Selling funds at a loss in a taxable account

At the end of last year, I wrote a post about selling funds at a loss and replacing them with other funds in the same fund categories to write off the loss against my taxes.

In that post I noted that there was plenty time to wait to do this if you were going to get socked with a fee for holding the fund for less than 3 months.

Specifically I asked:

"You think the markets will rally 40% in the next 3 months?"

In the last 5 months, one fund I own is up over 70%.

It is still down over 12% since I purchased it, but at this rate, it might not be for long. While solid gains are good, it is possible most of the losses I see in my brokerage right now won't be around much longer.

So if I want to ensure that I have loses to offset my tax burden this year, I need to sell some funds. Of course, the markets could tank again, but I will not be any more or less invested after doing this so my risk will remain the same. If markets tank, I'll be able to sell the new funds at a loss down the road and off set more taxes.

I like the categories I am invested in, so I will only sell a fund when it is at a loss and I can find a fund in the same category, that I like as much or more.

It must have equal or lower fees and fund turnover, must have solid long term performance relative to its peers, and must be a no load, no fee fund available through Etrade.

I'll go through one fund at a time and see what I can find in the next few days.

Etrade and Taxes

Last year, Etrade had alerts all over its interface and sent me notices that I may receive updated tax info, after I received my original 1099 form. I was grateful since I knew to wait to file my taxes or risk needing to refile.

This year, there were no alerts and no messages.

I assumed Etrade had updated its business processes from last year to catch up with changing regulations and was prepared to get accurate tax information to me on time.

I even read blog posts that other brokerages were warning their customers that they may get amended 1099 statements. I was pleased that Etrade was more on the ball than these other brokerages.

Boy was I wrong.

Etrade backtracked big time. On Saturday, March 1st , I got an amended 1099. I got an amended tax form in March.

As I wrote before, I don't mind that with ridiculously complicated regulations, amended forms are necessary. I'm disappointed in my government that we have overly complicated regulations in how real estate investments are taxed, but vastly inadequate regulations in how those investments are made.

Anyway- Etrade could have put the same message up that it did last year but they did not. They could have emailed me as a customer with real estate investments and foriegn investments that I may receive an amended tax form but they did not.

The good news is that I have not filed my taxes yet and I was able to sign into my turbotax account and re-download my statement from Etrade and see the information and all the impacts automatically updated. What I owe in state taxes went up almost 100%. Fortunately the increase in my federal refund went up more than enough to cover the difference.

Shame on you Etrade for not communicating what you communicated last year. You even included a document with the amended statement with a form dated 1/08 called "Enclosed is your amended Consolidated Form 1099." If you knew in 1/08 that you needed a form for your customers, why not let us know?

Shame on me for assuming Etrade was on the ball.

Kudos to me (maybe my unconscious) for waiting to file my taxes even though I had already done them.

Book Review: Navigating the Financial Blogosphere

I stumbled across Russell Bailyn's blog a while ago, and have enjoyed his articles so when he posted that he was publishing a book, I requested a copy to review.

Navigating the Financial Blogosphere serves as an excellent introduction to financial planning that references online (often free) resources for each topic covered.

There are as many approaches to 'providing' financial advice as there are financial advisers. And like anything, some are good and some are bad. On page one of Russell's book, he explains:

"All too often we trust the insight of so-called experts when it comes to managing our money and helping us make financial decisions. The problem is that many of these experts are driven by a profit motive, which leads to distorted information. Other experts have become comfortable with the idea of giving the same advice to different groups of people."

Russell goes on to explain his approach and why he works that way. As one of the "so-called experts" it is impressive to see that Russell explores what he is doing and why from the outset, in an open and honest way.

His book is organized and reads like a series of meetings with a financial planner. The very first topic talks about banking which inspired me to look at my own bank and make some changes. More about that soon.

Anyone interested in learning more about financial planning, especially those who are prone to browsing around online, should find this book very helpful. If you are thinking about hiring a financial planner, I strongly recommend you pick up this book first. If you read through this and research the topics you are most interested in, following the links provided, you will get far more bang for your buck from your planner as you will have a good base understanding of the topics you are exploring.

Many of the blogs Russell references are blogs I have found as well, but I still found the book well worth reading. The only criticism I have is that the chapter on Mutual Fund investing is a little light. Russell states, "In the blogosphere, at least at this point, no individual blogs have been written that strictly focus on mutual funds." I humbly submit that WylieMoney.com is a blog that explores mutual fund investing in depth. This book was being written while my blog was in its infancy... maybe I'll make the second edition. (hehe).

Anyway, I'll post soon about actions I've been inspired to take, reading Navigating the Financial Blogosphere. If you've got some amazon.com gift cards to spend, you can find Russell's book here: