Taxes: Prepare to Harvest Losses

It is not too early to think about capturing tax losses for 2010. We still have a few weeks before we need to make final decisions, but I would at least identify those stocks, index funds, or ETFs that are potential sell candidates. If you are using the TLH spreadsheet to track your portfolio, the information is easy to access. All one needs to do is examine the IRR, assuming you have not moved in and out of the investment to where one may have a loss on the shares held, but the IRR is positive do to prior gains. We will assume no such complicated trades took place.

To be more precise, go into the spreadsheet and examine what you paid for the shares and what they are valued at today. If it is a loss, make note of that fact as you will want to come back in late November or early December to make a final decision if you want to take the loss. Perhaps the loss will turn into a gain in two months.

This note applies only to taxable accounts.

Photograph: Pan Flute players on the Lisbon waterfront.