This strategy is particularly intense during the during bear market years as investors and portfolio managers lock in capital losses for the current trading year. A portfolio manager will engage in tax loss selling to ensure the overall portfolio does not attract a taxable gain in the event of a small per cent of profitable positions.
Important Dates for 2011
Canadian exchanges are closed Dec 26 & 27, 2011. In order to have a sale transaction settle within the 2011 calendar year in Canada
Any issuer sold cannot be bought back within 30 days, or it will not count as a capital loss. Consider buying a similar investment if you wish to retain exposure to the related sector such as metals, energy or the financials. As an example, if you sold Kinross Gold Corp at a loss you could buy IAMGOLD Corp on the same day. You would be trading a distressed gold stock for another distressed gold stock. If you had a basket of gold stocks to sell you could buy a gold stock related ETF such as the iShares S&P/TSX Global Gold Index Fund (XGD)
IMPORANT: This group has historically printed a significant rally in the first week of the following January. The basket below could produce a one-week return of 15%
Tax Loss Selling Rebound Candidates 14-Dec11
Stocks under $1 and a volume of less than 30,000 are removed
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5 comments:
Hi Bill,
Defensive sectors appear to be leading the US market (i.e. XLI, XLP, DIA) while small caps and technology lag (i.e. IWM and QQQ). Is this cause for concern in the short or intermediate term? Can you recall a bull market in the past when this occurred?
Shawn
Grandaddy
My wife held SLF with a $4,800.00 Capital Loss. As a result of your post, we sold SLF and purchased an equal dollar amount of MFC. We now have a $4,800.00 Capital Loss.
I am not entusuastic about MFC or SLF. This low interest rate environment is not good for their outlook. I don't know if I will hold onto to MFC after the Tax Loss Selling bounceback.
Thanks for the post.
Season's Best
andyt
Ottawa
Sorry, I meant XLU (utilities) and XLP (consumer staples). Large caps are also leading.
no santa claus rally this year
Grandaddy
MFC moved up 20% after our 23 Dec purchase. SLF rose by only 15%
Today SLF is up 3.2% while MFC is up 1.4%. Investors seem to be returning to SLF after the required 30 day Capital Loss period.
MFC was paying a dividend of 4.9%, SLF pays 7% so we sold MFC bought back into SLF.
Thanks for the post.
andyt
Ottawa
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