Author Topic: Can/should I sell part of a position to lower my cost basis?  (Read 1475 times)

leighb

  • Stubble
  • **
  • Posts: 145
Can/should I sell part of a position to lower my cost basis?
« on: August 05, 2015, 08:16:45 PM »
So I bought over the course of this year a REIT that I still really like. Today it took a big hit when it missed its earning target. Because I like it, I do not want to reduce my position. Seeing that REITs in general are a risky investment, I am hesitant to add to my position as well. That being said I believe folks are overreacting to the earnings report. The stock dropped .34 in one day. I do think it should have dropped, but, not by that much.
I have about 1000 shares that I bought at 7.8, other shares I've bought closer to 7.5. What I want to do is sell the more expensive shares and buy the cheaper ones today at 7.1.
I rarely deal in the short term. I know there are Wash rules, that I need to follow. I assume, if tomorrow I buy at the lower price of 7.1 it would be cool to sell those more expensive shares when the stock rebounds. Would I be violating the rules by doing it in the opposite order? Selling the expensive shares and buying the cheap ones? My understanding is that would be a no no. Why I want to do this is so I can offset my capital gains.

 
My investing background: I've had a portfolio for 15 years, but am still a novice. My portfolio is mostly inherited and a mess. I'm trying to reinvest more risky investments (penny stocks) into index funds, but that's a post for a different time. Currently 3-5% of my assets are in REITs.   

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5130
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Can/should I sell part of a position to lower my cost basis?
« Reply #1 on: August 05, 2015, 08:22:54 PM »
If you sell shares for a loss and then buy more shares within 30 days (before or after), that's called a wash sale. You are allowed to do wash sales, but when you do you may not claim the loss on your taxes. Instead, the amount of loss is carried forward until you eventually sell the replacement shares, provided that you don't have another wash sale situation. In short, there's nothing to be gained by selling at a loss now and then buying a similar number of shares shortly before or after, so don't bother.

leighb

  • Stubble
  • **
  • Posts: 145
Re: Can/should I sell part of a position to lower my cost basis?
« Reply #2 on: August 05, 2015, 08:28:27 PM »
 
If you sell shares for a loss and then buy more shares within 30 days (before or after), that's called a wash sale. You are allowed to do wash sales, but when you do you may not claim the loss on your taxes. Instead, the amount of loss is carried forward until you eventually sell the replacement shares, provided that you don't have another wash sale situation. In short, there's nothing to be gained by selling at a loss now and then buying a similar number of shares shortly before or after, so don't bother.

Great Thanks, so the order doesn't matter. Basically, I can't buy and sell in 30 days in any order and claim a loss. I suppose that makes sense.