window dressing stocks in December 2025

 window dressing stocks in December 2025

You cannot definitively identify specific "window dressing stocks" in December 2025, as this practice is based on fund managers' private decisions

. However, you can monitor stocks that have performed exceptionally well throughout 2025, as these are most likely to be purchased by funds seeking to improve their year-end reports. 

What is window dressing?

Window dressing is a legal but unethical practice in which fund managers sell off poorly-performing stocks and buy up top-performing ones near the end of a reporting period, such as the end of the year. The goal is to make their portfolios appear more successful in reports to investors. 

How to spot potential window dressing activity

Since it's not possible to know which specific stocks will be affected by window dressing in real-time, investors should look for signs of the practice. 

• Look for stocks with strong performance throughout the year: Fund managers buy stocks that have performed well to give the impression that they consistently make good investment decisions. For example, in 2024, NVIDIA (NVDA) showed strong year-to-date returns and was mentioned as a top growth stock.
• Be aware of end-of-year volatility: Fund managers selling underperforming stocks in bulk can increase market fluctuations, especially in December.
• Compare funds to their benchmarks: Examine if a mutual fund's holdings are consistent with its stated objective. For example, if a fund that tracks the S&P 500 holds an unusually high number of stocks outside that index, it could be a sign of window dressing.
• Analyze cash flow and financial statements: For individual companies, investors should scrutinize any unusual changes in accounting methods or financial ratios. 

Investing during window dressing

An investing strategy during periods of window dressing can be to take advantage of the related phenomenon of "tax-loss selling". This is when fund managers and individual investors sell losing stocks to offset capital gains. 

• Buy oversold stocks in late December: Tax-loss selling can drive the prices of poorly-performing stocks even lower in December. Some of these oversold stocks may rebound in January as proceeds from sales are reinvested.
• Consider long-term performance: When evaluating mutual funds or ETFs, focus on their long-term, consistent performance rather than just the holdings they report in December.