I believe in this stock but it’s pretty volatile. It’s seasonal, and right now it’s down a lot (below the 52-week low) because of seasonality and current industry issues, not because of the company’s fundamentals. If I don’t expect much price movement over the next 30 days, does it make sense to sell it for tax loss harvesting and buy it back after 30 days? The main risk I see is missing any price movement. Normally, I hold through downturns, but I’m already down a lot and think selling now could help with taxes and lowering my cost basis while I put the money somewhere else for a short-term gain. Thanks for any advice.
Just my personal take – selling and holding cash for 30 days doesn’t seem like a great idea. What seems better is selling and putting that money into another company that behaves similarly to the stock you’re selling. That way, you can still do tax loss harvesting and not miss any price action while waiting to buy back in.
@Ziv
Thanks for the input.
@Ziv
That’s what I would do too. For example, if I wanted to reset my cost basis on CELH, I could buy something like MNST, or even look at a partner or industry ETF like PEP or PBJ. By the way, it seems like funds might be a good workaround for the wash sale rule. If you’re trading between similar ETFs, it seems to be fine, even with VOO, IVV, or SPLG.
A lot of people would say this is a form of trying to time the market, which is usually not recommended. 30 days is a very short period for investing, and since you’re already at a loss (but believe the stock will go back up), maybe a better move is to hold the stock and add more to lower your average buy price during this dip.
Yes, the risk here is missing the stock’s price increase. One way to deal with this risk is to sell just part of your position. That way, you don’t miss out on any possible gains while still benefiting from tax loss harvesting. Hope you make the right choice!
I had something like this happen when I bought MSOS a couple of years ago. The price just went up and down but stayed around $4-$10 because of speculation. So, I sold it for a loss to offset $3k in dividend gains. I told myself I could always buy it back later, for a cheaper price if I wanted. Just recently, it’s been around $4, so I could have done exactly what I wanted. But now, I just think cannabis stocks are not a good bet, even if they legalize it. They’re too easy to grow with no intellectual property involved, and you know exactly what chemicals are used when you grow it yourself.
Tax loss harvesting could be helpful for offsetting gains at the end of the year.
I’m not an expert, but I think options could help here. You could sell the stock for tax loss harvesting and then buy call options, giving you the chance to buy back in if the stock price moves up during the 30 days. If it doesn’t or moves lower, you can just let the options expire and buy back at the lower price. Of course, the cost of the options will affect your overall profit.
Did you go all in on Spirit Halloween too?
Do you have any realized gains you need to offset this year?
If you need the money, feel free to take it out. It’s your choice. Just keep in mind that once you withdraw the money, it’s subject to tax. So even if you reinvest a few days later, you’ll still pay tax on that withdrawal, which could end up costing you money.
@Van
You should double-check that though.
How can anyone give you advice without knowing all the details?
Here’s another way to think about it. Sell the stock and buy something very similar to it. If you don’t know what’s similar, maybe stop picking individual stocks and look at your most confident picks. If the volatility is too high, just move the money to your best option. When you feel it’s time to switch, you’ll know.
Looks like you can predict the future, right?
Keir said:
Looks like you can predict the future, right?
Helpful comment.
Yes, you should take the tax loss (assuming you have other gains to offset). It’s a guaranteed win for you. You could also buy into an index where your stock is included, but considering the market is high right now… you might be fine holding cash for 30 days. If this stock doesn’t perform well in 2024, there will probably be more selling toward the end of the year.
@Blair
The real benefit of tax loss harvesting is not just cancelling other capital gains. It’s more about offsetting your income, especially if you don’t have any other capital gains. Income tax rates are usually much higher than capital gains tax rates, so it’s better to lower your income taxes.
@Sky
But you can only deduct $3k per year in capital losses against your regular income. That can be rough in a bad year. The good news is you can carry the loss forward to future years.