October often tests investors’ nerves. Historically one of the toughest months for equities, it’s also when mutual funds with October fiscal year-ends tend to dump underperforming holdings—putting extra pressure on already weak stocks.

But the calendar offers a silver lining: November has been, on average, the strongest month for stocks. That seasonal lift gives investors a good chance to unload underperformers that may get a brief bounce before year-end—and to use those losses strategically. With just weeks left in 2025, this is my annual reminder to start thinking about tax-loss harvesting.

Year-end tax planning doesn’t have to wait until December. Acting now gives you the flexibility to plan, evaluate, and execute without getting caught in the usual holiday-season rush.

Locking In Gains—Without Losing Too Much to Taxes

The 2025 market has been a tale of winners and laggards. Technology and communication services led the charge, but some sectors barely stayed in the green. The S&P 500 has gained nearly 20% year-to-date, so odds are most investors have realized at least a few sizable gains.

If you’re thinking about trimming positions or taking profits outside of retirement accounts, remember: those gains are taxable.

• Short-term capital gains—from assets held less than a year—are taxed as ordinary income.
• Long-term gains—from assets held more than a year—benefit from lower rates of 0%, 15%, or 20%, depending on income level.

Timing your sales carefully can make a big difference. But the best way to soften the tax bite is to pair gains with losses.

Harvesting Losses Strategically

Start by reviewing your holdings and noting which positions are down meaningfully for the year. Stocks that have slumped often attract additional selling pressure late in the year as investors reposition for tax reasons. November is the ideal time to make those adjustments—before the crowd moves in.

By selling a losing position, you can use that realized loss to offset realized gains elsewhere in your portfolio—dollar for dollar. This is especially valuable for minimizing short-term capital gains, which are taxed at higher rates.

You can even sell a stock you still like and plan to own again later. Just be mindful of the wash-sale rule, which disallows a loss deduction if you buy a “substantially identical” security within 30 days before or after the sale. That includes not only the same stock but also, potentially, similar index funds tracking the same benchmark.

Example: Swapping a Loser for a Sector Peer

Suppose you own shares of LyondellBasell Industries (NYSE: LYB), which has fallen about 36% this year as weak demand and tight margins hit the global chemical sector. Selling those shares now lets you realize a capital loss you can use to offset gains elsewhere.

To maintain exposure to the materials sector, you could use the proceeds to buy Dow Inc. (NYSE: DOW), another large-cap chemical producer that’s also down sharply—roughly 37% year-to-date. When the sector rebounds, perhaps as industrial demand strengthens or infrastructure spending ramps up, DOW’s shares could recover—while you’ve already locked in LYB’s tax advantage.

That’s the essence of tax-loss harvesting: reshaping your portfolio without losing market exposure, while also reducing this year’s tax bill.

A Few Additional Notes

• You can use up to $3,000 in net capital losses each year to offset ordinary income. Unused losses carry forward indefinitely.
• Remember that tax-loss harvesting works best in taxable accounts, not in IRAs or 401(k)s.
• Keep detailed records of your transactions and consult your tax professional before making large adjustments, especially if you’re juggling multiple accounts or mutual fund distributions.

The Bottom Line

No one enjoys seeing red in their portfolio—but turning paper losses into tax savings is one way to make the most of a volatile year. November’s seasonal strength may even give you better exit points before year-end.

I’d rather be feasting on gains than harvesting losses, but smart tax strategy is still part of successful investing. Don’t wait until the final trading days when everyone else rushes to clean house. Act early, plan carefully, and let your 2025 losses work for you in 2026.