What is tax-loss harvesting and how does it compare to other investment strategies?

What is tax-loss harvesting and how does it work?

Tax-loss harvesting is a strategy where investors sell securities at a loss to offset capital gains tax. It helps reduce tax liability.

How does tax-loss harvesting compare to other strategies like buy-and-hold?

Unlike buy-and-hold, which focuses on long-term gains, tax-loss harvesting actively manages losses to minimize taxes, potentially enhancing returns.

Are there any risks associated with tax-loss harvesting?

Yes, risks include wash sale rules, which can disallow the tax benefits if you repurchase the same security too soon.

Can tax-loss harvesting be used in retirement accounts?

No, tax-loss harvesting is typically not applicable in retirement accounts like IRAs or 401(k)s, as taxes are deferred.

What other tax strategies should I consider?

Consider strategies like tax-efficient fund placement, charitable giving, and tax-deferred accounts to optimize your tax situation.