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If there was one theme that dominated discussions about good portfolio administration in 2022 — aside from 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.
Specialists say tax-loss harvesting is a stable technique that many advisors can use to assist mitigate the chew that realizing capital features can impose on purchasers in taxable accounts. When purchasers promote appreciated holdings, these features will be offset in complete or partially by realizing losses on different holdings within the consumer’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 strategy to scale back a portfolio’s tax invoice, particularly when the tides flip as dramatically as they’ve in 2023, which has confirmed to be the most effective rebound years out there’s historical past.
As such, it is crucial for advisors to be properly 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 notably related for advisors to contemplate as we speak.
See the slideshow for a rundown of Milleson’s prime suggestions and insights about an important tax-management methods for 2023 and past. As Milleson and different consultants argue, advisors who fail to ship extra refined tax-mitigation companies will seemingly discover themselves falling behind their tax-savvier friends.
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