Find the Silver Lining in Investment Losses

Investment losses are something that every investor will have to learn how to deal with at some point. While no one enjoys taking a loss, there are a few things you can learn from a loss. Here are a few things to think about when it comes to trying to find a silver lining in investment losses.

Experience

One of the best things that you will get out of a loss is experience. Every investor takes losses in their trading portfolio. Not every trade is going to be a winner. Most successful traders simply have more winners than losers. If you lose a trade, you need to look at it as a learning experience. Each trade should be looked at as an opportunity to figure out what you did wrong.

If you are serious about trading, you need to keep track of every trade that you take. Document the trade and the results. By doing this, you will be able to figure out exactly what you did wrong down the road. You can look back at your trading experiences and try to determine how you can do better. For every trade that you take, you should be able to see what went wrong and improve on it in the future. If you can keep yourself from making the same mistake twice, you will become a much more successful trader.

Tax Benefits

Perhaps the best thing about taking a loss is the tax benefits that you will receive. When you take a loss from your investments, you are going to be able to save some money on your taxes. Losses get to offset gains in your investments. For example, if you sold a stock for a profit of $1000, you would have to pay taxes on that amount. If the sale was a short-term gain (less than one year) you would have to pay taxes on the gain at your marginal tax rate. This can be as high as 35 percent. If you had to pay 35 percent taxes on the gain, you would have to pay $350 in taxes. 

If in that same year, you decided to take a loss of $10,000 from another stock that you bought, you would then be able to offset the gain. The negative $1000 and the positive $1000 would offset each other. You can even deduct as much as a $3000 loss from your personal income.

Another great feature of this rule is that you can carry over the losses to a subsequent year. For example, if you lost $1000 this year, you could potentially save that negative $1000 for next year's taxes. If you had a $1000 gain next year, the $1000 loss from last year would be able to offset it. Therefore, if you have one bad year and take some losses, it could really help you out with a tax-free year in the future. 

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