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Making the Best of a Bad Situation

The stock market has been going mostly up in recent months, but even the shrewdest investors occasionally buy stock that turns out to be a “dog.”  The trick is to make the most of losses.  Continuing to hold stock that is dropping in value, in the hopes of a rebound, may not be the best move.  Often, it’s smarter financially to cut your losses and use the sales proceeds to reinvest in a company with better short-term prospects.

Losses from the sale of stock may be used to offset capital gains earned on the sale of stock that has appreciated in value.  If capital losses exceed capital gains, the losses may be used to offset up to $3,000 of ordinary income each year until all the losses are deducted.

Another good idea for loss investments: sell the stock and give the proceeds to charity.  You’ll receive the capital loss deduction and a charitable deduction.


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