After a dramatic decline that began in late September, the Russell 2000 Index climbed 25% to finish 2008 down 30% on the year. The Russell 2000 consists of the 2,000 smallest companies in the Russell 3000 Index which measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.
Jane and John have experienced significant declines in their portfolio over the past year and want to lock in capital losses now to offset future gains. They anticipate a market upturn at some point in the near future, so they don’t want to be out of the market. At the same time, they want to avoid any problems with the “wash-sale” rule that discourages the sale and repurchase of a similar security within a 30-day period.