☕ One Tax Thing to Check Before Year-End

December 11, 2023

What do financial advisors do for their clients every December with the same fervor and consistency as the Kardashians and their Christmas cards? It's called tax-loss harvesting 👩‍🌾

What's that, you ask? Tax-loss harvesting involves selling investments that are "at a loss" to offset gains you realized from selling investments "at a profit"; you do this to reduce your tax bill for the calendar year 📆

It's something you could also do yourself once you consult with a tax professional :) Cheers to less taxes! 🥂

Side note, this does NOT apply to non-taxable accounts, like retirement plans, IRAs, or flat-tax accounts like ISKs. 

Head over to the Sip of Learning section to find out more. 

 – Margarita T., CFA.

MARKETS

The European Stock Market Party Continues 🥳

Source: Morningstar, MarketWatch. Data as of December 8, 2023.
Indexes listed above are (in order): MSCI World Net (USD), STOXX Europe 600 (EUR), MSCI Pacific (USD), S&P 500 (USD), MSCI Emerging Markets IMI Net (USD)

Markets  

  • Feeling greedy... The CNN Fear and Greed Index remained yet again on "Greed" last week for the fourth week in a row. After the US market had its best month in November (up 8.9%) in more than 3 years, it finished last week slightly positive. 

  • European stocks continued to play party host 🥳, with France’s CAC 40 Index and the DAX in Germany up more than 2% despite deteriorating economic activity. The market only cares about rates no longer rising (and hoping they drop soon). 

  • The Japanese stock market dropped more than -3% as things are more or less where the US and Europe were one year ago. The Japanese policy interest rate is still -0.1%. Yes, that's a minus interest rate 👀 (that means when commercial banks deposit money to the Central Bank, they will pay interest, not receive it!). So, as Japan is finally getting some sticky inflation (3.3% in November 2023) after almost a decade of no inflation (see chart below), there is speculation the central bank will raise interest rates, which is bad news for stocks. It feels like the exact playbook that happened in the US and Europe a year ago. (Remember, markets don't repeat but they tend to rhyme).

Data as of September 2022. Year-Over-Year CPI change. Source: Wolfstreet.

Coming up this week - 👀 Major Central Bank rate decisions 👀

  • Tuesday, 🇲🇽 Mexico Bank Holiday

  • 🇪🇺 ECB, 🇺🇸 Fed, 🇬🇧 BoE, and🇨🇭Swiss interest rate decisions.

  • Earnings releases by Oracle, Adobe, Accenture, Carnival.

ENTERTAINMENT BUSINESS

ROB MCELHENNEY BY THE NUMBERS

The "It's Always Sunny In Philadelphia" star is not just a smart creative but also a smart businessman.

  • $50 million Net Worth

  • 5 ft 9 in (1.77 m) Tall

  • 46 years old

  • Alongside business partner Ryan Reynolds, they bought the UK football team Wrexham FC for £2m, + spent another £8m to buy and renovate its stadium and for salaries of high-profile athletes who joined the team.

  • How is their investment going? Like a Ted Lasso finale, the team was promoted to second League, and is now valued at £8m.

  • Additionally, the club is estimated to bring £6m in annual revenues, so after the heavy investment slows down, it will turn nicely cash-flow-positive. Warren Buffet would be proud.

  • On top of that, Disney has paid the duo £9m for two seasons of the "Welcome to Rexham" documentary, which chronicles the club's rise.

  • Cheers to one day doing business deals with our girlfriends. 🥂

SIP OF FINANCE KNOWLEDGE

YOUR LAST CHANCE TO LOWER YOUR TAXABLE INCOME. 

Let's say that in your taxable trading account (where you pay taxes based on the profits you realize each year), you sold some stocks earlier this year and "realized" a gain of $3,000. 

Congrats! Now you'll also have to pay taxes on that gain since you "realized it," which simply means that you sold the investment and booked the gain. Get your checkbook to pay––WAIT! 

You still have time to lower that taxable gain before December 31. How? 

Let's say you also own 2 more stocks:

Stock A, Valued at $1,000, with an unrealized gain of $500

Stock B, Valued at $2,000, with an unrealized loss of -$1,000

If you sell stock B, you can "realize" -$1,000 worth of losses. Then, that -$1,000 will offset the +$3,000 gain, and you will only have to pay taxes on $2,000 instead. Ca-ching!

If you don't really want to sell stock B, you could consider selling it only for a short term period, 31 days to be exact (that's the minimum wait time in the US in order for the IRS to let you book the loss–check with a tax accountant at to what applies in your country), and then after those 31 days pass, you can buy it back. In this period anything can happen with the markets, so you need to decide how much risk you're willing to take to reduce your tax bill.

Again, note this does NOT apply to non-taxable accounts, like retirement plans, IRAs or flat-tax accounts like ISKs. For these accounts, you don't have to worry about tax-loss harvesting as the tax due, if any, is not calculated based on gains.

NOTABLE GLOBAL NEWS

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Finance Latte AB is not a registered investment advisor. This content is for informational purposes only and should not be interpreted as investment or tax advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice. Past performance does not guarantee future results. Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment.

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