TITLE

Is Tax-Loss Harvesting Worth It? Greater After-Tax Returns Through Active Selection

PUB. DATE
November 2003
SOURCE
Journal of Financial Planning;Nov2003, Vol. 16 Issue 11, p74
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The article describes the powerful combination of active management and tax efficiency through tax-aware active management. Despite slowing equity markets and a more favorable tax climate, tax-aware investing is still the foundation of a successful portfolio for tax-sensitive individual investors. By combining a reliable stock selection signal with a disciplined portfolio optimization process that maximizes tracking error, it has become apparent that it is possible to consistently add value over an index on an after-tax basis. Research indicates that while tax-efficient indexing or loss harvesting, can add value to a taxable portfolio, it has its limitations, even when used in conjunction with stock selection. In simulations comparing all three strategies, we find that tax-aware active management would have outperformed tax-efficient indexing. The level of after-tax outperformance increased significantly post-liquidation when taxes were applied to the previously unrealized capital gains. The inputs to the dividend discount model are the results of bottom-up proprietary equity research by a team of experienced analysts. The point of the study is not to advocate use of a dividend discount model as a stock selection tool, but rather to suggest another way in which investors can use their own stock selection methodology.
ACCESSION #
11272576

 

Related Articles

  • Enronitis and Financial Planners...  // Journal of Financial Planning;Jun2002, Vol. 15 Issue 6, p17 

    The article reveals the loss of investor confidence in the stock market in the wake of Enron's collapse. A survey sponsored by TowersGroup, a New York public relations firm, found that 43 percent of active investors had lost confidence in the stock market. Curiously, 70 percent of investors...

  • Dirk Morris CHIEF EXECUTIVE BT INVESTMENT MANAGEMENT.  // BRW;7/3/2008, Vol. 30 Issue 26, p25 

    The author offers views concerning the attractiveness of global equities and the outlook for Australian equities. He notes that valuations in the U.S. and parts of Asia are more attractive than those in Europe and Australia. He states that his investment management company recommends resources...

  • WHAT'S AN ADVISOR'S VALUE? FINKE, MICHAEL // Research;Feb2013, Vol. 36 Issue 2, p26 

    The article discusses the importance of financial advisors to the investors. Financial advisor Joe Bantz at Foster Group Inc. mentions that services by the company help avoiding the financial mistakes that are costly. A survey by Advisor Impact showed that estate planning, retirement planning...

  • Outperforming For a Fifth Straight Year. Rieker, Matthias // American Banker;1/3/2005, Vol. 170 Issue 1, p1 

    Reports that bank stocks outperformed the market for the fifth consecutive year and fund managers, investors, and analysts are wondering how long the rally will last. Optimism that bank stocks will at least keep pace with the market; Suggestion that last year's gains were the result of strong...

  • Is your portfolio worthy of Olympic gold? BALSER, ROGER S. // Medical Economics;7/10/2012, Vol. 89 Issue 13, p28 

    The article offers tips for maintaining a successful portfolio at the stock market in the U.S. It is suggested that before investing in any stock, the investors and money managers should analyze the market and identify the market leader. Also, the investors should examine the sectors and decode...

  • SECURITIES ANALYST'S CONFLICTS OF INTEREST: ETHICAL AND LEGAL ISSUES AND INTERNATIONAL REGULATORY REACTIONS. Naffziger, Fred; Fox, Mark A. // Journal of Legal Studies in Business;2004, Vol. 11, p1 

    The article examines the ethical and legal issues of securities analyst's conflicts of interest. It is observed the stock prices are likely to be vulnerable to purely social movements because there is no accepted theory by which to understand the worth of stocks. Financial analysts plays a...

  • Out Of Favour.  // Money Today;Feb2013, p14 

    The article features illiquid stocks in mutual funds that may be good investment bets. Research analyst SP Tulsiyan stated that fund managers are least bothered about liquidity as they are long-term investors. Stock exchanges in India reportedly release a list of illiquid stocks every quarter...

  • State of play. Morris, Pamela // Money Marketing;7/18/2013, p20 

    The article examines whether the equity market in the U.S. is beginning to get overvalued as investors are flocking to equities in the current low-growth environment amidst the continued rise in ratings on the back of the country's brighter growth forecast. It cites a fund manager survey which...

  • Prior Return Effect in Indian Stock Market: An Intra-day Analysis. Tripathi, Vanita; Aggarwal, Shalini // International Journal of Financial Management;2015, Vol. 5 Issue 1, p33 

    In a first of this kind, this paper examines the issue of prior return effect in Indian stock market in intra-day analysis using high frequency data. We document that in Indian stock market, security returns exhibit a reversal in their direction within few minutes of extreme price rises as well...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics