Author Topic: To TLH or not?  (Read 980 times)

PencilThinMustache

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To TLH or not?
« on: September 29, 2015, 09:47:32 AM »
I (stupidly) bought VDE (vanguard energy sector) this past May at 117 with the thought that it had been the lagging sector for the past year and would be primed for rebound.  Boy was I wrong.  Now its down 30%.  Seems like it hasn't hit bottom. 

Now spare me the facepunches because I have learned the lesson every one must learn, that you cant time markets or pick stocks.  Back to my diversified index funds from now on!

But lets make lemonades out of this lemon.  Now that I've lost about $1000, should I tax loss harvest this or simply hang on and wait for it to come back?  It was a gamble, so I have no desire to buy into a similar stock and avoid wash sale rules.  It would be more like booking a real loss and moving on with a lesson learned. 

 it would equate to ~330 in tax savings.  thoughts?

rupanama

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Re: To TLH or not?
« Reply #1 on: September 29, 2015, 01:05:43 PM »
Your options are hold the investment, sell, or buy more. I think your decision should hinge on your long-term expectations for the sector and VDE as an investment. A 30% price change in a few months is relatively normal in equities markets: if that kind of volatility makes you nervous to sell, investing in stocks might cause you some sleepless nights. On one hand, you've bought-in at a low point in the energy market. If you don't need the money, hold the investment and reinvest your 3% dividend for 5+ years. You could even buy more VDE -- a declining price is a value investor's friend. I expect you'd see a positive return on your investment if you're patient. On the other hand, if you need the money, or you think there's a better investment you can make with that money, sell VDE and buy something else. Tax-loss harvesting should be something you consider as part of a broader investment plan, rather than an escape hatch to get out of an investment on which you've gone cold.