How to Improve After-Tax Return by Harvesting Investment Losses More Frequently
Tax-managed investment strategies involving loss harvesting have evolved over the years. The most basic strategies harvest losses in a portfolio a few times a year, typically near the end of the tax year. However, we find that higher frequency loss harvesting can more effectively create “tax alpha” that potentially boosts performance. Our research shows how investors can uncover additional tax alpha across different equity market environments. Further, we examine the impact of expected tracking error on the potential to harvest losses.
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