[zeroer]

That is exactly how tax loss harvesting works. Here's a quote from Betterment:

"What is Tax Loss Harvesting? Tax loss harvesting is the practice of selling a security that has experienced a loss."

https://www.betterment.com/tax-loss-harvesting/

[zeroer]

I think it's telling that in their promotional materials designed to show their merits, Betterment shows a maximum time horizon of 10 years. I think they know that their strategy is much weaker on longer time horizons, yet the fees remain constant. 10 years may seem like a very long time to some people, but when I invest I'm thinking about time-frames of 30 to 60 years. Meanwhile you can tax loss harvest yourself with a little education.

https://www.betterment.com/resources/investment-strategy/bet...

[sf_rob]

Couldn't they employ tax gain harvesting for users that are interested in the short/long term capital gains differential in TLH? They don't do this, but I'm curious.

i.e. cycle long term gains after one year of ownership so that they are more likely to produce harvestable losses in the next year. Obviously this prevents the basis gains of TLH, but wouldn't it be dwarfed for users whose long-term capital gains tax rate is much lower than their short-term capital gains rate?

[zeroer]

Yea, tax gain harvesting is definitely something you can do. Though it's harder than tax loss harvesting. You have to take into account the entirety of a person's tax situation to do it, as opposed to tax loss harvesting, which only require knowledge of the account transaction history, which Betterment and Wealthfront of course have. To do tax gain harvesting you have to wait until late December when you have most of the information, and you essentially have to complete an entire tax return.

[tanderson92]

Yes, but this only works for those who are exploiting a difference between their marginal tax rate and the LTCG rate. That is, those in the 15% marginal bracket whose LTCG rate is 0%. For other investors it is preferable to pay no taxes (continue to hold the security long-term even after it qualifies for long-term tax treatment)

[acchow]

No, you are not understanding how it works. Your portfolio can be in the black every single year, but you can still use TLH to improve your returns every single year by harvesting losses in individual securities.

See: http://www.investopedia.com/articles/taxes/08/tax-loss-harve...

[zeroer]

Thanks. I understand how it works. I still think it will be difficult to after 15 years.