Let's imagine Juanita. Juanita pays taxes in the USA.
Juanita bought equity
XYZ on January 1 and sold it for a profit of $100 a month later. Thus, it was short-term gain.
Juanita also bought equity
CRAP on January 1 for $100. Now, let's say it's December 1 of the same year, and
CRAP is worth only $25.
If Juanita no longer has confidence in
CRAP as an asset, does it make sense for Juanita to sell
CRAP before January 1 rolls around again so that her $75 loss on
CRAP gets deducted from her short-term gains instead of waiting another month to sell
CRAP, when it will be deducted from her long-term gains (the following year)?
Let's not make things too complicated and assume Juanita always has some short-term and long-term gains from which to deduct losses. Let's also assume that Juanita's short-term capital gains are taxed at a higher rate than her long-term capital gains, which I think is true in most, or maybe even all, situations.