Performing A Tax Loss Selling Analysis

Since it is historically the weakest month of the year, I do my tax loss selling for taxable accounts during October. Prices tend to be weak, so you can maximize your capital loss offsets by selling any losers you have in your portfolio, and thereby minimize your capital gain tax bill the following April. This also frees up cash to put to work before the seasonally strongest six-month period for stocks (November through April).

Something else I do myself, and recommend for all of you, is to carefully analyze those stocks you sold at a loss. Don’t simply try to purge them from your memory. Instead, study them and figure out what common themes those positions possessed. That way, you can learn from your mistakes. We’re all going to make them, but it’s great if you can figure out why they didn’t work out the way you thought they would, and most importantly, use such knowledge to maximize your future investment performance.