Who: This post is for people who know what the wash rule is and do not like it. This post is also for people who are not opposed to investing in ETF’s and have at least a mild familiarity with them.
What: This is an intermediate level post about using Exchange Traded Funds (ETFs) to avoid the IRS’s wash sale rule.

Many people are currently filing their tax returns or have already done so. If you are involved in investing, you will know that Uncle Sam can hit you pretty hard for your capital gains. You may also know that you’re allowed to use your capital losses to offset your capital gains. You can even claim up to $3000 of capital losses to deduct from your taxable income.



Now, what people used to do was hold shares of a security and then sell it for a loss when it went down. This way they could deduct the capital loss on their taxes. The next thing they did was immediately buy back the same amount of shares and hold onto them (hopefully waiting for a rebound). If they held them past the end of the tax year, they may have made all their money back, but since the gains were unrealized (they didn’t sell the stock again) it was not counted as a capital gain. The IRS quickly put a stop to these shenanigans by implementing the wash sale rule. This rule states that you may not deduct a capital loss for a security if you purchase a substantially similar security within 30 days of the original sale. This stinks.

Enter ETF’s. ETF’s allow you to sell off positions for a loss and then purchase another ETF that is not “substantially similar” to allow yourself to recapture gains if you think they will come. This is an excellent strategy, as long as you do not abuse it. The IRS has yet to specifically define exactly what “substantially similar” means, so many people take it to mean different things. You may purchase an ETF from one issuer that tracks the Pharmaceutical sector and then sell it off. If you buy another ETF that tracks the exact same index AND is issued by the same issuer, you may not be able to duck the wash sale rule. However, if you select a different issuer and use a SLIGHTLY different index, you may be able to
get around the wash sale rule.

How does that work? If you sell your original ETF purchase for a loss, this allows you to claim a capital loss without actually cashing out of your position (because you are buying an ETF that is highly correlated with the one you sold, but is not “substantially similar”). You’ll want to make sure the securities you are selling and buying do not constitute “substantially similar” securities, and this may be difficult, but in general if you buy from a different issuer and have a slightly different market, you’re safe. Good luck, and don’t get too carried away.

Popularity: 74%


Welcome to the 62nd Carnival of Investing, the first Carnival ever hosted by A Financial Revolution. You are about to join us for an exciting experience during which we will present the 5 Oscars of Investing to the bests posts of the week. I am your host, William Wallets. The staff and I here at A Financial Revolution are looking to put together an intensive blog that teaches the younger generation about personal finance and investing with examples and in depth posts about various topics. Please take the time to look around, I am sure you’ll find something that you’ll like.

Investing OscarsWithout further ado, let’s check out the Oscars Edition of the Carnival of Investing. This week, we received 16 submissions in 5 categories. The 5 awards we will be presenting this week are: Best Personal Finance Film, Best Directing of Investment Advice, Best Documentary (Most Informative), Best Foreign Film (Sector Specific), and Best Special Effects (Technical Explanation). First, I’ll present the nominees and then at the end of the post, I’ll announce the winners of the Oscars!

Best Personal Finance Film

Best Directing of Investing Advice

Investing OscarsBest Documentary (Most Informative)

Best Foreign Film (Sector Specific)

Best Special Effects (Technical Explanation)

Investing Oscars


The Oscar for Best Personal Finance Film goes to Top 10 Money Tips For Almost Everyone!

The Oscar for Best Directing of Investing Advice goes to Before the Crash: Buying Stocks With Debt!

The Oscar for Best Documentary (Most Informative) goes to 20 Typical Reasons To Sell Your Stock Or Mutual Fund!

The Oscar for Best Foreign Film (Sector Specific) goes to Effective Real Estate Strategies For Slow Markets!

The Oscar for Best Special Effects (Technical Explanation) goes to TWO Nominees, in an extremely close race. Approximating Social Security’s Rate of Return and Investing - Asset Allocation - Part 4!!

Popularity: 100%

I wanted to take this Sunday afternoon opportunity to present some of the features that A Financial Revolution has to offer. If you notice on the right sidebar, there is a section called features. I’ll be giving some brief descriptions of these features in hopes that the readers will find them at least somewhat useful.

Welcome New Visitors - An introduction to A Financial Revolution. Why we’re here and what we’re setting out to do.

The Staff - The staff of A Financial Revolution. Right now it’s just me (William Wallets) and Benjamin Frankbling. We may add on some board members soon, stay tuned.

The Archives - A Financial Revolution’s Archives. Here you’ll find a list of every post that has ever appeared on AFR. Search the archives, I am sure you’ll find something that interests you.

Multi-Part Series - A listing of the multi-part series posts on AFR. The popular series include Introduction to Investments and Uncle Sam’s Revenge! Have any suggestions for series? Let us know!

Product Reviews - Various financial products and services and AFR’s take on each of the products. We here at AFR have high expectations and give our reviews with this high expectations in mind.

William Wallets’ Library - Suggestions for financial reading from William Wallets. Reviews and overviews will be added over the course of the coming weeks.

Subscribe to AFR - Get AFR delivered daily to your feed-reader of choice!

Popularity: 70%

Who: This series of posts is for people who have been dying to do some analysis of their investments using real financial data and Microsoft Excel. This post will be beneficial for those who have an average knowledge of Excel and a basic understanding of high school mathematics concepts.
What: This is the first post in a series about how to actually calculate some ratios and create metrics that will allow you to make sound investment decisions. The theory is covered elsewhere and this is a practical application! This post will discuss downloading data from Yahoo! Finance into Excel and getting the data ready for manipulation.



Where Do I Get The Data?

There are many places from which you can download financial data. Some sources are free while others charge money and some are simple to use while others are quite complicated. For the purposes of this tutorial, I will be using a free and simple source: Yahoo! Finance.

So How Do I Start?

The first thing you will want to do is select some stock tickers that you’d like to research. In this example, I’ll use a mutual fund with ticker RYVPX (I do not advocate or discourage the ownership of this fund, yet). RYVPX is Royce Value Plus Service mutual fund.

Step 1: First, you’ll want to proceed to yahoo finance at http://finance.yahoo.com. Then, at the top left corner of the screen, you’ll want to enter the ticker symbol you want to look up. In our example, it is RYVPX. When you’re done, hit the get quotes button!

Step 1

Step 2: Now, you should be looking at a Summary of the mutual fund RYVPX that looks something like this:

Step 2

Click on “Historical Prices” on the left side of the screen to proceed. In the image above, you can see it highlighted inside the red box.

Step 3: Now that we’re in the historical prices area, we need to decide what sort of data we want. Let’s say that we want to analyze RYVPX over the last 3 years and we want to be very, very specific. In the start date, we’ll enter Feb 16, 2004 and for the end date we’ll enter Feb 16, 2007 to give us the last 3 years of data, as of last Friday. Now, we’re not scared of lots of data, so let’s use daily returns. When you’re done, press “Get Prices”.

Step 3

Step 4: So we are now staring at the data we want. Now what? Let’s export it into Excel. This is surprisingly easy. Just scroll down to the bottom of the page in your browser and look for this:

Step 4

You should find it immediately under the Yahoo! data table and once you click it, you’ll be able to download and open the Excel File. Once the file is opened in Excel, you can move to step 5.

Step 5: You’ll be looking at the Data in Excel and in order to do your analysis, you’ll do various things with the data and manipulate it in all sorts of ways. That will all be covered in the upcoming posts, but for now, let’s calculate the % change in price from one day to the next (since running analysis on price is less common than running analysis on % change).

There should be data in columns A-G, as shown below. The highlighted column (H) is where you will want to input the calculations for percent change.

Step 5

Step 6: Finally, enter the formula into cell H2, as shown below. All you want to do is put the previous close in the denominator and the current day’s closing price in the numerator and then subtract 1 from that entire quantity. Drag that formula down and voila, you have the percent change from day to day! Note: The last day will not have a % change, this is ok. Make sure you delete the last % change, as it will show up at 1.00, you don’t want this!

Step 6

Now what?

Stay tuned over the next few weeks for various analyses you can do and metrics that you can calculate using this base data set. Remember that your analysis is not limited to RYVPX. Data for any ticker that you’re interested in (that Yahoo! has data for) can be downloaded and used to run different analyses.

You have the Yahoo! provided data and daily percentage changes in stock price. Feel free to explore and run any sort of analysis that you like and stay tune for some specific suggestions. Good luck!

Popularity: 71%

Tax time is fast approaching and A Financial Revolution has some resources that may be helpful for those of you looking to fill out your tax returns in the near future. The Uncle Sam’s Revenge Series highlights AFR’s coverage on Taxes. You can also take a look at the Taxes category.

Uncle Sam’s Revenge Part 1: Tax Basics
Uncle Sam’s Revenge Part 2: Allowances and Exemptions
Uncle Sam’s Revenge Part 3: Get Your Tax Refund Early

Popularity: 57%

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