TLH
iShares 10-20 Year Treasury Bond ETF
Mentions (24Hr)
0.00% Today
Reddit Posts
Robo Advisor strategy to minimize AUM fee and maximize TLH. Would it work?
Frec - Low Cost (0.10%) S&P500 Direct Indexing Startup
Automatic periodic investment with no bells and whistles..
VTSAX vs VTI: substantially similar for wash sale purposes?
How valuable is Tax Loss Harvesting for a fresh grad?
Wealth Management & Tax Loss Harvesting Benefits for ~30Y/O?
What's the risk of selling stock losses when you can tax loss harvest?
Call the $UBER! Destination: Gainsville, USA
Help me understand the wash rule in tax loss harvesting
My 10-week report of auto investing platforms (mostly robo)
If you're 60% cash right now, will you allocate all in, or wait?
Mentions
Hey no sorry I commented on that post months ago but I cut it for TLH reasons in December
> And it got me wondering, is the the standard practice of financial advisors to invest in individual stocks only? It depends on who you're working with. With managed portfolios at a major brokerage, a taxable brokerage can be done as something called an SMA (separately managed account) or otherwise some flavor of direct indexing, where you hold potentially hundreds of individual stocks. The main benefit here isn't "picking winners" or trying to "beat the market"; it's active tax loss harvesting. Managed brokerage accounts may also have ETFs as core investment positions, and those can be TLH'd as well. In tax-sheltered accounts like an IRA, you could find a collection of mutual funds since taxable events aren't a thing. All of that can be typical of working with a big firm that has a bigger system they're working within. If you're just doing like a one-off guy as an investment advisor then who knows what they'll do.
Since I am tax loss harvesting ETFs I just check when the headlines are screaming about big downturns. You do not have to monitor closely. You can just check when "the stock market crash" is the first item on the news. I often also rebalance cash+bonds vs equities at the same time. For example. The last time I did TLH was early April 2025 when stocks took a nosedive over tariff uncertainties. I did a little bit of TLH, selling some recent lots of VTI and simultaneously buying ITOT, but I bought a lot more ITOT than I had sold of VTI because the sharp drop in stock/stock ETFs moved my cash+bonds location above my rebalance threshold.
i assume that you dont use any app tools to track triggers for TLH, just watch and do manually with gut check timing?
VTV and VTI are clearly not substantially identical. Wealthfront and Betterment have published white papers on their tax loss harvesting methods and they use index funds that are very similar, but which follow indexes from different index or providers. The IRS has not objected. The IRS has not even objected to swapping between ETFs that follow the same index, such as SPY and VOO, which are both SP500 ETFs. That is pushing it too far for my taste, but I do TLH between VTI, ITOT, and SCHB which are in total US market ETFs, but the index providers are different.
they could be selling to reduce concentration even if in accumulation phase. Sell only as much as you can counteract with TLH to keep reducing the concentration over years. I think the bigger parameter here is how much TL wil be generated from your invested capital and how long will it take for the amount of gains you have
When you TLH you defer taxes and are lowering your basis, from $20K down to $15K, using your example below. If now you hold on to that investment for a while and don't liquidate, say for 10 years, you get the benefit of tax deferral over that time, but eventually when you liquidate you pay the capital gains, including on $5K that you lowered it by, but it's in future dollars, and the money you saved compounded by then. But if you liquidate it say a year later, even if there is growth - say your $15K in VTI is now worth $25K, you liquidate it all and pay gains on $10K instead of $5K you would have paid if you didn't do TLH, you deferred the taxes only for 1 year. In other words, you harvested $5K in losses in year 1, saving yourself $1K in taxes (assuming 20% rate), but then in year 2 you paid taxes on $15K, resulting in $3K in taxes, so overall you still paid $2K in capital gains taxes, the same if you had not TLH, and just allow your $20K investment grow to $25K. (You may have actually paid more in reality due to difference between Short-term and Long-term capital gains, but lets assume it's the same rate and its all either STCG or LTCG) The only real potential "savings" is from the compounding/depreciation that extra $1,000 in your pocket gave you over 1 year period, which at 10% is about $100 or so, if you are lucky (as if you borrowed $1K from IRS, interest free but repaid it in 1 year). Had you held it for 10 years, the difference would have been more dramatic.
Thanks. Can you elaborate the below point? I didn't get it. >if you are doing TLH with a short-term plan, it's basically worthless.
It doesn't have to be simultaneous. Harvested losses from TLH can be offset when the market goes up which could be next year or later.
>Now when I sell the individual stocks, I get $12k and need to pay tax on $5k ($10k realized gain - $5k TLH). As a result, I scan invest $12k cash in individual stocks. What am I missing? If your VOO holding drops from $20K to $15K, why do you expect your individual stock holdings to remain same at $12K - realistically they should drop more than 25%. Now, do the math again!
there are many brokerages that offer Direct Indexing with Tax Loss Harvesting for a fairly reasonable fee (Wealthfront has S&P DI account with TLH, for 0.09%), all trades and harvesting are done automatically with roboinvesting, and you don't need to worry about wash sales. It's much more efficient than using VOO since it can harvest individual stocks going up and down, not just the entire index. Tax Loss Harvesting helps of course, but it only defers your taxes, eventually you will have to pay the same tax bill, you are just lowering your basis through TLH. The benefits of tax deferral grow the longer you avoid liquidating your position. So if you are doing TLH with a short-term plan, it's basically worthless.
I considered Direct Indexing but it leads to complexities with buying/selling individual stocks because of wash sale rule. Hence, I thought of getting a similar result by buying an index fund. To be clear, my goal or hope here is not to lose money. I have been sitting on this cash for several years because market is over-valued, but for some reason the market keeps going up. So, now I am thinking that I better put this cash in VOO. If it continues to go up, I'm happy but if it goes down, then I can find a way to be happy by using TLH :)
My goal here is not to lose money. I have been sitting on this cash for a long time because market is over valued but for some reason it keeps going up. So, now I am thinking I better put this cash in VOO. If it continue to go up, I'm happy but if it goes down, then I can find a way to be happy by using TLH :)
If I'm just a W2 worker at a tech company and holding mostly my company stock and SPY (say worth around $500k to $1 million combined) in my taxable account, does it make sense to move these money to a robo-advisor (ie. Wealthfront, Frec, etc.) and pay 0.1% - 0.5% annual fees for a TLH product? Why or why not?
Op is talking about harvesting gains. So moot. And it would be a nightmare for the IRS to backdate this common TLH strat. It’s what many individuals and all brokers that offer the service do. They might change in the future. But that can be said about any rule or regulation.
For me it wasn’t a clean TLH with proxies. I sold and didn’t re-buy similar exposure — names like CRWV and FIGMA were originally AI-theme trades, and once I realized I didn’t have a durable business thesis, selling became more of a de-risking decision than a tax swap. Timing-wise I waited too long and only acted on Dec 31, even though the conviction had faded earlier in the year.
What funds do they use? Do you have to sell current holdings to get into it? Or can they just automate TLH on exiting lots of your holdings?
Been using for about 3 months for the XLK-like strategy. I liked it's performance and TLH harvesting enough to add the SPY-like and EFA-like strategy 1 month ago. I haven't had any problems, although tracking error for the XLK strategy is -1%, SPY is +.9%, and EFA is +.5%. Seems pretty easy to administer. They haven't been around for a long time though. I am interested in moving assets to the long/short direct indexing strategy eventually - for which Frec is the only provider I know of not locked behind an AUM advisor.
TLH window ending. Hopefully the selling pressure stalls. Hopefully
I cut them weeks ago to TLH gains from the year. I’m sure they will be ok but just better opportunities in the market imo
Doing stock level TLH is not the same as doing ETF level TLH. Stock level TLH is only really possible with algorithms, like if you are tracking 3000 companies.
Not true. Being an SMA doesn’t just automatically mean you are getting a TLH overlay. You need to look at exactly what the SMA strategy is and what they are offering before you know that.
He’s not recommending a fund, he’s recommending an SMA, which in this scenario is probably even worse unless there’s a TLH overlay or something, but the fees will be high, and the admin on owning hundreds of securities isn’t worth it in an account this small.
You only get TLH in an equity SMA if the strategy includes it. Most equity SMA don’t just automatically do TLH.
There are a lot of wealth aggregator companies now… and they will run projections based on assumptions and give you Monte Carlo simulations of your probability of success in retirement. There’s even stock level long and long/short TLH for DIY type investors at low fees.
Fidelity advertised some SMAs and I think they are actually decent products. I ended up going with a different fin tech company that does automated TLH for lower minimums and lower fees.
For the benefit of others reading your reply, in the TLH example, $3000 of the $3500 loss could be used to lower one’s ordinary income in 2025. The remaining $500 loss can be carried forward to use in future years. I’m primarily a buy and hold investor. I rarely sell, but at the end of the year if I see that I have some capital gains, I’ll employ TLH to negate those gains with the end result being a net $3k loss. Though long term gains are taxed at a lower rate than ordinary income for me, due to liquidating an inherited IRA, I need to control the size of my MAGI. I can always sell some shares of PYPL. :-(
I just take the main portfolios and check if I get more than the S&P500. We use direct indexing S&P500 so I get more with the TLH. We also use direct indexing Russell 1000 and its generating more than S&P500. This year we tilted a bit to international and it paid a bit better. They don’t manage the 401K, so no fee but advised to tilt more in growth and international and it paid off. So YTD the S&P500 is at +18% and I’m around +25%, with TLH on the side and I didn’t panic sell in March because of them. Bottom line, for 0.7% fee, I estimate this year only it’s bringing me 7% more and probably 3% more of TLH and not selling at the wrong time.
It’s not about your spending, tax alpha is mostly structure and sequencing: asset location, TLH (wash-sale aware), QSBS, DAF/bunching, bracket management, and Roth conversion planning before RMDs while managing IRMAA. Those can be net-positive well before $20M.
Don't lose sight of the fact that even tax loss harvesting doesn't **eliminate** taxes; it just **shifts** them to some other point in time. ("Defer, *defer*, ***defer***!") Also, as a general rule of thumb -- there are legit exceptions here -- don't take your losses until you have gains to offset. It's like a "Get Out Of Jail Free" card: when you draw it, do you immediately try to GO to jail? No, of course not; you hold it until you need it. Same guideline applies to TLH.
But the losses are unrealized. If you want, you could just TLH the amount of the gain. Really, this decision-making is about the tax rate you are specifically reducing. For example, if you have high gains one year and incur the 20% LTCG rate plus the NIIT 3.8% rate, that's a good time to harvest. If your gains are only 10%, then it is less valuable. Same for the carryover...if your future income is in a low marginal bracket, it's not very advantageous to do it. It depends on these income variables to do the right thing.
Still 9% left to incinerate before EOY to maximize your TLH-potential. I have faith in you.
This snapshot just captures my largest positions in the port + the options I’m holding (I only grabbed $30k in KRKNF as a smaller bet). But I did TLH BULL a week or two ago, I’ve got a bunch of realized gains this year so took the opportunity to offset some with that -20% hit. They had a great earnings but got punished for it which was odd. I’d say my conviction is also just higher in my other stocks but I’d still look to rebuy in at a later date if they continue to execute
Make sure you are clear on capital gains vs interest/ordinary income vs qualified and non qualified dividends. TLH only applies to the capital gains piece. Typically a TLH strategy doesn’t just sell/realize the loss side and do nothing because it’s often a position you want to hold, you’re just forcing the loss so you can use it this tax year. Typically you would buy back a similar position but not something so similar it would trigger a wash sale. Once the wash sale period has ended, then you’d potentially move back into the original position you wanted to hold (unless the similar position is fine, then you’d just keep holding it).
How do I know if the TLH is short or long term? If I sold at a loss, what difference does that make? I had those for no more than 5 years, some way less.
Are your TLH sales STCG or LTCG? Cause 1900 in TDF gains will be taxed mostly at LTCG, so 15% for you.
Yea the idea is that we lose money too. We win some we lose some. The lost investments are sometimes lost causes and holding them is useless. So you just sell them at the end to TLH
That’s not how harvesting works. When you are taking a wining trade, if you already have a losing trade already in the market. Sell that in the same year to offset. And reset the money into something thatll improve. Nobody doing TLH will lose money like that.
Genuinely a smart way to handle TLH. Most people overthink the “substantially identical” rule when the IRS hasn’t even defined it. Rotating between similar ETFs that track different indexes is basically the cleanest way to harvest losses without messing with your allocation.
If it were me , I’d stop anchoring to the old high and plan a staged exit: harvest the loss, rotate most into XLV or VHT, and keep a small tracker or use covered calls for any rebound. What I’d do: sell enough now to lock the tax loss, buy XLV/VHT the same day so you keep healthcare exposure, then wait 31 days before deciding if PFE deserves a spot again. Earnings is a coin flip, so let the ETF carry the sector bet. If you want upside while exiting, write 30–60 day covered calls on the leftover shares and let assignment take you out on strength. To justify holding at all, I’d want clear signs on integration/execution, debt paydown pace, R&D updates, and guidance revisions, not hopes for another vaccine spike. For prep, I use Koyfin for ETF look‑through and Portfolio Visualizer for simple backtests, and Ask Edgar to skim filings and transcripts fast before earnings. Main point: set a rules-based exit, TLH into XLV/VHT now, and only keep a small, managed PFE slice.
You got a great entry! I added to ASTS recently, as well at PATH, ZETA, and TE mostly. I may also consider selling KRKNF to TLH as I got a ton of cap gains this year then just rebuy after 30 days
Not that anyone is following exactly but going to TLH my BULL shares that are at a loss (will help a little to offset all of the realized gains I have this year) as I’d prefer to roll that cash into my other higher convictions that are at a discount currently
I was hoping those will go up but they don't. Honestly not very sophisticated and I am definitely bad at cutting loss. I think TLH is a good motivation for that.
Sell the ETF and buy a similar but not identical one. VTI to ITOT, for example. The key is to capture the meaningful exposure you’re looking for while being different enough to not trigger a wash sale (the deferral benefit of the TLH is much smaller than the true economic gain youd miss out on if the shares rip during the 31 day cooldown period). I am personally not a fan of doing TLH with individual securities, since the idio risk of the holding is what you’re trying to capture in the first place; however, certain circumstances could make it a more attractive strategy. The wash sale rule applies to “substantially identical” holdings, and while this has never been explicitly defined by the Service, it’s generally accepted that ETFs issued by different companies tracking indexes created by different providers is well within the safe harbor.
I have a direct indexing account with Parametric. They sell-buy stocks every day and heavily during corrections and down turn. It’s fully automated. I do nothing. I saw massive TLH this year.
It probably only works with individual stocks. If you want to match the market and have 70:20:10 large, mid and small cap, make sure to calculate how many small cap your TLH portfolio can buy. Best is min $5k initial investment to allow for enough losses where you get to $3k with only selling a few stocks each year. So only 20 small caps even if you allocate $1 million just to individual stocks TLH. Only 2 small caps if you only allocate $100,000 for individual stocks TLH.
0.7% is quite high. What all do you get for this management fee? It generated $22K on my account so around 3% of TLH. Can you please expand on this statement?
I’m using Parametric direct indexing mirroring the S&P500. Basically, my manage account owns the individual stocks instead of the index. I get the same performance and return. It’s generating tax loss harvesting, I think this year It generated $22K on my account so around 3% of TLH.
Cut your losses and recoup with TLH.
yea, having life changing money in one position is incredibly stressful, you did great cashing out near the top. You should consider diversifying now. Maybe some money in real estate, some money in safe stocks (like McDonalds), and some bonds (like TLH) to preserve your capital from inflation.
It varies every time, but lately it's been to book LTCG for expenses in FIRE. I try to choose holdings that are a hold rating, at best, rather than selling those at a buy. Over the 30y getting to here, about 1/3 of our nw ended up self-managed in from 10-25 stocks/ETFs at any given time, ended up about half of that is in rollover IRAs. I got in and out of BP, in after they blew up the gulf out with some profits. I got into GE from teh get go because who didn't want GE! Bought more at their low of $6 going into 2009, made plenty of dividends along the way but ultimately closed the position and moved on when it became clear they were not good at being a conglomerate or doing more than one thing at a time. Generally, if Morningstar rates something I own at a hold or better, I'll hold. I'll consider adding more at four or five stars. I always had DRIP turned on up until FIRE, now the taxable account divs we keep as cash for expenses while the IRAs. Some core holdings, I'd sell around the core - trim a bit at low 4+ stars, add some back at lower share rates, sometimes doing so with TLH in the taxable side if losses were there to be booked. TL;DR The answer is basically it varies, bordering on never.
I'm keeping a list of "safe-up" options and have noticed bond funds like TLT / TLH / XTLH.to have been up a bit lately. Not much, but they are in 5-day positive territory.
If you think the selloff will be mild, like 5-10%, buy the dip. If you think it will be 15% or more, buy bonds. TLT / TLH
The only ones on my list the held up were Gold, JNJ, PG, TLT, TLH. Gold, long bonds, and non-tech blue chips.
Why do you need a robo advisor for TLH? It's not difficult.
I have about $100k with Wealthfront. This year Im at $730 in TLH, it all came with the April tariff downturn. Each year it varies obviously with market conditions and any withdrawals I do but its not insignificant by any means
I used it only last 4 months or so of 2024. Then I too went all in on VOO ETF instead. Decided the TLH wasn’t going to be hugely beneficial for me and opted for simplicity instead. But during those 5 months I saw just over 1k in TLH with a 50k portfolio.
If you want to TLH you shouldn't be trading other ETFs in other accounts. They may inadvertently put you in a wash sale because of your outside activity. I'm yet to see how robo advisors do anything a three fund/target portfolio won't accomplish.
Direct indexing can be amazing. The amount of money I saved the first year in taxes makes it worth it. If you have lots of capital gains you need to offset (aka I sold a business), there aren’t many better ways to take advantage of the TLH and still get the performance of VOO (or better).
The only way I see that working is 1) you start paying them 1% or whatever of your AUM (they'll want to manage all of it!); 2) they start churning through a bunch of buys and sells, booking losses, then TLH by selling enough AAPL to offset those losses. It's a stupid plan. Just start spending and don't stop until you die. You'll never run out. /s OK, sarcasm a bit, but really it's true. You can gift shares of AAPL and the recipient will pay their tax rate when/if they sell. You could trim the position by starting to gift shares now to your family that will be inheriting it eventually anyway. I recommend you pay a one-time fee to a financial advisor to analyze your situation and recommend the best way forward to raise funds every year to live off of and to do whatever you want with the bulk of it. You're better off just paying taxes as they become due than giving full control over the account to someone else.
The problem with traditional direct index tax loss harvesting (TLH) is they have to sell your assets to set up the TLH account. You will have large capital gains from that and in the first year of this you will have around 15% of total account value loss to offset gains. That means you'd still be paying taxes on 85% of the gains. This sounds like a bad decision. There are leveraged long/short strategies that can produce a large amount of losses. They can harvest 60-70% losses the first year while still matching or beating Russell 2000. This would seem like a better option if you want to get out of that large single holding. These strategies are only available through financial advisors so you have multiple fees as well. Might be best to slowly sell your AAPL every year to keep under the tax thresholds and minimize your taxes.
First of all you can only loss harvest if the price you bought is higher than today’s price. If most of your shares are very old you’ll never have an opportunity to loss harvest! Advisors get paid a percentage of assets under management (AUM) and sounds like this one’s trying to make a buck off you with some empty promises. P.S. This thread is filled with misinformation! You don’t need offsetting gains to TLH! You can just take losses and carry the losses indefinitely until you are finally ready to use them, Mitt Romney did this in 2008 and famously paid like no taxes for years. Also you can use 3k losses per year to offset regular income. TLH is great but doesn’t apply to your situation.
This assumes: 1: You have substantial assets to havest against. 2: Theres a loss. 3: You have time for recovery in your risk model. At 67 OP shouldn't be moving into any assets that could reasonably be expected to have large enough losses to offset any meaningful percentage of his Apple stock. OP also only has 450k and that only exists in tax advantaged accounts where you can't TLH. Even with that 450k, and an extremely optimistic 5% harvest ratio it would take 110 years to office the AAPL cap gains.
I'm not sure how you'd tax-loss harvest $2.6 million dollars worth of Apple gains. TLH would be selling underperforming stocks, while also selling winners to "cancel" out the taxes. Then re-buying a substantially similar stocks as the losers so it's a bit like you never sold them. Do you have that many underperforming assets to harvest that many tax losses?
This would have zero impact on future returns and would not "supercharge" future gains. The loss has already happened. Selling and rebuying has no impact on future returns. The reason to do this in taxable is SOLELY to claim the loss to offset other gains and thus reduce taxes due this year. Any money paid to taxes is money that could be invested so tax loss harvesting has value in taxable but only due to reducing current year taxes not because it supercharges anything. In an IRA there are no taxes and thus no benefit is TLH. Changing your cost basis artificially like this does nothing.
new investible cash goes to ETFs. I basically only go look at TLH opportunities when there are "big" market drawdowns. Reason for the switch is the tax efficiency of automatic TLH in direct indexing isn't sufficient to make up for the long-term inflexibility and may ultimately be inferior to the internal tax efficiency of ETFs.
Poor choice of words on my part - when I refer to "direct investing" I mean their direct indexing products; increases the velocity of TLH because they're indexing via single names. Having WF automate TLH across ETFs works, but 25bps feels like a steep price to pay for it. Using the direct indexing products means you also aren't paying the underlying fund fees. I'm still in that investment, too expensive to shift out. But I'm not making new investments in it outside of dividend reinvestment - not ideal since it means there TLH opportunities are being attenuated over time.
As the first commenter noted, you "stomach it" because the return comes with lower risk via diversification. The fees aren't driving the difference, the REITs and international exposure are (though less so recently). The correct comparison would be WF to VT, with some estimation of TLH savings. WF gives plenty of degrees of flexibility, including a very low ER TLH product that is S&P500 only. The TLH product(s) are "worth" the fee especially if you are not using WF to get international exposure (The TLH is inter-fund for international rather than direct investing)... IFF you want TLH. I am decreasingly of the view that these products make that much of a difference though, and they hinder flexibility on the longer horizons. I have a large-ish sum tied-up in the direct investing product and would convert out of it if the built-in gain hadn't reached the point of being untenable.
I was with Wealthfront for 5-ish years. Took a lot of advantage of TLH, but moved to Fidelity in the stable years of growth with minimal TLH(hence unjustified fees). Now may be a great time to get inyo robo investing, for TLH
Oh, right! Forgot about the losses we booked '08-'10 or so. TLH has been nearly impossible since those losses with everything in the green pretty much. Good problem to have. Now we've FIREd, and we're booking gains up to the top of the 0% LTCG bracket for a few years.
Correct. The people who sold after liberation day for any other reason than TLH made a big mistake. Most seasoned investors on here were begging people not to get out of the market after that dip.
As a new investor in the US, I wish someone told me; 1. Max your emergency fund. 2. Max your 401K. 3. Max your Roth IRA or back door. 4. Keep 5% cash in HYSA. 5. Invest simple in VOO / VT / QQQ / IWF for growth. 6. Think long term full cycle so 10 years minimum. 7. Don’t time the market, stay invested. 8. Generate TLH every year via direct indexing.
that 1.5% of dividends in 50 years isnt going to generate MUCH in terms of allowed losses. Assuming in 50 years there is NO more TLH available on the core positions and their alternatives.
Morgan Stanley Wealth Management. They manage everything for me, generate TLH on top of matching/beating the index, keep me invested, optimize my cash and fixed income. Perfect for me.
Yep, Im pretty sure I can do an in kind transfer. But once my SWPPX positions are moved yo WF, I assume they have to be liquidated in order to use their S&P500 Direct roboasvisor for the TLH benefits. Liquidation at that point would be a taxable event, no?
Yeah I found it a great tool to learn. It helped explain the different sectors and recommend some options and some strategies for TLH. It pushed me to do more research and learn even more.
Yes - they do give me better performance than MYSELF managing my money. The TLH this half year is already close to $25K. With a passive index it would be zero. They put me on a growth index in addition to S&P500, I would have just stayed on S&P500. Many times including this year I would have sell to go to cash, same thing during covid, they kept me invested. A lot of time I would have tried to time the market, they didn’t. They kept me on better HYSA for some of my cash that provided almost 1% better than most of HYSA. Most researches show that most investors failed to do like the S&P500. While most of people complain about a 1% fee, most of people largely underperform the market to emotions and bad decisions. QAIB Report (2019 data): Over a 20-year period, the average retail investor earned around 4%–5% per year, while the S&P 500 returned around 9%–10%. The gap is largely due to: Panic selling during downturns Chasing performance (buying high, selling low) Market timing attempts Lack of a consistent strategy
SpecID or specific lot is the most flexible because you're in charge of deciding what to sell. But it requires understanding of taxes. All other methods just sort the shares by one attribute while ignoring the rest. HIFO sells shares with the highest cost basis, it doesn't care about holding period, you might be selling short term gains when you don't want to. In your case, if you purely just want to minimize capital gains and don't care about realizing losses, meaning you don't want to wait for any asset to recover, then doing HIFO will generate the least amount of capital gains, then if you still have losses, do TLH to sell any lots that are at a loss.
TLH is a benefit on DI, however it could over time lose steam. If you own the index fund, you can’t take advantage of individual stock movements which leads to potential tax alpha. If the S&P is up today, there are certainly some stocks within it that were down on the day offset by more that were up. Having the ability to sell individual stocks instead of the entire fund can be powerful. Additionally if you need to take a withdrawal, you can use more precision with which stocks you want to sell based on embedded gains or at the lot level. That can also lead to potentially less tax on a distribution if done correctly.
Yes, I agree with you. I can easily sell SPY and buy VOO after a loss and do a quick $3K realized loss. But 4% of my portfolio in the past 12 months, equivalent to $25K loss? I can’t do that by myself. My understanding, and I can’t be totally wrong, I’m not looking for an argument, it’s that direct indexing via parametric allow to boost TLH and squeeze the juice to the maximum by going at the line item level on a daily basis.
Sorry I mean TLH is not a benefit of direct indexing. If you make investments, even low fund passive indexing, you will have multiple chances to realize $3k+ losses every year. You can be tax loss harvesting no matter your investment strategy. You should ask yourself whether not holding SPY is worth 0.91% (or more with other funds) in increased management fees (hundreds of thousands of dollars over your lifetime).
What's the relationship between direct indexing and TLH? You don't need to do direct indexing to take advantage of of TLH, you can transfer funds between similar indexes to harvest losses.
I see. Usually you get 1% to 3% TLH. I’m happy with the 4% but don’t expect it on a bull year. $5K is in the 1%. I would be curious if someone has a Fidelity direct indexing s&p500 to compare considering yours is not apple to apple.
I had 500k in basis to TLH from. The “silos” are not customizable. I was unhappy with paying Fisher 1.25% and just moved this over a month ago. They have harvested about 20k but I am willing to pay the cap gains tax to get away from fisher. Fisher wanted me in all stocks and didn’t want to consider advising me on things like my CDs and other ETFs. Fidelity got me to move all my CDs and what ETFs over to them and make 0 money on them so they effectively make .2% from my investments. They also believe in the bucket theory like I do and were willing to just make nothing at all and move me 100% to ETFs. But I thought they deserve 20 bps for the great experience I have had with their staff so far.
Interesting. How TLH is done if you do not do monthly contributions? for 0.40% is it actively managed? Do you have customization available? I believe the fee might be similar for my Parametric Direct Indexing but included into my 1% overall fee as my advisor manages other portfolio, with Private Equity, and others services. But good to know I might be able to run it by myself one day for -0.6% less fee. For now, I keep the wealth management.
I do this with Fidelity but for .4%. I have an S&P silo and a US total market silo and an International silo. You can never undo this without a lot of capital gains. Also it only takes one or 2 really good years of returns to make TLH not really doable except with newer money. I plan to just leave it alone and if there is anything when I die I have instructed my trust to sell it all and buy ETFs when my kid gets the step up in basis.
Interesting. So you underperformed the S&P slightly, but made it up on the tax side. Makes sense. Do you know how much of a tax benefit you actually realized from the TLH?
I understand, but for instance. my entire portfolios beside direct indexing is matching or better than s&p500. And direct indexing did 4% TLH. Paying 0.04% fee to get 0% TLH seems less benefiting me?
Yes - but no TLH and difficult to forget it. I’m able to forget my $401K but for some reason, I have always quarterly “investment ideas” and bad allocation rebalance decisions.
That portfolio has averaged 21.6% over the last 5 years but I haven’t ever moved my entire portfolio to the strategy. Lots of short term capital gains but I’ve been able to decently offset with TLH.
I took the opportunity to sell some equities that simply weren't going anywhere so I can TLH this year. But other than that, you're correct - don't just do something. Stand there!
Appreciate you being open. You probably know TLH is helpful in the first few years but is essentially useless after that (as it's almost guaranteed that most/all of your stocks will have a gain after 5/10/etc years) so consider getting out of the 1% fee after that if it's only for TLH. If you need advice etc then it may still be worth it
To give you an example. This year, we are only 4 months in and the direct indexing portfolio generated close to $15K loss. For the year it could easily go to $30K or $50K based on volatility. Therefore next year, I can deduct $3K of my taxes, and if I need to sell a portion, let’s say $30K, of my other investments to take some gain, I will not pay any taxes. If I was on VOO only, I will have the exact same performance, except that I will have to pay $3K in tax because no TLH and no loss. I would also have to pay ~$10K more in taxes (37%). I might be wrong but this is my understanding.
The fee is 1%. I have multiple portfolios. The biggest one is using direct indexing and tracks the S&P500 with weekly TLH, so not only I get the same performance as the S&P but on top of that it generates loss based on volatility, and it will offset gain going forward. Other portfolio track the S&P500 at 70% and Tech at 30%. Private Equity is in the single or low double digit, more here to hedge. So bottom line, performance is almost same as S&P500. Probably on the lower side. Your point is going to be just VOO and chill. I did it in the past but ultimately finish to reallocate, sell, buy again.
TLH stands for Tax-Loss Harvesting. It's a strategy used to offset capital gains tax liability by selling investments that have declined in value. When you sell these investments at a loss, you can use those losses to reduce your taxable capital gains from other investments, potentially lowering your overall tax bill. As you can guess, it's quite time-consuming and requires active management.
What does *TLH* stand for in this context?
I use a private wealth manager because I don’t have time to manage my portfolios, buy/sell on time, deal with private equity, make money transfer to family, manage the cash/HYSA/T-bill, manage the TLH… I pay 1% for it. The main point for me is also to not act on emotions and sell or put my portfolio in bond or something else every time there is an event like tariff or volatility.
I was wondering how much in TLH/cap losses folks have sitting around for use in the future. I recently decided to restructure my portfolio and in the process, got rid of a bunch of losers that I doubt will ever come back (not just based on recent madness, but things that had dropped before the crash). I also dumped a bunch of stuff that was at a slight loss because I wanted to move my money to some index funds that were/are at bargain basement prices. So... All told I racked up over 125k in cap losses. I did so knowing that the losers were probably never coming back and the index funds are more in line with my current plans, and that I will surely be able to use those to offset gains in the future. I got to thinking about it and even though this is a very small % of my portfolio, I wondered if it's thought of as a "small/medium/large" number for TLH. Just curious... thanks in advance for any input.