Seems I raised a few questions from my previous post where I mentioned tax loss harvesting. This information only applies to taxable investors. Tax-deferred investors can ignore this post.

You can also read about tax loss harvesting here:

http://www.bogleheads.org/wiki/Tax_Loss_Harvesting

http://www.getrichslowly.org/blog/2008/12/22/tax-loss-harvesting-how-to-use-the-market-downturn-to-save-on-taxes-this-year/

The basic idea is you sell off your losing asset to capture the losses and apply those losses against other gains and your annual income. You then buy back into the asset in a couple various ways to build your position back again to where it should be. This allows you to bank those losses as a credit that can lower your tax bill. It is easier than it sounds and can save you big bucks. If you have losses in your taxable investments and don’t understand this, talk to a CPA. It may pay for itself many times over.

Usually you can’t do much tax loss harvesting after the first few years because most assets will have developed too much in gains so there are no losses. But with the markets so volatile the last year or so this option has become more available to investors. You can use tax loss harvesting with stocks, bonds, gold and other assets that show a loss (check with your CPA for your situation). The IRS requires you to wait 31 days before buying the same asset again to avoid a “wash sale” (which would negate the ability to write off the losses) but this is easy to work around.

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