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How much do you know about tax-loss harvesting?

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      By Brian Langstraat, CFAChief Executive Officer, Parametric

      Seattle - Last week I wrote about the reasons I think tax-loss harvesting isn't right for every investor — how its recent popularity has led it to become an overhyped, oversold shortcut to the really difficult work it takes to do it well. And how, contrary to our experience over the past 27 years, many in the industry assume that loss harvesting is a one-size-fits-all solution.

      It got me thinking about other things the investment community assumes about tax-loss harvesting but may not really understand. Parametric spends a good deal of time helping advisors and their clients with loss harvesting, so I thought it would be useful to also devote some energy to lore harvesting — gathering some of the things we hear from advisors and investors from time to time and testing them against what we know to be true.

      Here are six true-or-false questions to help you advance your knowledge:

      1. It doesn't matter when you harvest losses in a portfolio as long as you do it before the end of the year.
      2. Tax-loss harvesting opportunities shrink over time.
      3. You can't harvest a loss and maintain the same market exposure at the same time without violating the IRS's wash-sale rules.
      4. Harvesting losses works the same way in an SMA as it does with an ETF or mutual fund.
      5. You can harvest losses in your equity portfolio to offset gains in other holdings, such as real estate.
      6. You can harvest losses even when the market is rising.

      Bottom line: Come back tomorrow for the answers.

      tax forward