Techniques for Harvesting Higher After-Tax Returns

Highlights

• Research has shown that taxes can cost investors as much as 2% or more in return on an annualized basis. Yet surprisingly, many investors and their advisors pay little attention to taxes when making investment decisions.
• One of the most effective techniques for reducing the tax liability generated by investment portfolios is tax loss harvesting, but other strategies can help, too.
• Research compares pre-tax and after-tax performance of equity allocation model accounts.
• Overlay managers are well-positioned to execute tax management techniques, as they coordinate activity across the entire portfolio.