If there was one theme that dominated discussions about sensible portfolio administration in 2022 — other than the brutal 20%-plus losses suffered by many buyers — it was in all probability tax-loss harvesting.
Merely put, the exceptionally difficult yr that was 2022 demonstrated to many buyers that tax-loss harvesting affords a silver lining to dramatic market sell-offs.
Consultants say tax-loss harvesting is a strong technique that many advisors can use to assist mitigate the chew that realizing capital beneficial properties can impose on purchasers in taxable accounts. When purchasers promote appreciated holdings, these beneficial properties could be offset in complete or partly by realizing losses on different holdings within the consumer’s portfolio.
Nonetheless, as famous in a brand new weblog put up by Jeremy Milleson, director of funding technique at Parametric Portfolio Associates, common loss harvesting isn’t the one strategy to cut back a portfolio’s tax invoice, particularly when the tides flip as dramatically as they’ve in 2023, which has confirmed to be among the finest rebound years out there’s historical past.
As such, it is vital for advisors to be effectively versed in different tax-mitigating alternatives that current themselves in rising markets, and Milleson’s weblog put up affords some well timed meals for thought. Milleson says the rising use and class of individually managed accounts and direct-indexed portfolios are significantly related for advisors to contemplate right this moment.
See the slideshow for a rundown of Milleson’s prime ideas and insights about crucial tax-management methods for 2023 and past. As Milleson and different consultants argue, advisors who fail to ship extra refined tax-mitigation providers will seemingly discover themselves falling behind their tax-savvier friends.
