If you buy mutual funds through a broker, you’ll pay a sales load. Say you invest $10,000 in a fund that charges 5.75 percent upfront, or $575. The day you open the account, it’s worth only $9,425, so your investment is down by $575.
To lighten the load, first buy a different but similar fund in the same family. Keep this fund long enough to avoid any early-redemption penalty, then take the capital loss and reinvest the proceeds in the desired fund. Most fund families permit such a switch without imposing a new load.
You’ll wind up with the fund you wanted all along as well as a capital loss “in the bank.” When you file your next tax return, your capital losses can offset any taxable gains while net capital losses are deductible, up to $3,000 per year.
