Opportunities as investors sell stocks for tax losses before June 30

Tax-loss selling is a phenomenon typically driven by retail investors and best exploited by those who are willing and able to scout for small parcels of typically small-cap stocks that have been deeply discounted by selling that is not always tied to company fundamentals.

Buying into tax-related selling will prove foolish if the market continues to fall in the face of rising interest rates or if individual companies produce disappointing earnings results over the next few months.

But it can also throw up opportunities.

Brokers say tax-loss selling typically peaks in the first two weeks of June as accountants and stockbrokers advise clients to offset capital gains booked elsewhere during the year by selling out-of-favour stocks that are sitting on paper losses and seemingly have limited prospects.

But market watchers say the phenomenon is starting earlier each year and has been an influence in local market activity since April.