Problem: How can I sell a stock to get the capital loss income tax deduction, without missing a gain if the stock's sector goes back up?

        Strategy: Buy a basket of stocks in the same industry.

        Jim McGrath, a portfolio manager with Johnson Investment Counsel in Monfort Heights, says that IRS “wash sale” rules prevent you from taking the tax loss if you buy a substantially identical security within a month before or after the sale.

        This could be problematic if the market, or the desired sector, spikes. Many people may simply choose to sell the stock and purchase another similar (but not identical) security in that sector. For example, you could sell Intel and buy Advanced Micro Devices.

        If you still want to own Intel after the 31-day period ends, you can unwind the transaction by selling Advanced Micro Devices and repurchasing Intel.

        If you are lucky, the price of your original holding (Intel in this case) stayed the same or fell, and you can re-establish your position for not more than you sold it for, while at the same time generating a valuable tax deduction. This assumes your replacement security (Advance Micro Devices in this example) has not significantly declined in value during the 31-day period (which has recently occurred).

        But a preferred way to stay invested in a specific sector (like technology) without the risk of relying on a single company is to buy a sector-specific exchange-traded fund (ETF).

        For example, after you sell your Intel, instead of buying Advanced Micro Devices, you could purchase shares of an ETF that mirrors the tech-dominated Nasdaq 100 Index, such as the QQQ.

        ETFs can provide you with the desired sector exposure and can reduce company specific risk by investing in many stocks, while abiding by the “wash sale” rules.

        Readers: Consider Savvy Strategies as general information only and seek the help of professionals because circumstances might vary.

        Planners: Share your unique tips with Enquirer readers. Send your Savvy Strategies to Amy Higgins, 312 Elm St., Cincinnati, OH 45202 or e-mail ahigginsenquirer.com.

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