Blogs & Comment

Tax-loss selling

In my column to appear on the Canadian Business websiteSept 24 (after 4pm) and in the sites column archives, I take a look at tax aspects investors should consider as the year end approaches. One was tax-loss selling and using exchange-traded funds to substitute for sold securities until they can be bought back after the 30-day, superficial-loss period.
Sometimes, though, its hard to find an ETF that will serve as a good proxy. An alternative strategy is to simply sell your beaten-uppooch early in the tax-loss selling season (like now) and buy it back as tax-loss selling builds to a peak in early December. There is a good chance it can be regained at a cheaper price as selling pressures intensify frominvestorscrystallizing capital losses.
Of course, there is a risk its price could shoot upwards during the waiting period. So its a strategy one should use with holdings where the commitment is not all encompassing.
Relatedly, tax-loss season is also seen by many value or contrarian investors as prime hunting season. The Contra Guys, for example, havesaid they do most of their buying during the late November and early December period. So, considerbuying other peoples tax-loss sellers too.