Time to Squeeze Those Lemons?

Tax benefits alone may make it a good idea to sell your worst mutual funds

Thousands of mutual funds have performed terribly in this long bear market, yet many investors continue to hold on for dear life. But letting go of your losing funds and reaping the tax benefits is one way to turn your lemons into lemonade. By selling, you realize capital losses that reduce your capital-gains tax bill. If you don't have any gains, you can still write off $3,000 of losses against your income and carry the rest forward to nullify gains in future years. Even if you like a fund, you can buy it back 31 days after selling it; the Internal Revenue Service will allow the write-off.

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