The Hidden Cost of Ignoring Tax Management

If you hold accounts outside of tax-advantaged retirement accounts—like standard brokerage accounts—and you’re not implementing tax management strategies, the returns displayed on your statements don’t tell the whole story. Those numbers don’t reflect the taxes you’ll owe when you eventually sell positions, which means your actual returns are lower than they appear.

Without proactive tax management, you can become essentially handcuffed to particular stocks or funds because selling them would trigger substantial capital gains taxes. This creates a problematic situation where tax concerns drive investment decisions rather than sound portfolio strategy.

Understanding Tax Loss Harvesting

Here’s how strategic tax harvesting works: even when we want to maintain exposure to a particular sector or investment theme, we might sell positions that have declined in value to harvest the tax loss. This realized loss can offset capital gains from other investments—either in the current year or carried forward to future years. Then we reposition into similar companies or sectors to maintain our market exposure.

Why Tax Management Matters:

• • Reduces your overall tax liability on investment gains

• • Improves your actual after-tax returns significantly

• • Provides flexibility to rebalance without tax penalties

• • Helps avoid being “locked in” to underperforming positions

• • Creates value that compounds over time

Unfortunately, many investors overlook this critical aspect of portfolio management. If you’re not actively managing the tax implications of your investments, you’re likely leaving money on the table.

Breaking Free from the Tax Trap

Think about why you’re investing in the first place. Perhaps you’re building resources to generate retirement income, creating a financial cushion for unexpected needs, planning to pass wealth to your children or grandchildren, or pursuing some combination of these goals.

Unfortunately, when you’re locked into positions due to embedded capital gains, your options become limited and unappealing. You can wait for the investment to decline in value—which means you’ve lost money even though you’ll owe less in taxes. Or you can hold the position until it passes to your beneficiaries, who will receive a step-up in basis—but that means you can’t access those funds during your lifetime.

Neither scenario is ideal, which is exactly why proactive tax management throughout the year is so valuable.

Time-Sensitive Opportunity: Once January 1st arrives, the window for 2026 tax harvesting closes permanently. Any action you want to take for this tax year must happen before year-end. Don’t let this valuable opportunity slip away!

Note: We do this for portfolios we manage on an ongoing basis. There is no need for our clients to have to worry about this or do anything – that is what we are here for!

Position Yourself for Success in 2026

We’d be happy to review your portfolio and help you identify strategic tax planning opportunities. Beyond tax optimization, we’ll ensure your investments are properly positioned for whatever market conditions 2026 brings.

If next year brings renewed volatility, you’ll have financial peace knowing your portfolio is structured to weather the storm. Your income sources will be protected, and you’ll be strategically positioned to capitalize on opportunities while avoiding unnecessary risks.

Don’t Be Complacent About Your Portfolio

The time to act is now. Let’s work together to optimize your tax situation and position your investments for long-term success. Your future self will thank you for taking action today.

Remember: smart investing isn’t just about choosing the right securities—it’s about managing the entire picture, including taxes, risk, and strategic positioning. Make the most of the remaining days of 2025 to set yourself up for success in the year ahead.