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How to Get Rid of a Bad Investment

When you invest, you do so in the hopes of a gain. Sometimes, however, the investment does not work out. When you have a losing investment, you have two choices. You can hold on and hope for a turnaround, or you can cut your losses and look for a more promising investment.

Instructions
1.Compare the returns on your investment to the proper benchmark before deciding that it is a bad investment. If you hold a stock fund, for instance, you cannot expect it to be up when the overall market is declining. But if your fund is down in a bull market, or if the decline is much more than a benchmark like the S&P 500, it might be time to sell.

2. Calculate the loss on your investment, as well as capital gains from other investments. When you sell a losing investment, you can use that loss to offset capital gains elsewhere. If your losses exceed your gains, you can use some of those losses to reduce your taxable income.

3. Search for other suitable investments to replace the one you are about to sell. If you have one fund that has been doing well and one that has been doing poorly, you might want to sell the losing fund and move the money to the other one.

4.Contact the brokerage firm or mutual fund company holding the investment and let it know you wish to sell. If you have online access to your account, you can sell your holding that way. Otherwise you can do the transaction over the phone, either electronically or through a broker.

5.Keep a copy of the sales confirmation. Put that document with your tax paperwork. You will need documentation of the loss you suffered when you complete your tax return.

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