Business

Tax strategy can cover losses – but investors need to act now


Good harvest (tax loss)

Investors may receive a wake-up call this winter when it comes to taxes, but it doesn’t have to be.

According to BNY Mellon’s Ben Slavin, this is an important time to sell losing investments to capital gains cut. He warned waiting until January or February could be too late.

“Mutual fund investors are in for a rather nasty surprise,” the company’s head of global ETFs told CNBC.next to ETF“Last week.” A lot of mutual fund companies have provided estimates on their websites, so investors can look through and see their expectations for capital gains and what kind of tax bill. they will receive at the end of the year.”

With the major indexes lower for the year, Slavin thinks the strategy has broad appeal.

“It’s not just about harvesting losses,” he said. “This is the right time of year to look at the portfolio you have and understand how to position yourself in these markets. It’s a double-edged sword.”

Matt Bartolini of State Street Global Advisors also sees an advantage for investors looking to cover their tax losses and stay in the market.

“You own a mutual fund that tracks a broad base of U.S. equities. … That mutual fund can really be lined up to pay a large capital gains dividend because of the loss associated with the portfolio. overall investment,” the company’s chief executive said in the same division. “At this point, sell that mutual fund and then buy a related ETF and so you can maintain your market exposure and reap those losses in a number of regions.” this on the market.”

Bartolini said investors can also sell ETFs broadly and buy them back into other funds with similar markets.

“One of the tactics we’ve seen used in our client’s portfolios in tax loss harvesting is to just reduce your costs, switch to lower cost exposure, harvest a amount of losses and maintain that allocation to market risk like US equities, like emerging stock markets,” he said.

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