Blog : Penny Stock Tax Loss Selling

by Peter Leeds on November 23rd, 2009

Near the end of every calendar year, many investors dump losing positions to take the capital losses. You pay less tax on the capital gains you made on the winners, when you book a loss on your portfolio's losers.

This year may be a little different, however. Compared to last year, when there were plenty of penny stock and blue chip investments that had taken major losses, we now will probably see much more limited selling.

After a pretty flat year across many industries, and even some pretty major winners in the penny stock world, as well as strength in many of the mid and large caps, the options for tax loss selling have become quite thin.

The good news for penny stock investors is you probably won't see the typical end-of-year dumping of positions that has been known to put added pressure on smaller companies. In fact, you may even see a trend of buying leading into the winter, to be followed on by strength in the spring predicated on the recovering economy.

Without the influence of widespread tax loss selling, and combined with a an overall economic return to health (which will come slowly, but it will come nonetheless), a lot of high quality penny stock investments will hold their ground throughout December, and be poised for a great run in early 2010.