With equity markets poised to close out another strong year, investors have an opportunity to manage their tax burden by tax-loss harvesting. This strategy uses portfolio losses to offset capital gains to lower the tax bill. Many investors may not realize that even bull markets have loss harvesting opportunities.  

Stocks Dip Even in a Bull Year   

So far, 2024 has been a good year for the stock market. The S&P 500 is up 21.5%¹. That said, markets never rise in a straight line, and pullbacks are normal, even in the best years. Since 1980, the S&P 500 experienced positive returns in 33 out of 44 years but also experienced an average annual decline of -14.2%². These market dips create opportunities to reduce one’s tax burden because market volatility creates winners and losers even in a bull market.   

Not All Stocks Rise in the Index  

Even in a good year for the markets, there are plenty of stocks that are down big, too. The Russell 3000 ETF is a good proxy for the total U.S. stock market. Year to date, the investment is up 20%.  Despite this, nearly 42% of all stocks within the investment have losses, and roughly 21% of the stocks are sitting on losses greater than 20%³.    

This pattern is not isolated to 2024. Between 2014-2023, the S&P 500 returned an average of 11%. In each of those years, 147 stocks, on average, ended the year down 5% or more⁴. It is no surprise there are a greater number of stocks available to harvest in a down year, but investors may be surprised that opportunities exist even in good years for tax-loss harvesting. 

Make It a Year-Round Strategy    

Tax-loss harvesting is an important part of after-tax wealth creation. For investors, a good resolution for year-end and looking ahead may be to harvest losses more frequently to take advantage of fast-moving markets.   

Tax-loss harvesting is a year-round strategy. Thanks to technology, losses can now be harvested throughout the year to enhance effectiveness because opportunities don’t just wait for tax season or year-end. 

Key Takeaways

Tax-loss harvesting can be a valuable tool for investors seeking to maximize after-tax returns. Here are some key points to remember:

• Tax-loss harvesting has the potential to be an effective strategy even in bull markets. 

• Even if the broad stock market has gains, many individual stocks have losses offering investors opportunities to reduce their tax burden. 

• Tax-loss harvesting is most effective as a year-round strategy. 

Turn Market Volatility into Long-Term Gains

Tax-loss harvesting is a powerful tool for investors looking to maximize after-tax returns, even in strong market years. By staying proactive and leveraging the opportunities created by market dips and underperforming stocks, you can turn potential tax burdens into long-term financial advantages. Whether you're navigating a bull market or preparing for more volatile times ahead, incorporating tax-loss harvesting into your overall investment strategy can help you stay ahead. Consult with a trusted advisor to ensure you're fully optimizing this strategy for your financial goals.

Questions? 

Contact us today to ensure you're fully optimizing this strategy for your financial goals. 

¹ S&P 500 Total Return. YTD. As of November 4, 2024
² FactSet
³ Bloomberg. YTD. As of November 4, 2024
⁴ JPMorgan Guide to the Markets

Johnathon Opet, CFP® is a financial advisor located at EmVision Capital Advisors, 251 W. Garfield Rd. ​Suite 155 Aurora, OH 44202. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (330) 954-3770 or at info@emvisioncapital.com.

Important Information 
This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345. 

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends. 

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7269957.1 | 11/2024 | EXP 11/2026