Wash Sales: Why They Happen and How We Minimize Their Impact
In periods of elevated volatility such as the fourth quarter of 2018—when we saw the largest quarterly decline in the US market, as measured by the S&P 500®, since the third quarter of 2011—investors have many opportunities to harvest losses. Preserving tax benefits by avoiding wash-sale violations becomes even more important during these periods.
Parametric tries to avoid wash sales altogether whenever possible. However, there are occasional circumstances that make wash sales unavoidable. It’s important to understand why they occur and why they aren’t necessarily a negative. This paper covers why wash sales occur in accounts, their impact on portfolios, and how to minimize violations.