In December of 2018, the markets delivered lemons by the truckload. We had a drop of about 7% in one week and most major indices for the US stock market were very near bear market territory.
TLH is the process of selling shares of an asset at a loss. It is typically paired with the simultaneous or subsequent purchase of a similar but non-identical asset.
When you take a paper loss, those losses will first be used to offset any capital gain you may have incurred that year. If you’re an index fund investor buying and holding, there’s a good chance you won’t have any capital gains to offset in most years.
If you sell an asset for a loss, some or all of that loss will be ineligible to be reported as a loss if you have a purchase of the same or a “substantially identical” asset 30 days before or after your TLH sale.