It’s been another great year for Palm Beach Research Group subscribers…
In January 2018, Palm Beach Confidential subscribers had the chance to scoop a little cream off the top of the market by selling partial positions in five cryptos, for an average gain of 3,000%. That same month, we also closed out of a position in Connecticut Water Service for a 62% gain.
In The Palm Beach Letter portfolio—which focuses on safer, more conservative assets like income-producing stocks—our average realized gain this year was 37%.
And year-to-date, Teeka Tiwari’s Alpha Edge (formerly Palm Beach Income) closed all of its 29 put sales for a profit—for an average annualized return of 25%.
Sure, we realized some losses along the way as well. But our winners far outweighed our losers. And in a market that was flat and volatile all year (including a year-long bear market in cryptos), that’s the best you can do.
Unfortunately, when we make money, the taxman wants his cut as well. But there are a couple of things you can do to lower your tax bill.
One of the easiest and quickest ways to do so is through a strategy called “tax-loss harvesting.”
I’ve written in the past about why every investor should consider selling their losses. Selling losers and holding onto winners is part of our overall wealth-building strategy. And it has the potential to save you thousands of dollars come April 15—which can go a long way towards building your nest egg.
If you’ve been following us this year, you’ve probably already booked a few realized gains. But if you’re holding on to some losers, too… you can use them to offset the tax liability on your gains.
Today, I’ll show you four simple steps you can take to “harvest” your losses. (And the best part is that it takes less than an hour to do.)
How “Tax Harvesting” Works
Every time you sell an investment, there’s a tax consequence.
If you have a gain, you owe money. But if you have a loss, you might be able to write it off—and use it to your benefit.
We call this “tax-loss harvesting.” And it can help you instantly recoup a portion of your biggest losses.
Here’s an example…
Let’s say you made $10,000 in your trading account this year. You could owe up to $3,700 in taxes. To cut that down, look at your open positions.
Specifically, look at your losers. What are you doing hanging onto them anyway? As I’ve written in the past, on average, they underperform winners.
Now, let’s say you have a position showing a $5,000 loss. You can book that loss now, and it would eliminate half of the $3,700 tax bill from your gains.
That’s a potential $1,850 going back into your pocket.
How to Harvest Those Losses
To figure out if you have any losses to harvest, follow these steps (they should take less than an hour):
Go to your brokerage account.
Find the “History and Statements” section.
Click on the “Realized Gain/Loss” report.
If you made a lot of realized gains, sell some losers.
For more information, you can read this article from Fidelity to help manage taxes on your investment gains.
Remember, tax laws are always changing… and the tax code is very complicated. If you’re still uncertain about your taxes, you should consult a qualified tax preparer.
The thousands you can save will make your tax accountant worth the expense.
Analyst, The Palm Beach Daily
P.S. We’ve heard from plenty of subscribers who’ve booked gains this year from our PBRG services. We’d like to hear how you plan to use them…
Do you plan to take a vacation or buy a new car? Maybe you’re setting aside some of those gains for a child’s or grandchild’s college education? Or is it all going into your retirement nest egg? Let us know right here…
Some readers fear that either technology or institutional intervention will make bitcoin obsolete in the future…
From Anonymous: Nick, you write that we’ll know bitcoin’s true price in 2019 when institutions start flooding into the market. [See December 14 issue, “In 2019, We’ll Know the True Price of Bitcoin.”] It’s never going to happen because quantum computing will come about sooner than most mainstream people think.
Quantum computers can break today’s cryptographic algorithms as if they were single passwords. So bitcoin is soon to be obsolete. Sorry.
From Arthur F.: Nick, your essay reflects many of our fears—namely, that institutions will take control of cryptocurrencies. Eventually, we’ll see a centralized digital currency. That could have a very negative impact on the future of bitcoin. I hope that Teeka addresses this.
Nick’s Reply: Thanks for the comments, Arthur. Teeka has addressed this topic before. Here’s an excerpt from my October 1 interview with him:
From a philosophical standpoint, I hate seeing big banks co-opt decentralized technology like bitcoin. The point of bitcoin is to decentralize the financial space by removing the middleman… not to build a whole new series of gatekeepers.
The beauty of bitcoin, however, is that it’s very easy to move, trade, and store. As more people come into the space (via the banks), people will learn they can hold their own bitcoin themselves. And that’s very encouraging.
From an investor standpoint, I’m extremely excited to see the big banks coming in. They will bring tens of millions of customers and trillions of dollars with them. Crypto can’t go mainstream without the help of traditional financial firms.
I believe early investors—such as my subscribers—will be well-positioned to make many millions of dollars as traditional firms take crypto mainstream.
And our newest service, Crypto Income Quarterly, gets applause from a subscriber…
From Billy T.: Holy smokes! Really nice job on this new service. All of the instructions are terrific—so easy, even I can do it. You guys should get a medal or a hug, or something.
Last week, Teeka shared the details on his top 10 picks for Q1 2019—and showed thousands how to collect up to an extra $81,624 per year.