“Typically, harvests happen seasonally. Strawberries ripen in the spring, corn is eye-high by the Fourth of July, those grapes get stomped in the fall, and chestnuts roast on winter fires.
Tax-loss harvesting is different. Those familiar with the strategy mistakenly assume that losses are best harvested at year-end when taxes are top of mind. In reality, tax-loss harvests can happen whenever market conditions and your best interests warrant it.”
From a 2016 post we did on tax-loss harvesting.
Unlike many advisors and do-it-yourself investors, we are on the lookout for tax-loss harvesting opportunities throughout the year. Many people (if they harvest at all) only harvest losses once per year, usually at the last minute in late December. Not us, not you if you’re a Hill Investment Group client. Remember the market decline in March 2020? If your advisor waited until December to harvest your losses, they were likely wiped away. 2020 is a perfect example of why, at HIG, we are opportunistic when it comes to harvest time.
The big question folks have debated is how much all this work is worth? How do we quantify the benefit to you? The Wall Street Journal caught our attention with Derek Horstmeyer’s report claiming the value to be more than 1%. The estimates go even higher if your tax rate is at the top end. If their estimates are somewhere in the ballpark, harvesting looks like a sound strategy year-round with the potential to show you some real money.
You can read about the study here.