Have a few really bad losses back from 2007

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Topic Author
Greatness
Posts: 226
Joined: Mon Feb 11, 2013 7:07 pm

Have a few really bad losses back from 2007

Post by Greatness »

I am reviewing my investments, both retirement and otherwise, and I have a few that never came back and have lost anywhere from 30% - 60% of their value.

UNG 62% loss (-6k)
UNWPX 60% loss (-5k)
LDF 61% loss (-4k)
USERX 58% loss (-4.5k)
EUROX 42% loss (-2.5k)
TREMX 39% loss (-2k)
BEARX 31% loss (-1.6k)
QFFOX 20% loss (-1k)


I have a 7k gain this year, so I need to sell some to get rid of the gain. However, what should I do with the rest. Everything else has come back in my portfolio. These have not. Should I start selling off the baddies to off set the gains in the coming years?

I, sadly, also own LDF for my ROTH which is also down 58%. Since I cannot recover losses in a ROTH, I have no idea what to do over there.
livesoft
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Re: Have a few really bad losses back from 2007

Post by livesoft »

I'm guessing that none of these losses are in your taxable account because you would've sold them long ago in order to get other people to help pay for your losses via the process of tax-loss harvesting.

Anyways, you should avoid loss aversion and sell them all and buy index funds instead. You should also read about behavioral finance traps such as loss aversion. I recommend Gilovich and Belsky: "Why Smart People Make Big Money Mistakes" as I found that one the easiest to read and understand.

Seriously, sell all those losers as soon as you can. With the proceeds you can buy index funds. If some of the money is in a taxable account be sure to buy the new positions AFTER the record / declaration date, so that you do not "get the dividend" that would add to your AGI.
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robertalpert
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Re: Have a few really bad losses back from 2007

Post by robertalpert »

Should you sell off funds with very high expense ratios in very narrow sectors?

Regardless of gain or loss, today is a very good day to replace all of them with broad index funds with very low expense ratios. Assuming you already have an investment plan.


http://www.bogleheads.org/wiki/Boglehea ... philosophy

See the wiki subject: investment philosophy (can't seem to get the hyperlink to work)
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nedsaid
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Re: Have a few really bad losses back from 2007

Post by nedsaid »

If you want an investment to go up in value, sell it!!! This has happened to me so many times that I have an aversion to selling. What I sell tends to do better than what I buy to replace it.

The challenge of an investor is to determine if an investment is down because of temporary problems or more permanent problems. There are times that investments have problems that can't be fixed and those are candidates for sale. If an investment's problems are temporary, it is best not to sell. The sell decision is the hardest decision for an investor to make. Making good buy decisions is easier than making good sell decisions. I say that from personal experience.

BEARX is down a lot because shorting strategies don't work in rising markets!! But if you want to maintain a hedge against another bear market, this might be something you want to keep. I don't think this is a good bet because markets tend to be up two years for every year they are down. But whether you want bear market insurance or not is a personal decision.
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bdpb
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Re: Have a few really bad losses back from 2007

Post by bdpb »

Depending on your tax situation, it may make sense to sell these after Jan 1, 2014.

If you have no carryover losses and no significant gains this year, you should pay CG tax on your current gains at 15% or 0%. Then, sell your losers in 2014 and take the CG loss at your marginal tax rate of 25% or 15%.
Topic Author
Greatness
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Re: Have a few really bad losses back from 2007

Post by Greatness »

I have a 7k gain right now in my taxable account. I was planning to sell 7k in losses to offset the gains. The remaining losses I was going to sell off next year to offset next years gains. These were purchased back in 2007. I now have index funds. We all make mistakes when we first start out investing. I am, without a doubt, not an exception to this rule.
livesoft
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Re: Have a few really bad losses back from 2007

Post by livesoft »

You really should not wait to sell because it actually makes it worse for you. That is, you will save more on taxes if you sell now. There is no need to wait at all to offset realized gains because the losses can be used to offset ordinary income.
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Topic Author
Greatness
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Re: Have a few really bad losses back from 2007

Post by Greatness »

It's actually a c-corp for my investments. With c-corps, the investments are taxed as ordinary income. However, you cannot write-off investment losses against ordinary income.
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youngindexer
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Re: Have a few really bad losses back from 2007

Post by youngindexer »

Greatness wrote:We all make mistakes when we first start out investing. I am, without a doubt, not an exception to this rule.
Some of us were lucky enough to find bogleheads before we started investing :mrgreen: I would accept your loss and move what's left of your principal into index funds. You admit these investment decisions as a mistake why not fix it as soon as possible?
Topic Author
Greatness
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Re: Have a few really bad losses back from 2007

Post by Greatness »

I was hoping they would come back like many of the other ones have done.
bdpb
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Re: Have a few really bad losses back from 2007

Post by bdpb »

Greatness wrote:I have a 7k gain right now in my taxable account. I was planning to sell 7k in losses to offset the gains. The remaining losses I was going to sell off next year to offset next years gains. These were purchased back in 2007. I now have index funds. We all make mistakes when we first start out investing. I am, without a doubt, not an exception to this rule.
You may want to give us more details on your overall portfolio and investment plan. Why are you selling for more gains next year? If you are rebalancing or rearranging your portfolio, why not sell this year?

All else equal for everything you wish to sell (including winners and losers), you should sell the winners in 2013 and pay CG tax rates. Then, immediately sell the rest (the losers) on Jan 1, 2014 and write off 3k of losses on your income taxes at ordinary rates for many years into the future.

If you plan on investing on a regular basis to taxable accounts, then it may not be necessary to do as I suggest because you will have plenty of TLH opportunities in the future. You still want to sell everything this year except for a few years of tax loss writeoffs (3k,6k, 9k).
robertalpert
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Re: Have a few really bad losses back from 2007

Post by robertalpert »

Greatness wrote:I was hoping they would come back like many of the other ones have done.
Whether they come back or not, is irrelevant. If the funds no longer fit into your investment plan, then they are taking up valuable space within your portfolio. Delaying their sale and replacement, means delaying the re-structuring to using low cost funds, (perhaps index funds) where you would achieve the return of the market.

If these "baddies" were to increase like gangbusters, that may actually be counterproductive because you might be tempted to keep them despite their clear departure from your current investment criteria.
dbr
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Re: Have a few really bad losses back from 2007

Post by dbr »

Greatness wrote:I have a 7k gain right now in my taxable account. I was planning to sell 7k in losses to offset the gains. The remaining losses I was going to sell off next year to offset next years gains. These were purchased back in 2007. I now have index funds. We all make mistakes when we first start out investing. I am, without a doubt, not an exception to this rule.
Given what you said about the c-corp ( I am not familiar with this kind of tax handling.), this plan sounds fine. After all this year is the next few days and next year is three weeks off.

However, aren't losses subject to carryover so that it is fine to sell now, not that it would make much difference? The only reason not to sell more loss than you need in a given year is to have that loss "wasted" inefficiently against some low tax rate gain. If you can't work against the highest tax rate gain, ordinary income, then does it matter what year you sell? What you can do is run this year's and next year's tax returns against different choices and see what difference there is.
pshonore
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Re: Have a few really bad losses back from 2007

Post by pshonore »

UNG is a Natural Gas LP. You're going to have to look at all the K1's you received over the years to get the proper loss number to report, or it may show up on the K1 when you sell but it won't be as simple as Sale Price - Purchase Price. See this thread for more info - it concerns UGL but the tax treatment is quite similar
http://www.bogleheads.org/forum/viewtop ... =2&t=93365
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