Tax-loss harvesting

Tax-loss harvesting strategies benefit from an "always-on" approach. Clients should realize losses throughout the year rather than just at year-end or during market dips. This creates more opportunities to loss harvest and maximize the benefits to their tax bills.

Many taxable clients may express hesitation in adopting a tax-loss harvesting strategy. Some possible reasons include:

• Appropriateness: An investor must have material gains from other investment(s) on their Schedule D (Form 1040) for loss harvesting to be valuable, especially after accounting for the fee premium vs other vehicles like ETFs.
• Mental accounting: Some investors think of investment returns and tax payments as different account buckets and may have difficulty understanding how they are intertwined.
• Behavioral reasons: Some investors don’t like to sell an investment at a loss – they may want to believe the investment will recover and ultimately become profitable.

The key to addressing pushback is education to ensure the client fully understands the benefits and drawbacks of the approach and makes a decision that is right for them.