As if you needed another reason to invest in exchange traded funds (ETFs), these investment tools are also void of the "wash-sale" rule. Gregg Greenberg for TheStreet.com reminds us that there are only 24 trading days left in 2007, which means time is running out to harvest tax losses within your portfolio. Dumping depreciating stocks may not be the best idea, given that the stock could take off after selling, and under tax law you can’t claim a loss on stocks if you re-purchase it within 30 days.
ETFs, unlike mutual funds, update portfolio weightings and holdings on a daily rather than quarterly basis. Shopping around for an ideal tax swap is efficient and simple. This is a tax-planning strategy that entails selling one security and buying another that is similar, not identical.
For example, you want claim losses on your Verizon (VZ) holding, but you don’t want to lose the exposure it offers to the telecom industry. Simply buy a telecom related ETF, such as iShares Dow Jones U.S. Telecom (IYZ). If there is a rally with Verizon, you won’t miss out while you wait out the 30 days.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.