Tax-Loss Harvesting Builds Over Years; Helps Offset Cap Gains; But experts caution not to let such maneuvers scuttle investment goals.(FUNDS & PERSONAL FINANCE)(YEAR-END PLANNING)

Byline: MURRAY COLEMAN

Investors are racking up a banner year. But don't celebrate too soon, warn tax-savvy pros.

"You can improve your returns even more by practicing tax-loss harvesting," said John Lah, an adviser at Waverly Financial Group Inc. "If you don't, you could be missing out on a very practical way of saving on capital gains."

Tax-loss harvesting refers to a method of using losses in one security to offset gains in another. It starts when, say, a losing fund is sold. Investors can generally count up to $3,000 in net losses against their taxable income.

And in many situations, if losses are greater, those can be carried forward …