Taxes are one area of investment management firmly in an advisor's control, unlike the direction of the markets, returns from various asset classes or the savings rate of a client. Investing with full knowledge of tax consequences is critical for portfolio performance, and tax-loss harvesting is one of the most useful tools in an advisor's toolbox. But has the tactic been over-hyped?
"There is less economic benefit to tax-loss harvesting than practitioners believe," says Prof. Kent Smetters of the Wharton School at the University of Pennsylvania. "There is a gulf between how economists think about this issue and how practitioners think about it."
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