-date is the energy
sector. Odds are, your overall portfolio is up, as the S&P 500 has gained more
than 20% this year.

You may be thinking about taking some profits, but if you have gains outside of
a retirement account, you will generate a tax liability.

A short-term capital gain occurs if you held an asset for less for one year
before selling it. Short-term capital gains are subject to taxation as ordinary
income.

For assets held longer than one year, you will benefit from a more attractive
long-term capital gains tax rate. The long-term capital gains tax rates are 0%,
15%, or 20% depending on your taxable income.

Accordingly, one consideration as we head into the end of the year is how long
you have held a security. By paying attention to the timing of your sale, you
can save yourself quite a lot on your tax bill.

But you can save even more on your tax bill by offsetting those gains with any
losses in your portfolio. This is the time of year that you should look over
your portfolio and make those kinds of strategic decisions.

TAX-LOSS HARVESTING

As you scan your portfolio holdings, take a look at the most and least
profitable holdings. If you have already sold some holdings for a profit, also
take note of that.

Companies that are down for the year can face increased selling pressure as the
year comes to a close. That’s why I prefer to do my tax-loss harvesting in
November.

If you sell off your losers and harvest those losses, you can offset
dollar-for-dollar your gains. This strategy is especially appealing to limit the
impact of short-term capital gains.

You can even sell a losing company that you still like. Just be careful about
the “wash sale” rule in the tax code. This rule prohibits a taxpayer from
claiming a loss on the sale of a security and then buying a “substantially
identical” security within 30 days of the sale.

What does “substantially identical” mean? It obviously covers selling and buying
back common shares in the same company within 30 days. However, an S&P 500 index
fund run by one company may be deemed by the IRS to be substantially identical
to an S&P 500 index fund run by another company.

SWAPPING A LOSER FOR A WINNER

Let’s say you own shares of oilfield services provider Halliburton (NYSE: HAL),
which was one of the worst-performing S&P 500 stocks this year with a decline of
22%.

You can sell those shares, record the loss to offset some of your gains, and
then buy shares in competitor Schlumberger (NYSE: SLB), which is down 19% on the
year.

When the oil services sector rebounds, your SLB shares should rise, but you got
the tax benefit out of recording the loss.

I’d rather be feasting on gains than harvesting losses, but smart moves now can
save you big time later. Just don’t wait until the last minute when all the
other procrastinators are trying to do the same. Get ahead of the herd and your
future self will thank you!

--------------------------------------------------------------------------------

PS: Robert Rapier just imparted invaluable investment advice, but the above
article only scratches the surface of our team’s expertise.

Consider our colleague Jim Fink. He made a fortune for himself trading options.
Now that he’s a millionaire, he’s ready to tell all.

As chief investment strategist of Velocity Trader, Jim Fink has devised a
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regardless of political uncertainty.



 

One of the most important presidential elections in our lifetime is just around
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In a new presentation, Jim Fink explains the simple strategy he uses to rake in
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Can Jim’s election-year trades really be this profitable? Click here to find
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ABOUT THE AUTHOR

Robert Rapier
Bio | Archive

It's hard to imagine anyone better suited to covering the energy-investment
waterfront than Robert Rapier.

Robert is no armchair analyst—he has two decades of in-the-trenches experience
in a wide range of fossil fuel and biofuel technologies, including refining,
natural gas production, gas-to-liquids, ethanol production and butanol
production.

During a six-year stretch at ConocoPhillips, Robert ran a team of engineers in
Scotland working on oil and gas projects in the North Sea.

For two years, Robert was an efficiency expert in a Texas petrochemical plant.
The process changes he implemented saved the facility $9 million a year. He
later worked as the Engineering Director for a Dutch environmental-technology
company and provided engineering support for a Chinese facility the company was
constructing.

Robert was also a butanol engineer in Germany for the Celanese Corporation,
where he designed a novel butanol unit that cut production costs by $5 million
per year.

In all, Robert has spent more than a dozen years working on liquid fuels
technologies. Along the way he's picked up five patents, including one for a
breakthrough way to convert ethane into ethylene (U.S. Patent 7,074,977).

Now, in addition to guiding readers to timely investments in Utility Forecaster
and Rapier's Income Accelerator, Robert travels the world evaluating startup
energy companies for deep-pocketed investors. After grilling management and
assessing the technology on-site, he makes a go/no-go investment decision. His
wealthy private investors and hedge fund backers trust him to make the right
choice for the same reason we do: his vast real-world experience in just about
every facet of the energy industry. If Robert votes thumbs-up, millions of
dollars flow into these cutting-edge outfits.

Robert earned his master of science in chemical engineering and a bachelor of
science in chemistry and mathematics (double major) at Texas A&M University. He
tells us he was "this close" to finishing his Ph.D. before he decided he was
having a lot more fun making money in energy stocks.

A prolific writer, Robert's articles have appeared in Forbes, The Wall Street
Journal, The Washington Post and the Christian Science Monitor -- and he has
been a featured expert on 60 Minutes and The History Channel. His new book,
Power Plays: Energy Options in the Age of Peak Oil (Apress, 2012), helps
investors sort through doom and gloom, hype and misinformation to understand the
true costs, benefits and trade-offs for each of our major energy options.

In what little spare time he has left, Robert consults for a number of energy
projects, including biodiesel, ethanol, butanol and biomass gasification
facilities.

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