I’m sure there’s something crucial I’m not understanding, but it seems like you’re just losing money? I’m trying to learn about investing and I’m so confused
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Two rules are in play: you can deduct losses if you sell a stock for less than you bought it for, but you aren’t allowed to deduct it if you buy it back soon after (wash sale rule).
The most effective tax loss harvesting I’ve seen is when you’re long on an asset: say, S&P 500 index fund. It has ups and downs like anything else.
You can sell shares, at a loss, when they dip below what you paid for them, and immediately buy a closely related but not identical stock (say, a Large Industrials index fund). That will likely follow the same general pattern as what you were in before. When the wash sale period is over, you can sell that stock and get back into what you were in, originally.
That way, you’ve “harvested” the loss to use to reduce your income taxes, without taking much risk in missing a big market upswing in the meantime, and you’ve avoided the wash sale rule that would prevent you from deducting that loss.
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