Buying and selling real estate properties can be quite lucrative for investors, but incurring capital gains taxes can weaken profits. What if there were ways to limit capital gains taxes on properties? In a recent article in SmartAsset, Ashley Kilroy suggested a few different ways for investors to limit their capital gains on real estate properties. The first to employ tax-deferred funds. For instance, you don't have to buy real estate with cash. You can use your IRA or 401(k). By depositing profits in your account, it allows your money to grow tax-free. Second, you can make the property your primary residence. The IRS exempts primary residence sales from capital gains taxes up to $500,000 for married filers and $250,000 for single filers. Third, employing tax-loss harvesting can help you avoid capital gains, assuming you are selling one property for a loss and another for a profit. Fourth, utilizing the 1031 Exchange allows you to use the income from the sale of one property to purchase another property of equal or greater value. In this scenario, you wouldn’t have to pay taxes on prior depreciation deductions. Fifth, the IRS allows rental property owners to deduct an annual depreciation amount from their income. Sixth, you can deduct the costs of managing property through itemized deductions, which lowers your tax burden. Seventh, improving your property boosts your property basis which can shrink your capital gains taxes and increase your property value.

Finsum:A recent article on SmartAsset provided seven different ways investors can limit their capital gains taxes on their real estate properties.

There’s no question that ETFs are a popular way to gain access to the market. They’re low-cost and tax efficient when compared to mutual funds. But, according to a new research paper, ETFs are not the most profitable after taxes are paid. That distinction belongs to large baskets of individual stocks that aren't found in a fund. The paper, which was posted recently by Roni Israelov, the president and chief investment officer of NDVR, and Jason Lu, a research economist in the economic modeling division of the International Monetary Fund, sought to quantify tax-loss harvesting, the strategy of selling losing assets to offset taxable gains that arise when selling winning ones. The paper found that tax-loss harvesting produced the best results when it's used for groups of individual stocks, not ETFs. In a recent interview, Israelov said "You make more money harvesting single stocks across an entire portfolio than you do in an ETF." The paper adds to a growing body of wealth management firms that have been promoting the merits of tax-loss harvesting and boosting the case for direct indexing, a strategy in which investors chose a basket of securities that mirror an index, but is personalized to their specifications.

Finsum: A new research paper found that tax-loss harvesting produced the best results when it's used for groups of individual stocks, not ETFs, boosting the case for direct indexing.

Robin Döttling, an assistant professor of finance in the Rotterdam School of Management at Erasmus University in the Netherlands, and Sehoon Kim, an assistant professor at the University of Florida’s Warrington College of Business, authors of a recently published academic study, found that individual investor demand for socially responsible investing “is highly sensitive to income shocks” and economic stress. The professors went through mutual fund flow data and surveyed investors' views of and expectations for sustainable investing. The study focused on the periods immediately before and after the COVID pandemic went global in early 2020. The results show that when times get tough for individual investors, helping to save the planet takes a backseat to selling funds that they believe may lose more during a downturn. When an economic shock results in incomes shrinking, investors become more risk-averse. In the authors’ words, “We start to view the emotional or nonfinancial appeal of ESG investing as ‘costly’ and ‘unsustainable’ if it means forfeiting returns.” However, the study found that demand for ESG investments from institutions such as pension funds remained more robust. Their actions are typically constrained by investment mandates and are often slower to respond to market shocks. In addition, those investors don’t have to face the same kind of pressures that individual investors deal with during COVID lockdowns and job losses.

Finsum:A recently published academic study conducted before and after the COVID pandemic found that individual investors sell ESG investments during economic downturns, while the demand for ESG remains robust among institutional investors.

Category: Wealth Management

Keywords: investors, ESG, covid, mutual funds

During a recent ThinkAdvisor FMG sponsored webcast titled “How to Drive and Close More Leads in 2023,” Samantha Russell, chief evangelist at FMG, and Susan Theder, chief marketing, and experience officer at the firm, outlined ways advisors can improve their lead generation efforts this year. Both Russell and Theder believe that holding webinars and other events is a great way to generate leads, but have found that only 23% of advisors are utilizing them. They recommend that advisors pick topics that go beyond financial issues as most people are not thinking about their financial issues all the time. For instance, Theder said that in the “most successful webinars I’ve seen, advisors do combine multiple different professions.” So, an advisor could talk about wellness and bring on a nutritionist, an estate planner, and a mental health professional and have a discussion that covers more than just the financial aspect. They also recommend picking topics that are timely. For instance, during February, tax issues are a great topic to discuss. They also suggest keeping the webinars short. Russell says “Between 30 and 60 minutes is really ideal for a webcast or webinar.” In terms of marketing your webinar, make sure you’re really specific with the title. Russell and Theder also recommend sending at least three promo emails and use Google Reviews if your firm allows it for SEO purposes.

Finsum:During a recent ThinkAdvisor webcast, Samantha Russell and Susan Theder of FMG recommend utilizing webinars to generate leads this year.

Capital Group, the parent company of American Funds, recently launched 12 active-passive model portfolios featuring Capital Group as the strategist. The models will be made up of American Funds' actively managed mutual funds and passively-managed ETFs from Vanguard, Schwab, and BlackRock. As the strategist, Capital Group will select the passive ETFs in each model and manage the allocations. The models are the latest in a series of active-passive model portfolios from Capital Group that include growth, growth and income, preservation and income, and retirement income strategies. They are designed to help advisors balance the demands of investment management with the need to scale their businesses and deepen client relationships. Capital Group's model portfolio business is an area of strategic focus for the firm. Its model portfolio business has more than tripled in assets under management since 2018. The new models bring the total number of model portfolios available nationally to 31. The new models comprise nine core models and three retirement-income-focused models. They include:

• Capital Group Active-Passive Global Growth Model
• Capital Group Active-Passive Growth Model
• Capital Group Active-Passive Moderate Growth Model
• Capital Group Active-Passive Growth and Income Model
• Capital Group Active-Passive Moderate Growth and Income Model
• Capital Group Active-Passive Conservative Growth and Income Model
• Capital Group Active-Passive Conservative Income and Growth Model
• Capital Group Active-Passive Conservative Income Model
• Capital Group Active-Passive Preservation Model
• Capital Group Active-Passive Retirement Income Model - Enhanced
• Capital Group Active-Passive Retirement Income Model - Moderate
• Capital Group Active-Passive Retirement Income Model - Conservative

Finsum:Capital Group added to its series of active-passive models with the launch of 12 new model portfolios, including nine core models and three retirement-income-focused models.