While your investments are down, it may be a great time to move some of your money around to generate a tax loss.

If you invested in a mutual fund and have lost money, you can switch to another fund of the same type to lock in your loss.

The reason for taking the loss is the IRS allows you to deduct up to $3,000 in capital losses from your ordinary income. Any loss above $3,000 is carried over to future years.

To give you an example of how this works, let's say Henry (who is a 25% tax bracket) sold his shares of Vanguard fund and purchased the same type of fund with Janis. If he had a $30,000 loss , he would save $750 a year on his taxes for the next 10 years.

Henry's total saving amounts to $7,500. When he decided to sells his Janis fund he will have to pay capital gains of $4,500 on this $30,000 because of the loss he took.

Henry made $3,000 because he generated a tax loss. He saved $7,500 over ten years and only had to pay $4,500 for these savings.

If Henry sells his fund before the 10 years, he will still receive a tax advantage of $300 for every year he waits to sell his fund.

This is a great tax strategy to discuss with your financial advisor. Be aware that you may incur extra fees or charges when you withdraw from your mutual fund which may offset the tax advantage.

Another issue to consider: mutual funds are managed by individuals or investment teams. Having the right people manage these funds can make a substantial difference in the returns they generate. If you invested in a well managed fund moving it to a poorly managed funds will not be worth the tax savings.

Talk to your financial advisor about moving your funds. Make sure to ask him or her about the fees involved and any other risks associated with changing your funds. When choosing a new fund, take some time and find out who is managing the fund and make sure they have a proven track record.