At WealthFactor we strive to eliminate unnecessary transactions. However, there is one area where being proactive pays: tax management. We seek to add after-tax value by actively seeking tax alpha. Taxable portfolios filled with mutual funds are inefficient. Going directly to underlying investments not only cuts out an unnecessary layer of fees it also allows for individual security specific tax decision making.
Lot-level tax loss harvesting. We seek out opportunities to take losses in individual stocks that have declined in price. We typically look to replace these positions with a similarly ranked position in the same sector, size and region.
Cross account asset allocation. When practical clients allocate retirement assets to less efficient investment strategies and their taxable assets to tax-managed strategies and tax-efficient assets.
Billing. Our simple fee structure lends itself well to paying fees out of taxable accounts and minimizing the fee impact to tax deferred accounts.
Gains deferral. Our investment strategy by design doesn't trade often, however when a large or short-term gain is to be realized our strategy can look to defer this transaction to optimize the timing for tax purposes.
Smart cash withdrawal. When cash is required, we are selective in what assets are sold seeking to sell investments with low gains or losses while maintaining the portfolio's risk and return characteristics.
Wash-sale rule avoidance. Our investment strategies are designed in a way that nearly eliminates the potential for a wash-sale (repurchasing a security within 30 days).