This time of year, it's smart to cast a critical eye on your losers--stocks that sell for less than you paid for them. The reason is taxes. By dumping stocks you've lost money on, you can offset capital gains elsewhere in your portfolio. (For details, see the articles below in the "more reading" section.)
One way to spot the sell candidates is to ask: Which losers are the most expensive, and therefore the most likely to drop even further?
I ran a screen in Premium Stock Selector for stocks that have dropped at least 40% this year, and which have Morningstar ratings of just 1 star. (Of course, what matters for your tax purposes is the return on the stock since you bought it--not the calendar-year 2001 return.)
Haywood Kelly, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.