Tax-Management Strategies for Appreciated Portfolios

Tax-Management Strategies for Appreciated Portfolios

Tax management can be an effective way to boost an equity portfolio’s after-tax returns. For example, by deferring the realization of capital gains, investors control the timing of the payment of taxes, effectively lessening the brunt the longer they delay. Similarly, tax-loss harvesting can offset capital gains, mitigating and in some cases eliminating the tax bill.


As time marches on, however, the natural consequence of these tax-management techniques is a reduction in the portfolio’s cost basis. In some situations investors could find themselves with positions with large embedded gains and few if any positions that are candidates for loss harvesting. At that point tax-management techniques can appear to no longer offer material benefit, leaving investors to wonder: What now?


In this brief we review several options available for investors to consider in this situation, corresponding to their tax situation and their forward-looking views on the market.

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Martha Strebinger

Martha Strebinger, CFA

Investment Strategist

 

 

Martha Strebinger

Martha Strebinger, CFA

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