SELLING STOCKS FOR TAXES AT YEAR END
Buying stocks is only half of the equation because eventually, every stock you own will need to be sold. Selling stocks for tax purposes isn’t something I would usually recommend because in theory, you should be buying and selling based only on the fundamentals of your holdings. In other words, if you think a company is going to do well you shouldn’t ever be selling just for tax reasons and conversely, if you believe a stock is on it’s way down you should sell right away regardless of the time of year.
However, only four more days of trading are left in 2011 and it is a good idea to take a last look at whether you will be reporting a gain or a loss for the year. The market was very choppy this year and that means most people will have both stocks that performed well along with stocks that went down. This is the last chance to sell your losers and take the $3,000 loss for taxes if that is something you want to do.
Being allowed to only take a maximum loss of $3,000 per year on stocks is one of the rules I am most upset about. Our politicians make rules that are often absurd and this is one of them but they get away with it because in reality, it affects so few people. With the huge swings in the market as well as inflation over the last 10 years, a mere $3,000 is a laughably small amount and that number needs to be raised significantly. People who lost tens of thousands or more in stocks during the 2008 downturn are probably still trying to get tax credit for those losses. This is just another example of how self serving Congress is and how politicians DO NOT have our best interests in mind.
The last week of trading is usually light as many people are on vacation. Portfolio and hedge fund managers spend this time making last minute moves so that the stocks they want to show they own will be on the books for year end. This week or two after Christmas is when the Santa Clause rally typically takes place so the market may go up. But that is often a temporary bump if it happens at all.
2012 is a big election year and when you combine that with an ever faltering economy it means that stocks will probably continue to be tumultuous. Industry changing events are happening so often now that it is hard to keep abreast of all the news!
