What's up you guys, it's graham here and the time has come for me to sell this is after we've seen one of the strongest stock market, recoveries in recent history, the s p, 500, the nasdaq and the dow is all trading near its all-time high. But now it's beginning to make some sense to cash out now. I know i've always been telling people to do the opposite of that and to instead just buy and hold your investments, regardless of what they do, and i almost never sell anything. But this time is different and hopefully, by the end of the video you're gon na, understand my reasoning and then maybe you might do the same.

If you agree with what i have to say, so, listen i'm not going to drag this intro out any longer than it needs to be so we're going to get right into it. But really quick. If you wouldn't mind just selling the like button for the youtube algorithm, it would help me out a lot. That's it.

The sell button is right there and you can lock in your like button profits by making it turn blue. So, thank you so much for doing that, and also a big thank you to morningbrew for sponsoring this video, but more on that later, all right. So here's what happened about a year ago, i made it a goal to begin diversifying my portfolio prior to then, even though i was investing in index funds and individual stocks. I was pretty much all in on real estate and even though that had been a really solid investment for me, i knew at a certain point.

It would be the smart thing to do to become more balanced and start placing a bigger emphasis elsewhere. Well, shortly after in march of 2020, the stock market just totally collapsed at a time where i was holding on to a lot of cash. So at the time i was hoping to buy an office space nearby to use as a youtube studio, but once everything shut down and the market just went into a free fall, i started dumping money into the stock market as a way to diversify. Now, from a cash perspective, i invested about 60 of my money into index funds encompassing the s p, 500, the total stock market and international stocks, and then the remaining 40 was invested into 30, really hard hit.

Companies that i felt had a really good chance to recover once all of this was over. Some of these included restaurants, airlines and hotels among some of the other heavy hitters like disney american, express banks and a few green energy companies, and yes, that also includes tesla. I would rarely add any more than that initial amount to that individual stock market position unless it was a unique occasion, but every week over these last 10 months, i've been plowing a lot of money into the s p 500, as a way to somewhat balance out What i have invested in real estate and to my amazement, that individual stock market position in my portfolio ended up seeing some really wild returns. That initial 40 has now grown to well over half of my overall portfolio, as some of those companies have doubled and even tripled in value, but i'll be honest with everybody, not everything i picked did well my two biggest losers.

This year were an oil, namely bp and exxon, who, despite their best efforts, could not manage to turn a profit. And then i also lost a little in wells, fargo too, and that one is kind of funny too, because i've always talked in the channel about how much i hate wells fargo. I refuse to use them and i just think they're a horrible company, but when their stock dropped from 50 to 30 dollars after already going down a ton in value, i figured they can't possibly get any worse, so i may as well invest but gosh. I was wrong and they just continue to get worse, and even though i didn't have a huge loss with them, they're still one of the only few stocks.

That is not in the green from what i bought earlier this year anyway. Now that the market is back to its all-time high and i have a lot of money invested in stocks that went up way more than i anticipated it's time for me to sell and before i explain my reasoning and why this might make sense for a lot Of you watching to sell, even though i never tell anyone to sell, i got ta. Thank our sponsor today morning, brew their totally free daily newsletter. They get sent to you every monday through saturday and they bring you up to speed with the most important business and finance related news in under five minutes.

See here's the thing. Usually, when you go on the internet and try to be responsible, you end up wasting a whole bunch of time getting sidetracked reading through pointless information. Reading up about articles on trading water futures and before you know it, the entire day is done. But morning brew is different.

They provide you with just the best business and finance related content, condensed down into exactly what you need to know in a really easy to understand way like just this week. They wrote about the shutdowns here in california how less precious metals like copper, iron and nickel have quietly been some of the best performing assets of the year and gave us quick tidbits about stimulus, earnings, economic data and the long-awaited airbnb ipo. This is always my first go-to read as soon as they wake up in the morning before i even get out of bed and that's because they give me a fresh update on the latest news without me: getting sidetracked, reading about water futures. So if you're interested in business, finance or tech use the link down below in the description to subscribe, it's totally free and it takes you less than 15 seconds plus i enjoyed enough to recommend it to you.

So, thank you so much and now we could get back to the video anyway back to the selling of stocks, because i get it. This is totally out of the ordinary for me to say throughout the entire history of this channel. I have been consistently telling people to only invest with the intention of holding long term and not selling, there's also no shortage of studies out there. That will show you that time in the market beats timing, the market, and from that perspective i completely stand behind that mentality.

Even now, i'm still telling people not to sell and just to hold for the long term. So what makes this different? Well, the reason i am selling is because of a term called tax loss harvesting. I know i'm going to sound a little like doug demiro when i say this, but this is a tax reduction strategy that allows you to sell a non-performing stock at a loss. To then offset the tax you would owe on a stock you made money on and if that sounds confusing well, that's because they did a horrible job explaining what it is.

So here's an example. Let's say you bought two stocks in january. First, one of those stocks is up, ten thousand dollars in profit and the other stock went down ten thousand dollars in value. Well, ordinarily, if you were to sell that first stock for a profit, you would have to pay tax on those gains which could be anywhere from five percent to fifty percent depending on your tax bracket.

But, according to the irs, you could offset that profit by selling another stock for a loss, and if you structure it correctly, that loss would offset the entire amount of tax. You would owe on that profit. That just means that i would be in a very strong position to sell off all of my losing stock market investments by the end of the year and then i could use that loss to offset the profits i've made from the stocks that have gone up now. Ordinarily, i would hold off from selling any stocks, but in this case there's zero downside to getting rid of and selling any losing stock market positions at the end of the year, and then those losses are able to offset the gains i've made.

So i won't owe any short-term capital gains tax and whatever i sell for a profit at the very least i'll, be able to raise my tax bases. So i owe less money in the future and at the very most i've just made a tax-free profit doing. This is an incredibly common tax strategy that a lot of investors utilize at the end of each year, and if you have any losing positions that would potentially offset your profits, then it's worth it to structure these in such a way to reduce your taxable gain. In my case for an example, maybe i could take a 20 000 loss on exxon and bp and then sell boeing for a 20 000 profit and then boom.

I'm not going to owe any tax. And now my tax basis for boeing is going to be a little bit higher because i can immediately buy back in now. In addition to that, if your capital losses exceeds your total profit, meaning you lost more money than you made, then that remaining amount could be deducted from your earned income up to three thousand dollars a year and any amount above that could be carried forward for future Years so, let's just say you were browsing wall street bets and you got a little too carried away in game stop and now you lost six thousand dollars. Well, even if you have no other investment profits, you would be able to reduce your taxable income by three thousand dollars the first year and then another three thousand dollars the next year until the full amount is fully deducted.

However, there are a few rules when it comes to this and a few pitfalls you have to avoid. If you want to do this correctly and the most well-known one is, what's called a wash sale, this is when you sell stock for a loss, you use that loss to offset a gain, and then you immediately go and re-buy back in that same stock. You just sold for a loss within a 30-day window. The irs does not allow that because otherwise everyone would sell their losing stocks as soon as they could and then just continually buy back in.

So you can't do that. However, there's nothing that says you can't go and buy another stock immediately afterwards. So, for example, maybe you sold exxon for a loss like me and you can't go and buy exxon again for another 30 days, but i could go and immediately buy another oil company like chevron, for example, or if you lost money on neo, you could immediately go And buy another electric car company like tesla, it's also totally okay to re-buy back in that same stock, you sold for a profit to increase your tax basis. However, only losses have this 30-day rule.

That means, for example, if i bought google at fifteen hundred dollars and then i sold it for eighteen hundred and fifty dollars. I would have to pay tax on that three hundred and fifty dollar profit. But if i sold exxon for three hundred and fifty dollar loss that would offset the tax, i would have to pay on google and then i could immediately go back in and buy more google at eighteen hundred and fifty dollars. And now that raises my tax basis.

So i'm not gon na pay as much money in the future, but remember i can't go and buy more exxon for that 30-day window, but i could go and buy another oil company now. The second rule is that the type of stock loss will first offset that same type of stock gain. I know that made absolutely no sense and i was trying my best to find a way to describe it and it's so difficult to do so. Just here's an example: if you have a short-term loss on a stock that you've held for less than a year, that tax deduction will first be applied to all the stocks you've held for less than a year and then anything remaining is then going to offset your Long-Term capital gains.

The same thing also applies with long-term losses on stocks that you've held for more than a year that will first offset your long-term capital gains and then whatever's left over is going to offset your short-term capital gains. I know it sounds confusing. I'm honestly trying my best but just remember: short-term losses. First, cancel out short-term gains, then long-term losses first cancel out long-term gains and that's it and make no mistake.

There should never be the goal to lose money, and this should not be made out to be a good thing if at all avoidable, it's not like you should ever go out of your way to lose money for tax reasons, because at the end of the day, You're still losing money and if you lose money, that's bad, however, think of this like making the best of a bad situation like turning lemons into lemonade or seeing the glass half full. If you have a loss at the end of the year, then you may as well sell that losing investment use that loss to offset the tax. You would pay on a profitable investment and then increase your tax basis. If you don't do that, then potentially you're paying more tax than you need to and you're not taking advantage of a tax code.

That's designed to help save you money, but still all things considered losses are never something you should celebrate unless you're posting it on reddit's wall street bets and get a whole bunch of upvotes, but tax loss harvesting just makes it less bad. If that makes sense, it's like saying, instead of losing a hundred dollars now you're only gon na lose 60, it still sucks to lose 60 dollars, but at least you're not losing a hundred dollars when it comes to myself. Tax loss harvesting is only going to impact a very small percentage of my overall portfolio, but still considering that most of my stocks are going to be taxed as ordinary income. If i were to sell them i'll take any tax savings, i could get for just a few minutes worth of work besides selling off those losers and then making sure i have an equivalent amount of profit to offset everything else stays the same.

I'm not selling anything else, i'm still investing on a consistent basis, even though the stock market is reaching another all-time high, and this strategy only makes sense. If you have losses that you want to realize and then use that to offset any income you make and again, we should never try to lose money on anything, because it's always better to pay taxes on profits than deductions on losses, but still chances are. We all have something that we've lost money on this year, so selling that and using that to offset profit is probably a good option depending on your situation and remember, even if your losses exceed your total profit, which, if that's the case, my disappointment is immeasurable and My day is ruined, but you could still deduct those losses against your ordinary income up to three thousand dollars a year, so that is my slightly advanced, somewhat confusing tax strategy when it comes to selling off my stocks, and hopefully that makes some sense. From my perspective.

There was really no downside to this. I may as well realize some of those losses use that to offset some of the profits i make and at the very least, i'm going to have more money left over and more money to smash the like button for the youtube algorithm wait. That makes no sense because the like button is totally free to smash, so you may as well smash it. So with that said, you guys thank you so much for watching.

I really appreciate it as always make sure to also destroy the subscribe button, and the notification bell also feel free to add me on instagram, i posted pretty much daily. So if you want to be a part of it, there feel free to add me there. As my second channel, the gram stefan show i post there every single day - i'm not posting here. So if you want to see a brand new video for me every single day, make sure to add yourself to that.

And finally, if you guys want four free stocks, use the link down below in the description and weeble is going to be giving you four free stocks when you deposit a hundred dollars on the platform with those stocks potentially worth all the way up to one thousand Six hundred dollars, so if you want free money, basically use that link down below enjoy the free money, let me know which restocks you get. Thank you so much for watching and until next time.