Displaying items by tag: tax loss harvesting

Dan Egan, VP of behavioral finance at Betterment, suggests that personality types play a critical role in invstmet decisions such as tax-loss harvesting. Investors' neuroticism and emotional intelligence are linked to the strategies they pursue and their behavior can be predictable. For example, investors with low neuroticism may not care too much about the day-to-day movements in their portfolio they don’t take advantage of tax-loss strategies for their accounts. Betterment offers robo-advisors that will offset these types of forecastable decisions in a portfolio.


Finsum: Investors' own bias can lead them to shut the doors on opportunities that could save them lots of money.

Published in Wealth Management
Friday, 25 March 2022 19:46

Crypto Portfolio Managers Offer Tax Solutions

Crypto could be a stress inducer when it comes to managing their tax solutions. However, a variety of portfolio products help investors navigate their digital wallets, track crypto investments, and manage their tax solutions. These portfolio trackers can help investors navigate the nuanced complexities in capital gains taxes that are constantly evolving. CoinTracker, TokenTax, and CoinLedger are all great crypto portfolio managers. TakenTax really lets investors take advantage of tax loss harvesting to optimize their crypto portfolio.


Finsum: Cryptos wash rule differences should incentivize investors to take advantage of tax loss harvesting.

Published in Wealth Management

The longer equity portfolios experience growth over time the fewer the opportunities there are to realize the losses and take advantage. Actually quant fund AQR called these appreciated portfolio’s a ‘liability’ for tax purposes. One interesting thing they find is that tax preferred passive equity and direct indexing can develop unrealized gains rapidly. It takes only 3 years for direct indexing to have unrealized gains hit 50% of the portfolio value and 5 years for a tax preferred passive strategy. AQR offers an alternative approach, ‘enhanced indexing’ which is a tax-loss strategy they developed that can help investors. If a direct-indexing strategy already has large unrealized gains it is hard to catch up, but the enhanced indexing strategy can still generate losses for tax purposes. Enhanced indexing is the preferred option when a portfolio is already heavily appreciated.


Finsum: Direct indexing and enhanced indexing are both novel strategies in maintaining an ETF like strategy while taking advantage of tax-loss harvesting.

Published in Wealth Management
Thursday, 24 February 2022 23:44

Advisors Boost Tax Efficiency

In the age of ETFs, many advisors may have a harder time justifying their fees to their clients however a new study shows that the fees alone can be justified by an advisor's ability to manage the tax burden of their clients. The primary method by which an advisor can add alpha to the portfolio is by appropriating funds for their most tax-efficient purposes, such as putting taxable bonds in a tax-deferred account and allocating growth stocks to a tax-free account like a Roth. Advisors also can edge out by advising about how to optimally tax-loss harvest when it comes to their portfolio’s crypto holdings. The main way to capitalize is through taking advantage of crypto’s status as property in the wash rule.


Finsum: Everyone is dying to hold crypto right now, but most haven’t made it big; tax-loss harvesting with the Wash rule exception is an edge as long congress doesn’t adjust the rules.

Published in Wealth Management

Capital gains taxes vary based on a lot of factors. Those dwelling in California for example may pay up to capital gains like regular income for their state taxes, which can be brutal. However, variation in income and holding duration play a large part in the total expected payments for cap gains. Finally, medicare surtaxes for those couples with over a quarter of a million in income will face additional capital gains taxes. Investors should take early precautions at the beginning of 2022 to consider how to mitigate their tax bill for the upcoming year with tax-loss harvesting. Realizing certain losses in the middle of turmoil can minimize your final tax burden.


Finsum: There are great advantages in tax-loss harvesting that you can take advantage of in crypto still, and now might be a perfect time.

Published in Wealth Management
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