International Business Machines Corp. (IBM), Intel Corporation (INTC): One Reason You Should Sell These Dow Jones Industrial Average (.DJI) Losers

Why should you sell?

The simplest reason for many of you may be to harvest the tax losses. While it’s more common to do this near the end of the year, good tax planning and portfolio management is a year-round exercise. In a strong market, this strategy can give you two advantages:

• If you’ve sold big winners, losses can cancel out any amount of taxable gains
• You can apply up to $3,000 ($1,500 for those married filing separately) above and beyond taxable gains against other income

So, not only can it reduce taxes on any gains against stocks you may have sold, but you can apply the balance against your regular income. Depending on your income tax bracket, this could be worth $500-$1,000 in tax savings against regular income.

Sell versus hold; final thoughts

Here’s the share price performance of these three over the past 12 months:

AA data by YCharts

As you can see, all three stocks have seen periods of volatility, and there’s no reason to think this will change. The share price could move up or down relatively quickly from where it is today. With that in mind, part of your strategy should be on whether or not your long-term plans are to be invested in the company, and whether selling at a loss today and looking to add back later, is worth the risk of paying more and not ending up ahead of the tax man.

The bottom line is all three companies offer strong reasons to hold as well as legitimate reasons to sell. But if you want to capture tax losses today, it’s a safe bet the market will give you a good chance to buy back in at a decent price. Just be sure to reinvest those tax savings wisely.

The article 1 Reason You Should Sell These Dow Losers originally appeared on Fool.com and is written by Jason Hall.

Jason Hall owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and International Business Machines (NYSE:IBM).

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.