Ken Fisher Explains: Tax-Loss Harvesting. Is it Right for You?
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- Опубліковано 17 гру 2020
- In a year like 2020 which has seen a number of ups and downs, with some categories doing better and some categories doing worse, more investors than usual are interested in tax loss harvesting. In this video, Ken Fisher explains what tax-loss harvesting is and explores some potential mistakes that can trip up investors looking to use it in their portfolio.
Tax-loss harvesting lets you realize a capital loss when you sell a security that has declined in price. In taxable accounts, you can use capital losses to offset capital gains this year or in future years (through what is known as a tax-loss carry forward). However, the wash sale rule specifies that you cannot realize a loss by selling a security and immediately buy the same security back. You must wait at least 60 days or replace the security with a different security.
Ken Fisher explains that investors often look to replace a security they have sold with a similar security. For instance, an investor may replace an Energy stock with an Energy stock, a Technology stock with a Technology stock.
Many investors, however, may try to use tax loss harvesting at the end of the year. If many individuals are trying to sell securities which have already declined, that can push prices down even further. Similarly, if you are looking to replace the stocks you have sold, you may find those stocks have declined even further in price. This can scare some investors off. But, if you wait to buy a replacement stock until after year end, you could get whipsawed, losing as the price of the stock you are selling falls and then buying a replacement only after it has risen.
For these reasons, Ken Fisher suggests you consider tax loss harvesting well before the end of the year, maybe even in September or October, before very many people are thinking about tax-loss harvesting at all. This can help you to avoid market noise and possible fluctuations in price due to many shareholders buying and selling at the same time.
Fisher Investments would like to remind you that as with many investing matters, whether tax-loss harvesting is right for you depends on your personal circumstances. You can learn more about tax-loss harvesting on our website: www.fisherinvestments.com/en-...
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Ken is the master and great investment guru of our time
a very simple and understandable approach!
Why wait till September? This year was a perfect example of the need to do it when you have the opportunity. Those who acted decisively in March and April did very well with this strategy. Also, it is very easy to accomplish with ETFs and funds, because you can find similar funds that will track each other but not annoy the IRS.
That's interesting (the correlation suggestion).
I was seeing your Twitter comments earlier this year when you said the marker was going to rally... I thought you lost your mind (you and Bill Miller). I was wrong, didn't understand how wide open the credit markets would be. Nice call.
Thank you for your video. I'm wondering if buying an option for the stock you sold counts as if you bought the same stock right away in terms of tax rules.
This video did not answer the question posed in the title.
Is Mr Fisher is discussing secondary considerations related to wash sale avoidance (but without mentioning wash sale)?
I believe so yes. My understanding was that tax loss harvesting is a good thing. But if you want to keep your exposure to the potential upside, reinvest in something very similarly correlated to avoid a wash sale but not miss out on the upside.
The IRS wash sale loss rule period is 30 days not 60 days.
I believe it’s 30 days prior to sale and 30 days after
Graham Stephan is doing this tax loss harvesting but I suspect making more money in views from that video than the taxes he is saving.