Bond ETFs Down 3.5% Offer Tax Loss Harvest
Bond ETFs fall 3.5% year to date, creating a rare tax-saving chance. Investors can sell now to offset gains and reinvest at higher yields.
Key points
- Vanguard and iShares bond ETFs are down more than 3.5% year to date.
- The 10-year treasury yield is near 5%, causing bond prices to fall.
- Investors can harvest losses now to offset gains and reinvest at higher yields.
Bond ETFs are down 3.5% year to date. This drop creates a tax-saving chance for investors. You can sell now to offset other gains. You can then reinvest at higher yields.
The 10-year treasury yield hovers near 5%. Bond prices have fallen as a result. Many funds now show unrealized losses. CNBC notes this is not just a year-end issue.
Yields rise as prices fall
Higher yields push bond prices down. This hurts fund values today. It also creates a tax asset for you. You can use the loss to lower your tax bill.
Stocks have risen about 13% this year. The S&P 500 is up sharply. Bonds are the only part of many portfolios down. This makes bond losses valuable for tax planning.
Check cost basis before selling
A negative price return does not guarantee a tax loss. Your purchase price matters most. If you bought recently, you might still have a gain. Dividends also change your cost basis.
Review your brokerage records carefully. They track your true cost basis. Reinvested dividends increase this number. This determines if you have a real loss.
Act before year end
Waiting until December risks losing the benefit. Bond losses can shrink quickly. Markets do not wait for the calendar. Acting now secures the tax advantage.
Advisers recommend regular tax-loss harvesting. They say do not wait for year-end. The current bond drop is a specific opportunity. Use it to improve your portfolio efficiency.
