Monday, April 6, 2020

Take Advantage of the Lousy Market

Like me, you probably lost a lot in the past few months in the stock market, after making big gains last year.  Those big gains, and rebalancing my portfolio, caused me to have a higher income in 2019 due to capital gains, and pay more tax.

Is there any way to deal with this?  Yes there is.

You can sell your losers today, and get a capital loss in 2020.  Then, according to the Canada Revenue Agency (CRA), you can use these losses to get back some of the tax you paid in 2019.  Here is an excerpt from the CRA website:

So there is some relief.  By the way, don't just sell and then quickly buy back the same stock or fund, that is called a "superficial loss" in Canada (wash sale in USA).  You will not get credit for your loss if you sell and buy within 30 days.  Better to look at what needs rebalancing, sell the losers in the overweight category, then buy appropriate investments in the category that needs more weight.  For example, selling a Canadian mutual fund and buying an international fund to get more international exposure.

Disclaimer: this is not professional investment or retirement advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

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