Is Tax-Loss Harvesting Right for Your Portfolio?

Aug 09

Creating a well-diversified portfolio is the foundation of growing wealth. But there’s an aspect that may help increase your overall return – and it isn’t just an investment strategy. Being strategic about handling asset value declines is also a tax strategy. It can help you offset capital gains taxes resulting from managing your portfolio or taking income in retirement.

There’s also a provision in the tax code that allows you to offset a portion of ordinary income if the loss is greater than the capital gains taxes you are liable for. And you can carry it forward indefinitely.

Being proactive and thoughtful about managing the “losers” in your portfolio should be part of your overall strategy, whether or not it makes sense to sell a position and turn a paper loss into a tax offset. Making the decision involves looking across your financial picture and investment strategy, and there are some pitfalls... ...