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What I Care About This Week | 2022 Dec 12

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Photo by Tim Mossholder on

by Franklin J. Parker, CFA

The Summary

The Details

As we close out the year, there are some “to-dos” that tend to pop up. On the investments side, one of them is tax-loss harvesting.

Tax-loss harvesting is a helpful tool. In short, you sell investments that have lost value before year end. This gives you a tax credit that you can use either now or in the future to offset gains when you sell an investment at a profit.

This year’s market volatility has given some investors an opportunity to capture that tax benefit. Now that my outlook has shifted to the negative, booking losses today gives us two immediate benefits in the face of potentially more losses next year. First, we get the tax benefit. Second, we get the cash to deploy at lower prices in the future. Of course, the latter reason carries some risk that markets move higher instead of lower. But, in a volatile market, cash gives us the luxury of future choices.

Considering these tax advantages is important—especially in this environment! And, it can be an incentive to go ahead and dump some of those stocks you’ve been waiting on to recover, but suspect never will.

Taxes can be boring to talk about, but incorporating taxes in your investment strategy is a must! Tax-loss harvesting is an important component in managing your investments efficiently.

Chart of the Week

Industrial Production is a figure that is on my recession dashboard. While not perfect, we do tend to see a contraction in production over the 6-months leading into a recession (sometimes more), but certainly not always. At the moment, we are not seeing a contraction in industrial production, but it is getting close. A drop of 0.5% or more in November would be a recessionary signal.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

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