Tuesday, December 29, 2020

Tax loss harvesting for 2020

Earlier this year, I sold TJX and ROST, discount department stores, due to them cutting the dividend. These two companies are still strong and I believe have strong opportunities for the future. But the loss of the dividend was not good and I had to put the cash elsewhere. TJX and ROST, even selling after the dividend cuts, were still at large gains, so I had to offset my gains with losses. I also wanted to have a net loss of around -$3000 for this year, to offset my income.

To perform this loss harvesting, I sold $22,152 of MO on 12/24 right on the ex-dividend date so I still will get the MO dividend paid in January. And I sold $31,109 of PM today on 12/29, the last day that one could register a transaction for 2020 as the settlement date has to land on 12/31. PM went ex-dividend on 12/22 so I got the dividend as well that will be paid in January.

My positions in MO and PM are the few positions in my portfolio that have net losses, nearly all my positions are positive as the market keeps going higher. I used these MO and PM losses to offset the gains from TJX and ROST. 

MO and PM already paid their dividends in October, I had dividend reinvestment turned off so there wouldn't be any wash risks. My plan is to buy back the positions of MO and PM back in the end of January or early February after the 30 day rule.

Since the sold amount is a lot of cash, around $53K, I deployed the cash temporarily into these positions that go ex-dividend some time in January month and will pay their dividends in February. This way I get even more dividends in February.

- CL: $15,754

- PG: $15,364

- GIS: $22,166


When doing tax loss harvesting, make sure dividend reinvestment is turned off or there is potential risk for a wash. And also be mindful of dividend dates and also have a replacement position in mind you can use to offset the 30 days that you are not invested in the original position.

My plan is to recycle the temporary positions in CL, PG, and GIS back into MO and PM as MO and PM are critical to increasing the average yield of my portfolio. I need to have a way to balance high yield with lower yielding companies. Higher yielding companies I have noticed do not perform as well as lower yielding companies with higher growth potential, however the dividend is still important to me and I believe MO and PM are still safe investments if one just relies on the dividend and is not there for capital appreciation. 

However, I am open to changes in opinion as I will be researching in the coming weeks for investment ideas.

3 comments:

  1. I moved my portfolio slightly toward growth instead of dividend simply because history is very clear - high dividend less growth. I am still in dividend income but not 100% but more like 80%.

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