Missing the Boat
I���VE BEEN WAITING since late last year for a stock market correction. No, I���m not sitting on a pile of cash and looking to time the market. Instead, I���m simply hoping to trim my tax bill.
Last October, I sold the recently vested shares of my company stock and used the proceeds to buy Vanguard Total Stock Market ETF (symbol: VTI). This sell-high-buy-high exchange was meant for diversification, but I also hoped that the market would drop later. I could then harvest tax losses by temporarily replacing the Vanguard fund with a combination of Russell 1000 and Russell 2000 ETFs. Given the prospect of an interest rate hike to counter rising inflation, a market correction was a distinct possibility.
The market seemed to move in my favor by November���s end. My Vanguard ETF dropped below my purchase price, but the extent of the unrealized loss wasn���t worth the effort of tax-loss harvesting. I waited for a bigger drop, but a market rally wiped out my unrealized loss.
My hopes were renewed during the fourth weekend of January, as I glanced through Barron���s. My Vanguard ETF shares had dropped more than 6% the week before. Another 3% drop would be enough for some meaningful tax-loss harvesting. I planned to keep an eye on the market on Monday.
I logged onto my brokerage account on the morning of the 24th and was pleased to see a further decline, but I didn���t pull the trigger. The rapid price swings made me nervous. What if the market rose substantially between selling my Vanguard Total Market shares and buying the replacement funds? Anything���s possible in a volatile market. I decided to wait another week, hoping the market would settle down.
Instead, the market pulled off a weekly gain and I missed the boat. For now, I���m keeping my fingers crossed, hoping the next boat will come along soon.
Last October, I sold the recently vested shares of my company stock and used the proceeds to buy Vanguard Total Stock Market ETF (symbol: VTI). This sell-high-buy-high exchange was meant for diversification, but I also hoped that the market would drop later. I could then harvest tax losses by temporarily replacing the Vanguard fund with a combination of Russell 1000 and Russell 2000 ETFs. Given the prospect of an interest rate hike to counter rising inflation, a market correction was a distinct possibility.
The market seemed to move in my favor by November���s end. My Vanguard ETF dropped below my purchase price, but the extent of the unrealized loss wasn���t worth the effort of tax-loss harvesting. I waited for a bigger drop, but a market rally wiped out my unrealized loss.
My hopes were renewed during the fourth weekend of January, as I glanced through Barron���s. My Vanguard ETF shares had dropped more than 6% the week before. Another 3% drop would be enough for some meaningful tax-loss harvesting. I planned to keep an eye on the market on Monday.
I logged onto my brokerage account on the morning of the 24th and was pleased to see a further decline, but I didn���t pull the trigger. The rapid price swings made me nervous. What if the market rose substantially between selling my Vanguard Total Market shares and buying the replacement funds? Anything���s possible in a volatile market. I decided to wait another week, hoping the market would settle down.
Instead, the market pulled off a weekly gain and I missed the boat. For now, I���m keeping my fingers crossed, hoping the next boat will come along soon.
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