From the May 2007 issue of Entrepreneur

The fidelity Research Institute--funded, of course, by the behemoth Boston investment company with the same name--recently released a report suggesting that in 2003, only 10 percent of investors took advantage of the tax-loss selling opportunities available to them. Another 23 percent reportedly had no opportunities available that year. So take all those folks out of the equation, and about two-thirds of investors left up to $500 on the table by not doing some tax-loss selling, according to Fidelity's research.

You could quibble with the study's methodology, pointing out that it was a survey of Fidelity brokerage accounts, which may not be representative of the larger population. But then you would be missing the larger point. I believe Fidelity's research and think it might even understate things. And the research points to an investing truth: We should all take a fresh look at our portfolios at least once a year, rebalancing and culling as necessary. Offsetting capital gains against investment losses is a legitimate goal of that process.

It's not complicated. Sometime after Thanksgiving, take a peek at the trades you've made this year in your taxable investment accounts to gauge if you're in the red or the black (trades inside your IRA or 401(k) don't count for these purposes). If you see a net gain, you have an opportunity to offset it with a loss to save some tax cash. Conversely, if (combined with any tax-loss carry-over from previous years) you see a net loss, you have the opportunity to cash in some investment profits without incurring a tax penalty.

Now the standard caveat: Never make an investment decision solely for tax reasons. But if you're rebalancing your investments anyway, there's no good reason to ignore the tax implications, either.

The mechanics and even the theory behind tax-loss selling are relatively simple. There are thousands of sites online that can walk you through it, and any decent financial planner ought to be able to help. Don't get tripped up on the wash-sale rules, of course. But that's not too hard. Though the new Fidelity report didn't point out a brilliant new idea, it did remind us of the wisdom behind an old one.

Scott Bernard Nelson is a newspaper editor and freelance writer in Portland, Oregon.