The process for tax-loss harvesting within a separately managed account (SMA) involves the following steps: (1) The SMA seeks to provide market-like returns through direct indexing by purchasing a portfolio of diverse stocks resembling the broad equity market. (2) The manager opportunistically sells stocks throughout the year that are trading at a loss, meaning the stock price has fallen below the purchase price (cost basis). (3) The manager replaces those sold stocks with securities that have similar risk and return characteristics, such as replacing a large financial institution stock with another large bank stock. (4) The realized losses are used to offset capital gains incurred in other parts of the investor's portfolio.

Authors

• Person: Not available Organization: Goldman Sachs
  Tax-Loss Harvesting Strategies: How They Work

Sources

• Tax-Loss Harvesting Strategies: How They Work am.gs.com Goldman Sachs via serper

Referenced by nodes (2)

• direct indexing concept
• tax-loss harvesting concept