When stocks or bonds decline in value, you may be able to harvest those losses to offset capital gains elsewhere.
Harvesting losses means selling investments in taxable accounts that have lost value to offset capital gains elsewhere and help reduce taxes owed.
What Happens When You Sell a Position That Has Lost Value?
What Is the Wash-Sale Rule?
Tax swaps enable you to invest proceeds from the sale of a losing position to lower costs or target new markets.
Replacing higher-fee mutual funds with low-cost core equity and bond ETFs may help you build more cost-efficient portfolios. Expense ratios for SPDR® Portfolio ETFs are 95% lower than the median US-listed mutual fund.1
Use our Morningstar Fund Comparison Tool to compare your selected mutual funds and ETFs.
The time to harvest losses is when losses occur. Investments that are down early in the year could bounce back into positive territory — resulting in missed opportunities to sell losers and book losses to offset gains.
To get maximum value from tax loss harvesting, take a long-term view of the asset and your needs when making decisions and consider:
If a loss is less than $2,000, transaction and tracking costs may erode tax savings.
The longer you plan to hold the asset, the greater the chance that the tax savings you’ve re-invested will grow.
If an asset will be left to heirs, there’s less need to measure the value of harvesting a current loss against future taxes due. Because heirs receive a step-up in basis, asset appreciation doesn’t turn into a future tax liability.
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1 State Street Global Advisors, Morningstar, as of August 1, 2023. Based on median prospectus net expense ratio for US domiciled open-end mutual funds across 18 Morningstar categories representing SPDR Portfolio ETFs.
Important Risk Information
This communication is not intended to be an investment recommendation or investment advice and should not be relied upon as such.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.
The values of debt securities may increase or decrease as a result of the following: market fluctuations, changes in interest rates, actual or perceived inability or unwillingness of issuers, guarantors or liquidity providers to make scheduled principal or interest payments or illiquidity in debt securities markets; the risk of low rates of return due to reinvestment of securities during periods of falling interest rates or repayment by issuers with higher coupon or interest rates; and/or the risk of low income due to falling interest rates.
There can be no assurance that a liquid market will be maintained for ETF shares.
Diversification does not ensure a profit or guarantee against loss.
Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs.