While low cost asset class investing is significantly more tax efficient than active management, we incorporate additional tax reduction best practices when implementing client portfolios to increase after-tax returns.
Tax management is one lever of investment performance that an investor can control, and we pay heavy attention to tax in providing our customized portfolio management services.
Customized Asset Location
We make use of tax deferred accounts to house the highest taxable gain securities in a portfolio. This is a service that is highly customized to each individual investor.
Tax Loss Harvesting
We tax loss harvest year round by selling securities substantially below their cost basis, and using the tax loss to shield against same-year or future-year gains.
Charitable Giving of Appreciated Securities
For highly appreciated securities, we seek opportunities to remove unrealized gains via charitable giving. We may recommend the use of a donor advised fund.
Avoidance of Short Term Capital Gains
When rebalancing, changing portfolio composition, or transitioning accounts from brokerages or other advisors, we make careful use of tax lots and inventory the tax basis of each position (provided that the client is able to provide that information). We generally avoid any short-term capital gains altogether when trading. For potentially large long-term capital gains, we weigh the benefits of a fund/security change vs. the potential tax liability of selling the position.