Tax loss harvesting
used to be an end of year tradition, with advisors and individuals poring over account statements to identify stocks that could be sold at a loss in December to reduce taxes paid the following April.
This incentive is what lies behind the process commonly known as tax loss harvesting
. (32) Tax loss harvesting
is "the process of selling securities at a loss from their original cost, ...
* Investment advisor/firm performs annual tax loss harvesting
on the portfolio.
This is often attributed to prices rebounding from selling pressure associated with year-end tax loss harvesting
. We tested this hypothesis by analyzing whether changes in the short-term capital gains tax holding period affected the relationship between monthly returns in the previous two calendar years and subsequent January returns.
Vanguard's robo platform differs from its competition in several other ways: Its minimum account size is $50,000 (only Personal Capital has a higher one, at $100,000); its onboarding of new clients requires a conversation with a live financial planner, but it doesn't offer automated tax loss harvesting
, which is a common feature among many other robos.
Robo firms like Betterment, along with incumbents like TD Ameritrade, Fidelity, and soon, Schwab, offer "white label" automated investment management tools such as auto-rebalancing and tax loss harvesting
for RIAs and other kinds of advisors to use with their clients, Cufr notes.As an advisor, having access to automated investment management tools provides a means not only to empower the digitally inclined and do-it-yourselfers among an existing client base, it can also open doors to serve younger investors--and investors of all ages, for that matter--whose smaller portfolios might not otherwise meet a firm's minimum threshold of assets.
Tax loss harvesting
is usually a savvy year-end strategy for investors.
This distributed taxation can be managed through "tax loss harvesting
." This process requires realizing actual losses to offset the realized capital gains.
Particularly when robo-advisors these days can rebalance automatically, advisors will be under pressure to have more capabilities here, such as tax loss harvesting
and the ability to rebalance more frequently.
As always, we urge you to consult your tax advisor for specific information about tax loss harvesting
and the wash sale rule.
Clients can access automatic tax loss harvesting
on accounts with $50,000 or more.