Rational Investor Fund

Posted onFebruary 12, 2012 - 11:35 pm by Admin | 0 Comments

A sound investment plan looks for tax saving ideas year round, but the end of the year is when many U.S. investors begin thinking about the upcoming April tax filing deadline. Ordinary investment accounts, IRAs, qualified retirement accounts, and estate assets all offer opportunities to reduce the current year’s taxes and trim future federal income tax liability as well.

Investment Tax Tips

Investors with unrealized capital gains are often reluctant to sell their profitable positions, preferring to delay the capital gains tax as long as possible. However, doing so for long periods can result in lopsided portfolios with too much exposure to one particular stock or asset class. A better approach is to rebalance the portfolio at least annually, which can mean selling some of the “winners” and using the profits to increase positions among the “losers” at lower prices.

In its simplest form, this approach would almost certainly result in capital gains tax exposure. However, there is a way to offset some of the gains by selling some of the losing positions as well. The resulting capital losses can be used to negate some or all of the capital gains generated from sale of the appreciated positions, yielding a source of tax free income for the investor.


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