If there was one theme that dominated discussions about sensible portfolio administration in 2022 — aside from the brutal 20%-plus losses suffered by many buyers — it was most likely tax-loss harvesting.
Merely put, the exceptionally difficult 12 months that was 2022 demonstrated to many buyers that tax-loss harvesting presents a silver lining to dramatic market sell-offs.
Specialists say tax-loss harvesting is a strong technique that many advisors can use to assist mitigate the chunk that realizing capital features can impose on purchasers in taxable accounts. When purchasers promote appreciated holdings, these features will be offset in entire or partly by realizing losses on different holdings within the shopper’s portfolio.
Nevertheless, 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 technique 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 probably the greatest rebound years out there’s historical past.
As such, it is vital for advisors to be nicely versed in different tax-mitigating alternatives that current themselves in rising markets, and Milleson’s weblog put up presents some well timed meals for thought. Milleson says the rising use and class of individually managed accounts and direct-indexed portfolios are notably related for advisors to contemplate in the present day.
See the slideshow for a rundown of Milleson’s prime suggestions and insights about a very powerful tax-management methods for 2023 and past. As Milleson and different specialists argue, advisors who fail to ship extra refined tax-mitigation providers will doubtless discover themselves falling behind their tax-savvier friends.
