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Financial Planning > Tax Planning > Tax Loss Harvesting

Stay the course? You're kidding

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I often lose myself in the freak show that the bailout blame game has become. The chutzpah of Chris Dodd and Barney Frank knows no bounds, considering their fingerprints are all over the housing train wreck. To see them front-and-center in developing a “solution” makes me want to puke. Ditto to Republicans and the not-so-mysterious (and completely hypocritical) abandonment of any pretense of limited government. Seems laissez-faire works just fine until it doesn’t. With all this head-shaking cynicism it’s easy to forget the real world consequences with which they’re dealing (but will little affect them, of course). Expect more stories like this from the Wall Street Journal on the reward for loyal bank stockholders:

“[For]Grace Pace, a 72-year-old widow, Wachovia’s dividend once provided a third of her income. That money is now gone. Her son recently reassured her that if things get really bad, she can move out of her home and into his basement, which has a window. Then she began to cry again.”

Stay the course just got a whole lot rockier, especially when combined with MarketWatch‘s little reminder of the consequences of all the equity fund outflows. Not only are investors losing out on the NAV, they’ve got the added tax bill from forced manager redemptions to look forward to.

“Mutual fund investors, facing large losses due to the market downturn, may also be hit this year with a high tax bill as redemptions create capital gains for their funds. As spooked investors pull their cash from stock funds — more than $110 billion so far this year, according to TrimTabs Investment Research — managers are forced to sell assets to pay them out. Often, the quickest way to raise cash is by selling high-valued stock, which creates capital gains liabilities for the fund that investors must pay at year’s end.”

I’m confident we’ll ride it out, but your knowledge of the wash rule and tax loss harvesting skills are needed now more than ever.

Read the full WSJ article at

Read the full MarketWatch article at


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