Coach’s Corner

Waiting until year end to help clients offset capital gains with tax-loss harvesting can be time consuming and may not be the most efficient approach from a market-timing perspective. What if, instead of waiting to year end, you discussed the benefits of a systematic approach to tax-loss harvesting with clients now?

The primary benefit of a systematic approach would be a reduction in your clients' current year tax bills so they can keep and re-invest more of what they earn from their investments. After all, the longer a portfolio stays invested, the more time it has to grow and compound. When repeated in a systematic way, year after year, tax-loss harvesting can further compound this benefit while potentially accumulating losses that can be saved and used at a future date for large or unexpected gain recognition events.

Another less-discussed benefit of systematic tax-loss harvesting is that it can help reduce emotional investing. This can be particularly important during times of economic volatility. By automating the process, you remove the temptation for both you and your clients to make knee-jerk decisions based on market fluctuations. Instead, they can stay disciplined and focused on long-term investment goals. As a bonus, the tax savings generated by harvested losses can provide a silver lining to market downturns.

Bottom line: Consider adopting a systematic approach to tax-loss harvesting now so you can help clients maximize their after-tax outcomes for the 2023 tax year.