TLH
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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
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.
You are worried over nothing. Millions of people do this every year with no issue. There are many confirmed reports online that VTI/ITOT and VXUS/IXUS were acceptable TLH partners.
It’s why I use Direct Indexing with Parametrics. I have a team dedicated to do that every single day. They already generated close to $40K of TLH this year alone. I can carry this loss the following years and deduct capital gains from it. All getting the same performance as the S&P500!
It does not make sense. High quality bonds are mostly uncorrelated with stocks, not anti-correlates, so they are not a hedge. They are a diversifier though. FBND has the same trailing ten year return as the bonds it holds. Well actually it is an active fund so it may or may not have outperformed based on the managers' trading. It has beaten treasury bonds and bills over the past ten years. https://stockcharts.com/freecharts/perf.php?FBND,BIL,BND,IEF,TLH&p=6
$US10Y $US20Y $US30Y on tradingview. TLT and TLH, BND etfs
Same need. I moved about half into TLH after the election knowing the Emperor of Pussy would fuck the market six ways from Sunday. But now that’s getting fucked too. Where is safe? Just a money market account?
And buying when? At least cash isn't < 1% anymore. u/roknzj \- Most people are buying with their paycheck withdrawals. We're retired now and very low bond positions, so no real cash to speak of to invest with. We are rebalancing here and there and I did add a new position by TLH some recent buys into Realty income (O is still huge position for us, but now adding EPR).
Thinking TLH? What would you be eyeing here?
I switched a large position to TLH after the election and it did great until last week. Should I be getting the hell out of that?
TLH is what you do in December bro
How do you like Schwab? I was thinking to move everything to there but on the robo side, they won’t enable TLH until the account is at $50k
My leverage is a bit more conservative. I increase leverage as market drops, decrease as it rises. I have my own analysis on appropriate levels that I update every year or two. For example, I’d go to 2:1 when SP500 goes to 2000. That’ll likely never happen, but maybe. I have substantial retirement savings where I can buy LEAPS without tax implications. If I need to buy in taxable, market has likely dropped enough where I’d TLH to buy the LEAPS and then can deduct gains when they expire/I sell them. LEAPS are maximum 2-3 years out. I only had to do this during 2020 covid crash. I also bought LEAPS during the 2022 crash. My strategy does not have much history. In general, I go with Pascal’s wager- I know leverage is good for me while I’m young. However I also humbly accept I will experience a severe bear market (2008 style) at least once in my lifetime. So I plan conservatively to not get wiped out. “To make money they didn’t have and didn’t need, they risked what they did have and did need.” PS my analysis told me to stop buying SPY at 5500. I had 13% cash at the start of this year
The absolute value of TLH really depends on your situation. Generally all that TLH really does is defer taxes until later. Deference has value (it's like borrowing money for free, which produces real money if you keep it invested), but quantifying that value is difficult unless you know exactly how long you'll defer for and how much gains you'll make from the deferred taxes. In the best case, you can defer indefinitely, but that comes with some major caveats and so probably doesn't apply to most folks (i.e. donating your stocks to charity, or dying and passing them on to your heirs). So even though it may be possible to quantify the average value of tax loss harvesting for a large group of people, that average is unlikely to apply to your particular situation.
Wrong comparison. Yes, TLH can save you 1% annually. Though it’s a little more complicated than that — it may be a permanent benefit, or it may just be timing (if you sell in a taxable account later, you will have a larger gain because you did TLH). More importantly, it is easy to TLH yourself, or with funds like Parametric. Not fair for your advisor to claim TLH pays for his fees. He’s not really adding that value. It’s readily available with or without him.
This needs more nuance. The $3k yearly loss limit applies to earned income i.e. if you make $100k and then have capital losses, your new income is $97k; however, there is no limit to to offset capital gains. So if, for example, you have $20k in losses, then you can offset $20k gains. The biggest benefit for me is stacking gains. So basically in this scenario, I’d realize $20k in losses, buy a dissimilar investment so I’m still invested, take $3k loss against income in the current year, then rollover $17k losses to the next year. I did this the few months before the wash sale rule went into effect for crypto. I bought at $40k; sold it all at $16k, bought it back in 60 seconds, lost about $700 to transaction fees and price appreciation, but had about $ $30k in capital losses that I used against SMCI gains. Moral of the story, TLH is great, but you don’t need to pay an advisor to do this for you.
Here is a more complete discussion regarding TLH as found at bogleheads.org. Be advised Bogelheads embraces more passive investing and may not be what you are looking for (since we are in r/investing). [https://www.bogleheads.org/forum/viewtopic.php?t=351267](https://www.bogleheads.org/forum/viewtopic.php?t=351267) The long and short of it is that it's not a straightforward Q&A.
Tax loss harvesting is basically selling securities at a loss and using those losses to offset gains elsewhere. The losses can be written off to a limit of $3000 per year. It only applies in taxable accounts and not in IRAs. I'm skeptical TLH gains will provide enough to cover advisor fees. A good financial plan wouldn't see that much churn (buying and selling) in a year to generate the necessary sales.
Mostly 1-3 month, but some longer. Specifically about 70/30 SGOV/TLH
What do they do?? Not gaslighting just want to hear your arguments FOR a financial advisor. NOT for an entire firm offering (estate planning/ tax prep/ etc..). Anything outside of TLH? Or are you talking about stuff a person can easily learn on their own, i.e. asset allocation and asset location. Thanks in advance.
> _" I'm buying calls on TLH for a short term play"_ When you actually do this, screenshot it and post it. - https://www.reddit.com/r/wallstreetbets/s/BdrgVrYNwg
Moving significant chunks to TLH and VTEC for now, in the cash account. Moving to a 50/50 allocation in retirement accounts, for now.
At least snag some SGOV or TLH
good to know, thank you! great tip about turning off dividend reinvestment entirely in taxable accounts, i pretty much set it and forget it in VTI in my taxable but it's also the only place i ever think about TLH, so makes sense to turn it off.
Yes. If TLH turn off all dividend reinvestment. In fact I always have dividend reinvestment turn off in taxable to avoid dividends blocking TLH.
All I heard was: “Buy more Sept ATM calls on TLH, near-miss (if that) national debt default loading…”
Me: *sitting on an absolute shitload of TLH watching the market crumble* yes, yes… nature is healing
I’m long on TLH, yes you read that right… treasury bonds motherfucker. See you all in hell when we blow through the debt ceiling and yields go to 12% and the etf price goes to $150+
I have 10% cash, 10% in private equity. 20% on one managed portfolio balanced with 20 ETF. 60% on one direct indexing portfolio generating TLH and mirroring the S&P500. I think it’s a good mix so far. I’m well positioned.
This was incredibly helpful! Thank you very much! I guess I'm thinking of it more as a 'punishment' for and not just a guard against fraudulent TLH.
Once every few years, when the market crashes, I TLH enough to carry forward the losses a few years. Similar (but not identical) investments are easy to find.
TLH is a tax-deferral tactic, not an investment strategy. The U.S. Tax Code is pretty damn efficient regarding cap gains and losses. Thus, **both** of these statements are equally true: * If you didn't make a profit, you don't pay any taxes; AND * If you didn't pay any taxes, you **didn't make a profit**. Don't lose sight of the fact that tax loss harvesting, no matter how you couch it, is still ***taking a loss***.
I use Wealthfront. They charge a .25% fee. But I think it’s worth it for automatic rebalancing and TLH
This money is legally theirs when they become an adult (18-24). So just be ready to turn all of this over when the time comes. And at $10K seed and $5K per year, that could be a huge sum in 18 years. Personally I have a UTMA, 529, and brokerage account. UTMA will be a smallish nest egg to start their adult lives (maybe around $30K). 529 will pay for college. Brokerage will pay for stuff like cars, wedding, other future large purchases. For UTMA I solely buy VT for simplicity. 529 is a diversified glide path. Brokerage a TLH Robo account.
TLH isn’t going to help with VOO dividends. I do both though. I use the WF TLH and hold VOO. The TLH helps offset my short term ESPP gains when I sell and diversify or ordinary income.
Almost everybody sees their initial investment go into the red at one point or another. Happened to me several times along the way. Important thing is to set the emotions aside and ride out those swings and you'll reach the point where something like last Wednesday still sucks but at least you're still holding on to gains. Save the gambler's mentality for when you're earning consistent dividends and can afford to make some bets. I usually drop about $3k per year on high risk/high reward stuff since I can TLH them at the end of the year
Ahh. Makes sense. So by TLH'ing, I'm actually incurring a bit *more* of a tax bill. Because a small portion of my investment dividend income will go from Qualified -> Ordinary. In this case, this will probably be the last year I TLH until I start running low on my $3K yearly deduction. Thanks again for the replies :)
Just checked. I had about $10k in dividends this year. I didn't realize it was so high. In this case, my Tax Loss Carryover will probably be exhausted in <3 years. So I think TLH makes sense! Thanks for pointing this out. Was able to harvest another $20k from some badly timed VXUS lots.
I don't think you understand the concept. Lets use a simpler TLH strategy first to illustrate how it works: You have two funds, VTSAX (Total Stock Market) and SPY (S&P500). They are subtly different but very closely correlated, which is important to avoid wash sale rules. You invest 100k into VTSAX and the next day, the stock market goes down 10%. You exchange 90k of VTSAX for 90k of SPY creating a loss of 10k. Your 90k of SPY now climbs back up to 100k, as does VTSAX because they have almost identical returns. If we compare this to just holding onto VTSAX, you have now realized a 10k loss and created a paper gain of 10k. While you will, at some point, need to pay taxes on the 10k gain you created, you can use the 10k loss right now. This is valuable because you can use it to offset long term gains you've realized now, short term gains you've realized now, and up to 3k of ordinary income. The rest of it will carry over. For a long-term index fund investor, you generally don't have much if any long-term gains, but your short term gains and income tax are taxed at a significantly higher rate than your long-term gains will ultimately be taxed at, which is the benefit. Similarly, for many of us our income in retirement will drop which means that capital gains tax rates will likely be lower too, so we're better off taking the 10k capital gain at later on and harvesting against our short term gains/income tax now. Back to the wealthfront fund. Lets say that you are a lump some investor, which is mathematically beneficial over dollar cost averaging. You dumped 100k into SPY at the beginning of the year. The fund has literally gained all year and there is no opportunity for you to realize any losses because the index, as a whole, has only gained. However, not every stock in the S&P500 has gone up this year. For example, Walgreens is down 65% and CVS is down 50%. So the benefit of this wealthfront robo-advisor is that it owns the individual stocks that make up the index. So much like the example above, you can sell Walgreens and buy CVS, or sell Coke and buy Pepsi, etc., allowing you to realize losses even though your overall portfolio has gained. The key to understand is that the losses you realize today are far more valuable than the paper gains long-term gains you will realize decades from now.
Yes. Bogleheads offers lists of “TLH partners” for this reason. OP seems to be discussing individual stocks rather than funds, but the same idea applies. If you want to TLH losses in Home Depot, perhaps you put those proceeds into Lowes for 31 days. If you have losses in NVDA, maybe you park it in QQQ. 31 days isn’t a terribly long time though, and market momentum is a real thing. Holding your TLH proceeds in cash for a month might well help you avoid further losses. Good luck.
Yeah but he already talked about how he doesn’t care about overlap. Having 4 ETFs like this is pretty simple and lets you keep them all equal while having solid international exposure and letting you TLH if either growth or dividends are underperforming
That 40%+ is the overall portfolio return which includes international allocations that have been a drag vs. the US portion which is tracking the S&P figures… If you don’t understand the benefits / mechanics of TLH after reading those links, I’m probably not the one equipped to explain it to you….Just imagine that if you are contributing regularly to an S&P 500 basket of stocks, the price of some of those stocks will at times dip below your original cost basis (even if the overall basket is up). So they sell to generate a “loss” and buy comparable stocks during that dip (e.g., Pepsi instead of coke). So you are maintaining your approximate S&P allocation while harvesting losses along the way when individual stocks dip.
9 bps for a tool that can TLH for you seems like a great deal to me. Not sure where is the confusion on your end but seems pretty simple and straightforward to understand.
Can you explain more? I guess the alternative is an index fund with buy and hold. Then you get a giant tax bill at the end With this,depending on much TLH it can do, you get some annual tax savings and potential less capital Gains when you eventually sell. Right?
You have to pay the savings from TLH when you eventually sell.
You don’t pay TLH so I am unsure what you’re getting at.
You'll eventually have to pay that TLH later though. Yes it might be better to pay taxes in the future than today but it doesn't just go away.
100% agree - the whitepaper example is very helpful for folks new to TLH. Link below for those interested: [Whitepaper](https://research.wealthfront.com/whitepapers/s-p-500-direct/)
I write off about 3k year in TLH which I consider significant savings. Would be less work to automate it. Cheapest fee for this I have seen.
I TLH manually so I think I understand it pretty well but I think the white paper does a good job addressing your questions. They give an example of Selling coke at a loss and buying Pepsi. Waiting 31 days to buy back Coke. There will be minor tracking error from the index because of this from time to time but will ultimately realign.
If it's simple enough, yes, it can work on any account. I found it too difficult getting it to avoid wash sales across 401k's. I could enter my company's ticker so it would at least avoid that. But the VOO/VTI wash sales from TLH were a pain.
I do not bother with tax loss harvesting. I have a simple portfolio and I like it that way. My marginal tax rate is in the 28-30% range typically. TLH would require me to substantially complicate my holdings and/or possibly expose myself to a wash sale violation, all to offset $3k/year in taxable income? That's a tax savings of $840. I would pay $840 to avoid all the hassle. Not worth it.
If you expect VOOG to go back up, why sell it, unless you are offsetting gains, or reducing income for a specific income point (but that's limited to $3k, so not very helpful). If you sell today and take a $3k loss sure, you get to deduct that from this year's taxes. But, if QQQ then goes back to $50k, and goes up, then you will owe tax on that gain from $47,000, which could be a bigger tax issue. Maybe, depending on bracket and amount. IME, tax loss harvesting is rarely much useful. Selling stuff that is no longer worth it is useful - selling just for some TLH normally isn't. YMMV.
I think some of these super severely beaten down stocks are caught in a TLH loop, in addition to any negative narratives that also plague them. Might need the new calendar year to get the monkey off the back.
if it goes up, we get gains. if it goes down we can TLH. win win if you plan on holding for years anyways
You could TLH (tax loss harvest) your losers. IOW sell and deduct the capital loss.
Also agree TLH is overrated. Do the math and you'll see.
TLH isn't that useful if you don't have a lot of money invested. Like you'll benefit, but complicating your taxes by a fair amount to save $10 is meh IMO. If you have other brokerage accounts, as a separate matter, it'll be a pain to avoid wash sales if any of the holdings overlap, also. But if you mostly hold money in wealth front and have a large account, it's potentially useful/helpful.
I've been happy with our taxable account at Betterment. Does a reasonably good job with tax loss harvesting using ETFs. Granted direct indexing with individual stocks may be more fruitful (more options for finding losses). We've also been happy with our S&P 500 separately managed account at Fidelity, also with TLH, in that case using individual stocks. The effectiveness of TLH diminishes a bit over time if the market simply continues to go up, as there are fewer losses to capture, however when volatility kicks in and / or after you've DCA'd more money in. The fees are higher at Fidelity for the SMA however it's performed well so we have no complaints with the SMA. Weathtrack does seem like a reasonable option as well though.