Mistakes I Made When I First Started Investing

This post only applies to US investors and those who pay taxes to the IRS.

Wash Sale

https://www.investopedia.com/terms/w/washsale.asp

https://www.google.com/search?q=site%3Areddit.com+wash+sale

I was messing with a few index mutual funds, buying and selling the same fund within a 30 day window. It wasn't intentional.

I didn't realize there was anything wrong until I saw the orange W sign on my holdings dashboard.

Adjusted due to previous wash sale disallowed loss. If you sell shares at a loss and you purchase additional shares of the same or a substantially identical security (in the same or a different account) within the 61 day period that begins 30 days before and ends 30 days after the sale, the purchase may result in a wash sale. If a wash sale occurs, the loss from the transaction should be "disallowed" for tax purposes.

Avoid: After the Sale

• Check account activity before you buy the same security again; or better yet, see if your broker supports automated warning.

https://www.fidelity.com/learning-center/personal-finance/wash-sales-rules-tax

One way to avoid a wash sale on an individual stock, while still maintaining your exposure to the industry of the stock you sold at a loss, would be to consider substituting a mutual fund or an exchange-traded fund (ETF) that targets the same industry.

ETFs can be particularly helpful in avoiding the wash-sale rule when selling a stock at a loss. Unlike the ETFs that focus on broad-market indexes, like the S&P 500, some ETFs focus on a particular industry, sector, or other narrow group of stocks. These ETFs can provide a handy way to regain exposure to the industry or sector of a stock you sold, but they generally hold enough securities that they pass the test of being not substantially identical to any individual stock.

Swapping an ETF for another ETF, or a mutual fund for a mutual fund, or even an ETF for a mutual fund, can be a bit more tricky due to the substantially identical security rule. There are no clear guidelines on what constitutes a substantially identical security. The IRS determines if your transactions violate the wash-sale rule. If that does happen, you may end up paying more taxes for the year than you anticipated. So when in doubt, consult with a tax professional.

Avoid: Before the Sale

• Don't sell them at a loss