Tax Loss…. What?
It’s been a while and today I am back with a pretty technical topic but it is a topic that can make a big difference in your returns. The topic of the day is Tax Loss Harvesting. In its basic definition, this consists of selling an investment (like stocks/ETFs/ Mutual Funds) at a loss. Why? So you can use the loss to offset a gain in some other investment. While you sell you loser investment, you also buy something very similar. This way, you maintain your desired asset allocation while paying less in taxes. Remember that portfolio of 80% stock and 20% bonds we originally established? That’s your allocation.
By now, you are probably thinking: “Why in the world would you torture me with such a boring topic?” Here are a few reasons. #1: It is a really good way to pick up extra returns = make more money (read on for more on this one). #2: It is 2016 and there is no excuse not to do it. And #3: It will take 10 minutes to read this and you will learn something new that might help you make more money in the future. The younger you are when you start doing this and the higher your tax bracket is, the better your life will be as a result. Read More