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Tax loss selling…is it a good time for investors?

Dr. Kal Kotecha Dr. Kal Kotecha, Junior Gold Report
1 Comment| December 11, 2019

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Every year on Black Friday, shoppers anticipate great deals and are lined out the door to get a discount on a TV or on a much needed appliance. Buyers will go to many lengths, including camping outside the store to be the first in or even trampling on other shoppers to get the items they desire.

Thankfully, tax loss selling is not as contentious. December generally has been a pretty good month to get deals on stocks as many astute investors want to curb their tax payouts from capital gains with taking capital losses. Generally with a lot of tax loss selling, share prices of many stocks recede.

In the junior mining sector, some may argue that some sort of tax loss selling has been upon us for close to 8 years. Even though it is not “tax loss” selling, there is an argument that the stocks may be very undervalued and it could be a good time to accumulate.

Although a comparison can be made between tax loss selling and the sell-off of junior mining stocks, there are differences. A tax-loss selling essentially is: a type of sale in which an investor sells an asset with a capital loss in order to lower or eliminate the capital gain realized by other investments, for income tax purposes. Tax selling allows the investor to avoid paying capital gains tax on recently sold or appreciated assets. https://www.investopedia.com/terms/t/tax_selling.asp

Buying undervalued stocks is a different scenario than tax loss selling but buying undervalued stocks during tax loss selling seems to be a great strategy. I believe that junior mining stocks have been unfairly beaten up and there seems to be some very good buys. During the month of December, this may be even more highlighted.

Purchasing a stock that is reaching new lows creates anxiety but is the share price decreasing because of fundamentals or because of being in an industry that has been beaten up, especially during tax loss selling? It is hard to predict what will happen in 6 months let alone tomorrow but I am a sucker for a good investment. There may some really good buys in the month of December, especially in the junior mining sector.

Happy Investing!

Dr. Kal Kotecha

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