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Deutsche Bank AG recently analyzed 74 diverse asset classes globally. The chart below shows that 2018 is on track to be one of the worst ever for market environments according to at least one metric: A full 89 percent of asset classes have returned losses in U.S. dollar terms, more than any previous year for more than a century.

To mitigate the pain of losses from these asset classes, some investors may want to consider tax-loss selling, also known as tax-loss harvesting. Using this strategy, an investment with an unrealized loss can be sold, offsetting any realized gains in the portfolio.

Investors may use losses this year to offset up to $3,000 of ordinary income tax and any capital gains realized this year. They also may carry forward the losses to future years indefinitely.

It is important for investors who adopt the tax-loss harvesting strategy to avoid trigging the “wash-sale” rules. Under these rules, capital losses would be disallowed if an investor repurchases within 30 days the security that was sold. The rules require investors to wait 30 days before replacing loss positions with identical securities. However, investors could replace the security with a similar asset to try to maintain the portfolio’s asset allocation and expected levels of risk and returns. So, for example, an investor could sell a healthcare insurance company stock and buy another.

The tax-loss harvesting strategy can be implemented at any time of year, but typically happens at the end of a tax year because for many investors it is an important tool for reducing taxes. Cardan Capital Partners takes an active approach to tax-loss selling when opportunities present themselves. If you would like to learn more about this strategy, please contact us.

The Firm is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.


Disclosures: Any reproduction or distribution of this presentation, as a whole or in part, or the disclosure of the contents hereof, without the prior consent of Cardan Capital Partners, LLC, is prohibited. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy, completeness or timeliness of this document. Investments in securities entail risk and are not suitable for all investors. This is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC. For further information please see Important Disclosure Information

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