Q: I'm confused about when it makes sense to do tax loss selling. I am down almost 30% in CSU and LMN. Does it make sense for me to sell and register the loss and possibly rebuy after the 30 day wait? I am an older senior and don't have a lot of time to patiently wait for recovery, and despite the speed with which it dropped, I suspect recovery will be much longer. My main confusion, I think, is not really understanding how tax loss selling actually works.
5i Research Answer:
Tax losses crystallize over a 30 day period. So, an investor can sell at a loss in a taxable account and as long as they do not transact in it for 30 days before and after the sale, it can be utilized as a tax loss. This can be done at any time of the year and typically we prefer to take advantage of losses throughout the year, opposed to waiting to year-end when everyone else is trying to do the same thing.
We like both names but if wanting to lock in some losses, we might sell one name and wait thirty days and buy it back. Then sell the other and buy it back after 30 days. The two names will likely be correlated to some degree, so selling one at a time allows an investor to maintain exposure overall.