It's December. Time again to dip into my long-suffering tech stock holdings and dump some, thereby taking the maximum deduction for April '08's tax season. Anybody else?
It's December. Time again to dip into my long-suffering tech stock holdings and dump some, thereby taking the maximum deduction for April '08's tax season. Anybody else?





Better late than never ! However, I usually don't wait until the end of the year to dump losers. I set a maximum 20% trailing stop (much less on certain types of stocks / ETF's) and if the stop gets hit the stock / ETF shares get automaticlly sold then and there. I then redeploy the proceeds into something different that hopefully won't result in additional losses. But yes, definitely, if you're sitting on shares that have experienced a significant drop in share price since you bought them, it's far better to sell them off and use the tax loss to offset taxable gains on other investments on THIS year's taxes than to continue to hold the losers and pray for a miraculous recovery (which is EXTREMELY UNLIKELY).
My sell philosophy mirrors Melonie's. Then again, I wasn't investing during the Dot-Bomb era, and didn't buy into the hype (was pretty young and out of college, focused on savings and debt elimination then). Stock options from a company that never went public don't count, lol!
I have clients who have 100+ years of existing capital loss carryovers from that era. Ouch!
As for the sell-discipline I use with clients, I try to use the same as above. Some people are really stubborn though, and won't let me sell their precious stock. That's when I write really, excellent documentation of all conversations and emails, and keep several copies, particularly for my compliance people. Eventually, people like to have someone to blame for their mistakes. It won't be me.
Mel, refresh my memory, what's the statistical likelihood of a 20%+ loss regaining back to positive? I forget, but its really bad, and the reason I created my strategy in the first place....
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M



Actually of all the strategies, buying the dogs has been proven to beat S&P 500 by 1-2% points. This has also been backtested for the past 80 years.
This is purely in a tax shielded account.
Buy Losers and Sell Winners. Of course, if you use a rebalance strategy, it sort of automatically aligns to this strategy





I can't lay my hands on the documentation to prove this, but in terms of NUMBER of stocks it's something under 20% over the past 20 years. This was skewed downward by the dot-bombs where the recovery rate was in the single digits, but skewed upwards by the post 9/11 broad market cliff-dive and subsequent broad recovery.Mel, refresh my memory, what's the statistical likelihood of a 20%+ loss regaining back to positive? I forget, but its really bad, and the reason I created my strategy in the first place....
However in terms of absolute dollars, that one in five stocks that has fallen 20% plus and later recovered usually rises a LOT more than just 20%. But to counterbalance this, two of the other stocks will decline in value all the way to zero as the company goes belly-up !
The big issue for me of course is the 'lost opportunity cost' of leaving your investment capital tied up in a loser stock. Even if that loser stock stabilizes and doesn't lose any additional share price, you've still got the trade-off that by selling the loser stock and putting the money into a different stock / a bank CD / a muni bond etc. you will be generating positive earnings. Thus people who refuse to sell at a loss and continue to hold onto losing stocks for years in the vain hope that they'll eventually 'break even' are losing out on 5-10-whatever percent of positive earnings potential with each passing year.



I know exactly where you are coming from there. Some of my files have copies of 10+ emails where I suggest they do some selling - to no avail. What can you do?
It is funny how the human memory gradually rewrites itself to recall what it wants. I have one client who always complains about 'my' investment advice re his tech stocks - but he and I didn't meet until early 2003...
I had some clients lose their entire retirement. Fortunately he was a Fed. employee and had a pension plus TSP.
It was sad to watch but they refused to let me sell their ONLY stock in the entire portfolio. Until it was found that the company was writing fradulant contracts and went under. I cannot place unsolicited trades without prior approval.
Then, the Feds started to cut down on his retirement and pension. They were really upset, and there was nothing I can do. I actually cried (not to them, but to my boss.)
That was 3 years ago. Today, I am extremely proactive, and will not sit there like some broker-slave and watch that happen.
If prospective clients come to me, show me their statements, and are unwilling to reduce large, dangerous positions like that, I won't hire them.
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M





Doesn't the dump happen in January as to put off paying capital gains on high flyers like aapl, rimm, goog, bidu. I bought puts on goog and bidu this morning (yay!)
Rebecca Avalon





^^^ smart move ! The 'four horsemen' have been responsible for a lot of recent market 'levitation', and eventually things that have increased in price well beyond fundamentals will wind up giving back a good share of those fundamentally unjustified gains.
And yes some people hold off selling their winning stock shares until January 2nd because the capital gain is then booked during the 2008 tax year. However, this isn't as much of a plus as it might appear to be on the surface since by the letter of IRS tax code the seller should also be making an estimated tax payment for the capital gain by the April 15th 2008 estimated tax deadline for 1Q2008 income.
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