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>> "the prospect of higher taxes on capital gains is prompting many [investors] to unload some of their winning stocks." And the stock market's 6% loss over the past month makes it tempting to lock in some gains before they dwindle further.

"It's all too easy to convince clients to sell equities right now," says Katherine Nixon, chief investment officer for personal financial services at Northern Trust NTRS +0.71% . "That's what they already want to do."
If you dump a stock in 2012, you can immediately buy it back and, as the jargon goes, "reset your basis." You once again hold the same position, but at a higher purchase price than before.

It is a trade-off. Sell this year and your gains will be taxed at a maximum of 15%. But the immediate tax hit leaves you with less money upon which you can earn future gains.

On the other hand, the decision not to sell exposes you to the risk of paying taxes at a much higher rate down the road. But it does ensure that 100 cents of each dollar will rise tax-deferred along the way—assuming, of course, that the markets produce positive returns.

Which choice is right for you depends primarily on three variables: how long you plan to hold the investment, what rate of return you expect to earn and how much the capital-gains tax rate goes up.
Assuming you earn at least 8% annually, the capital-gains rate rises no higher than to 23.8% and you hold your position for more than five years, you are better off not selling in 2012, Mr. Stein's firm has calculated.

"In many cases," he says, "it makes sense to defer your capital gains into the future even if tax rates do go up."
you probably should sell only if you need the cash or you think the investment is overvalued. Don't let Wall Street's latest bogeyman scare you into an unnecessary trade. <<

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