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Last week I for some reason I decide it was a good time to do a little more tax harvesting. My financial holdings in Wachovia/Wells Fargo had lost significant value and I was beginning to think that the decline had leveled off a bit. I figured why not go ahead and lock in the loses to harvest some tax savings and shift that money into a financial ETF.
I believe it was on Tuesday morning I put in a sell order for 100 shares of Wells Fargo and it executed at $9/share. However I was stuck in meetings for several hours and lost track of time. By mid-afternoon I was able to log back into my brokerage account and confirm the sale. However, by that time there had been a pop in the market and the financial ETF which was trading at roughly the identical price as Wells Fargo was now ~$10/share.
It was then I made the critical mistake - I hesitated. I didn't want to buy the financial ETF at the higher price so I instead put a limit buy order at $9/share. The rest is history - nearly two weeks of rallying in the financial sector and I look like an idiot. Maybe the market will turn south again and I will be able to recover from my mistake, but maybe not. The KBE financial ETF is currently ~50% higher than where it was just about a week ago- its amazing how quickly things turn.
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Comments (9)
0 market timing skills. At least technicals would have told you that you were selling when the market was terribly oversold.
The lesson is when ordinary people sell, it's time to buy.
Posted by aa | March 20, 2009 1:46 PM
if your principal was only $900, this was a relatively inexpensive reminder not to try to time the market.
Posted by Crash | March 20, 2009 2:24 PM
you need not worry, the junk basket of financials are on their way down again, buying around S&P 741+ could be good if you are bullish that 741 will hold. On a sidenote are you looking at gold in anyway?
Posted by waren's bufet | March 20, 2009 4:04 PM
2mill:
do not get suckered by the rally.
- s.b.
Posted by some body | March 20, 2009 7:08 PM
I feel your pain. I actually dumped my entire life savings (what seems like it) into an index fund following the S&P 500 at the PEAK of the market. You just can't time it.
Posted by Trevor @ Financial Nut | March 21, 2009 1:41 AM
Don't beat yourself up over investments you could have made but didn't. I know its just human nature. I was kicking myself the other day for not buying Citi. Even though I don't like the company I've made some decent money trading it short-term. When it got down to $1 I was going to buy 30k shares just for a short-term trade (e.g. a few days to a few weeks). I knew it was getting pounded largely because of the arb between prefs and common. But at the last minute I decided not to, a week later it got up to over $3.50. That $30k could have turned into over $100k in just a week. I have a ton like that. One thing I can say though is in this type of market if you are down a lot (e.g. 50% or more) you need to take some big gambles if you want to make your money back - of course you can lose a lot more than too. If you can't stomach that then just get used to the new reality that you won't make back your losses. A broad diversified portfolio that is down by 50% won't double, but a lot of beaten up individual stocks will double, triple, etc.
Posted by JD | March 21, 2009 2:34 AM
Let me get this straight, you would rather trade off $10s of thousands of dollars in losses in the rest of your portfolio to go back and make up for a $1000 "mistake" on one trade? Don't beat yourself up over this 2Mil. Stay the course, and remember why you sold those share in the first place..to take a tax loss.
Posted by Golfer65 | March 22, 2009 10:52 AM
What am I missing on tax harvesting? I am sitting on some meaningful losses but it doesn't seem to make a lot of sense to me. If you sell at a low and buy an equivalent security at a similarly low cost basis that new purchase will subject to capital gains from the low base. Don't the tax losses on the sale and the capital gain on the new purchase just offset when the $ gains on the ETF equal the $ losses on the WFC sale?
Posted by Ocho Dedos | March 22, 2009 12:44 PM
Ocho Dedos,
What you are missing is, the capital losses first go against capital gains, however, up to $3,000 can go against ordinary income which is taxed at a higher rate.
Posted by David | March 24, 2009 4:54 AM