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Ever hear of too much of a good thing?
Years of strong stock market returns have created an unexpected challenge for advisors using separately managed accounts. It has become harder for direct-indexing strategies to generate the tax losses that underpin much of their appeal, said Eddie Bernhardt, head of SMAs at Invesco. But an innovative strategy is gaining popularity. Maintaining both long and short positions on stocks, opening up additional opportunities to realize tax losses in different market environments.
Here's how it works: In a rising market, short positions can generate tax-loss harvesting opportunities when those stocks move higher. Conversely, long positions can generate harvestable losses as stock prices decline. "You're generating realized loss potential in various markets, and you're extending the life of loss generation in a portfolio," Bernhardt said. While ***** et managers say the approach can help wealthy clients offset gains from concentrated stock positions, advisors caution such strategies add complexity and aren't a substitute for comprehensive tax planning.
Sign up for The Daily Upside at no cost for premium ***** ysis on all your favorite stocks.
Ever hear of too much of a good thing?
Years of strong stock market returns have created an unexpected challenge for advisors using separately managed accounts. It has become harder for direct-indexing strategies to generate the tax losses that underpin much of their appeal, said Eddie Bernhardt, head of SMAs at Invesco. But an innovative strategy is gaining popularity. Maintaining both long and short positions on stocks, opening up additional opportunities to realize tax losses in different market environments.
Here's how it works: In a rising market, short positions can generate tax-loss harvesting opportunities when those stocks move higher. Conversely, long positions can generate harvestable losses as stock prices decline. "You're generating realized loss potential in various markets, and you're extending the life of loss generation in a portfolio," Bernhardt said. While ***** et managers say the approach can help wealthy clients offset gains from concentrated stock positions, advisors caution such strategies add complexity and aren't a substitute for comprehensive tax planning.
Sign up for The Daily Upside at no cost for premium ***** ysis on all your favorite stocks.
4 months ago
