There's a lot written about tax loss harvesting (TLH) including some articles written by me. I will try to avoid repeating what we all know. After all, although some argue that TLH is not worth pursuing, most advisors agree that accelerating tax benefits is a good idea.
While true that rebalancing software allows for more frequent, opportunistic TLH, the tech savvy advisors will be joined by the "spreadsheet brigade" in grabbing tax losses at the end of the year. This year, TLH is more important than ever because of the new surtax on investment income. Also, the process can be conveniently used to reposition clients' portfolios.
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Advisors and clients are both concerned about bond investments. When interest rates rise, bond values will decline. As this rate increase nears (and we get closer every day), shorter term bonds will fall less than long term bonds. And, maturing bonds may be reinvested in higher yielding bonds.
So, for advisors that want to shorten bond durations (or move to more aggressive bonds), year-end is ideal. Since many of our clients' bond positions have unrealized losses, selling to recognize these losses will provide the opportunity to reposition holdings.
Please don't ignore this opportunity! In one simple step, you can lower your clients' tax bills, avoid the Medicare surtax and strategically reposition models. Such a deal!