How Tax-Loss Selling Can Help Grow Wealth Over the Long Term

Investors often consider timing of stock purchases and sales as important to growing one's nest egg over time. The old mantra of "buy low and sell high" has been pounded into most of our heads since our youth, and finding ways of generating outsized returns over time is often what many investors spend a heck of a lot of time doing.

One quasi-"free lunch" which many investors believe can create significant short-term value is tax-loss selling; that is, the act of selling one's losing positions near the end of the year for the tax loss, and buying said securities back at the beginning of the year (if one wants to hold this position for the long term) or simply walking away (if one believes said company is a poor long-term investment or has little upside in the future).

For long-term investors such as myself, I do believe that tax-loss selling can create both short- and long-term value, and would encourage investors who are seeking to hold onto a given portfolio of stocks to engage in tax loss selling if the loss originated in a non-registered account (there would be no tax loss benefit from a RRSP or TFSA), the benefit from doing so is substantial enough, and one wishes to reinvest the tax refund into one's retirement back into a registered account, for an additional tax benefit.

Minimizing taxes via tax-loss selling is one of the few rare ways one can gain simply by moving money around in the short term, and should be considered in conjunction with a registered tax professional.

Invest wisely, my friends.