The first two trading days after the United Kingdom voted to pursue negotiating an exit from the European Union were not pretty. Equity prices sunk worldwide, on the order of about 5% to 10% depending on the market.
When a small drop like this occurs, and they occur quite often (this is the third time in about 9 months we’ve had such a drop), you have options.
You can: – Freak out and sell before the bottom drops out completely. Please don’t. – Don’t just do something. Stand there! – Take advantage of what will hopefully be a short-lived drop before the rebound.
To avoid a wash sale, which could cancel at least a portion of your losses, you must not purchase replacement funds of the same or substantially identical fund within 30 days before and after you sell at a loss.
I’ll be able to take a $3,000 deduction every year for the next twenty years. I can also access money invested in funds with significant gains without taking a tax hit
Tax loss harvesting requires making a decision to sell. Buying into a similar fund prevents you from missing out on rebound gains (or realizing further losses).