Shift Your Mindset from Saving Tax to Generating Tax Alpha

Smart investors are evolving beyond simple tax-loss harvesting to embrace a more powerful approach. While harvesting a $10,000 loss saves $3,700 in taxes today, systematic tax management delivers compounding value over time. Through continuous optimization, precision-based lot selection, and strategic rebalancing, this approach has consistently generated an additional 2% in after-tax returns annually for many portfolios. Think of it this way: Traditional tax-loss harvesting is like finding extra money in your pocket. Systematic tax management is like building a machine that generates value every day. Remember: While tax savings feel good today, systematic tax management builds enduring wealth for tomorrow.

By Kerri Quinn
Head of Index Solutions

Image generated by Mid Journey

Looking for tax losses at year-end? It’s time to think bigger. The most successful investors are moving beyond sporadic tax-saving actions to embrace systematic, year-round tax management that compounds value over time.

Beyond the Quick Win

Consider this common scenario:

  • You harvest $10,000 in losses
  • In a 37% tax bracket
  • Get $3,700 back on your taxes
  • Feel good about the one-time savings

But what if you could transform that single tax-saving event into a systematic approach that builds lasting wealth?

The Power of Consistency

The traditional December loss harvest leaves significant value on the table. Today’s sophisticated portfolio management unlocks continuous optimization through:

  • Dynamic, year-round rebalancing opportunities
  • Precision-based lot selection for every transaction
  • Strategic dividend capture and timing
  • Real-time position monitoring and adjustment
  • Risk-aware execution across all trades

Compound Your Advantage

This systematic approach creates a powerful multiplier effect:

  • Every tax dollar saved gets strategically reinvested
  • Gains are thoughtfully deferred for maximum impact
  • Position sizes remain optimally balanced
  • Market exposure stays precisely calibrated
  • Trading costs are carefully managed
  • Harvest opportunities are captured year-round

Real Impact

The numbers tell a compelling story. While a single harvest might save $3,700 in taxes, systematic management has consistently delivered 2%+ in additional after-tax returns annually for many portfolios. This represents real wealth creation that grows exponentially over time.

Making the Shift

Transform your approach to tax management:

  • Replace periodic with systematic
  • Prioritize long-term compounding over immediate savings
  • Integrate tax considerations into every portfolio decision
  • Leverage technology for optimal execution
  • Monitor and measure tax efficiency consistently

Looking Forward

Modern direct indexing technology lets you optimize for both immediate savings and long-term growth. But the real opportunity lies in shifting from sporadic harvesting to systematic tax management. This evolution in mindset – from reactive to proactive, from periodic to systematic – represents the future of sophisticated wealth management.

Remember: While tax savings today feel good, systematic tax management builds enduring wealth for tomorrow.

January 19, 2025
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Deliver a superior client experience with truly customized investment solutions

Alphathena’s cloud-based platform eliminates the complexities associated with direct and custom indexing, simplifying personalization through tax-loss harvesting, auto-rebalancing, and index lifecycle management capabilities.

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Share:

Deliver a superior client experience with truly customized investment solutions

Alphathena’s cloud-based platform eliminates the complexities associated with direct and custom indexing, simplifying personalization through tax-loss harvesting, auto-rebalancing, and index lifecycle management capabilities.

What’s next

January 29, 2025
By Tushad Driver

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