We’re headed into the final month of 2022 and what a year it’s been!

This year’s bear market has been especially painful for investors because both stocks AND bonds have lost value. And many of the most popular stocks from last year are now down 80% or more from peak levels.

Speculative tech stocks in particular have suffered huge losses.

These stocks were extremely popular during the pandemic bull market. But this year, investors are selling stocks with high prices, low profits, and questionable long-term business models.

The current bear market rally triggered a rebound for many of these plays.

But this December, the hardest hit stocks will likely face more selling as investors prepare for tax season.

Get Ready for Tax Loss Selling

Here in the U.S., investors pay taxes on realized profits. Which means gains (and losses) are only taxed when a position is sold.

This is why many investors hesitate to sell winning positions… They don’t want to have to pay taxes on the profits!

But in today’s bear market, investors can benefit from selling losing positions.

If you sell a stock for a loss, that loss can be offset against any capital gains from earlier in the year.

So investors who locked in profits before the bear market really took off can now sell some of their remaining positions to offset gains. This reduces tax liabilities for the full year and let’s investors keep more of their hard-earned savings.

This is definitely a strategy worth considering if you’ve got losing positions in your account right now.

Even if you don’t have gains to offset these losses, selling your losing positions can be a good move.

You can carry losses into next year and offset future profits helping to reduce your tax bill in future periods.

Just make sure you don’t buy back the same position (or a “substantially similar” position) within 30 days. This would trigger the “wash sale rule” and could disallow your tax loss.

If you have questions on your specific situation, make sure you consult a tax advisor.

Trading Plays for Tax Loss Selling

Many speculative tech stocks are down sharply from their highs and are great candidates for tax loss selling.

Investors selling these names (to lock in capital losses) could drive the stocks sharply lower this December.

So if you’re an active trader, you could set up new bearish plays on these stocks. As selling pressure drives these stocks lower, your gains should add up!

More By This Author:

How To Play China’s Zero-Covid Policy Change
Crypto’s Meltdown Is Good News For Gold
Big Stocks Aren’t Always Better