Loss Harvesting : What’s It Worth To The Taxable Investor?
- Topics:
- Commercial Lending
- Tags:
- Finance,
- Financial Planning,
- First Quadrant,
- Free Trade,
- Investor,
- Loss,
- Personal Finance,
- Taxes
- Source:
- First Quadrant
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Overview: Loss harvesting has become a well-known tool for the management of taxable portfolios. By “harvesting” losses, one can realize capital losses, which, for tax purposes, can be offset against any gains an investor may have. Often, this can bring the capital gains taxes down to zero or even create loss carry forwards for future tax years. How much is it worth to the taxable investor? Specifically, if one assumes no stock selection skill whatsoever, how much can we increase the after-tax returns on a portfolio by combining loss harvesting with otherwise passive portfolio management? The answer is that loss harvesting adds a great deal of value, far more than most active strategies can hope to achieve, net of trading costs and capital gains taxes. It is found that loss harvesting is remarkably robust, adding substantial value over time, whether markets are volatile or quiet, strong or soft.
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Format: PDF | Size: 169KB | Date: Jan 2003 | Pages: 16
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