[beryilma]

> We handle all the management, including rebalancing and tax-loss harvesting—proactively selling losing stocks to potentially save on taxes

- For a non-retirement portfolio, isn't rebalancing is a taxable event? Rebalancing by selling stocks and buying others is not the best approach. Isn't it better to rebalance by shifting the focus of new investments based on a strategy?

- I think it is misleading to present tax-loss harvesting as a way of saving on taxes. I don't know why people present it this way. In order to "save on taxes" you have to realize (i.e., sell stocks at) a loss first...

[DeRock]

This is the question I have too. The ability to create a "custom" ETF is highly desirable to me. I don't want to trade individual stocks, but instead would rather input some weightings on top of existing indexes (i.e buy less of stock A, more of stock B, etc.). However, my understanding of ETFs is that they are able to rebalance through "in-kind" creation/redemption in order to avoid creating a taxable event. I'm not sure how this is possible to scale to a custom one-off fund...

[jjmaxwell4]

You are correct the in-kind creation/redemption pushes any taxable gains/losses to the trading of the ETF by the holder, not the ETF itself.

But there are some benefits to doing what you refer to as a "custom one-off fund". Namely we can Tax Loss Harvest any losses and realize those to offset gains we realize in the name of rebalancing. The industry generally calls this direct indexing and wealth clients with $1M and above portfolios have been doing it for years.

We also provide the option of entering a "Buy & Hold" optimization for strategies, which would not rebalance your winners into losers and realizing any gains or losses, but your portfolio will drift over time if you choose this.

[loeg]

TLH is sort of a synthetic loss. You just sell and buy essentially equivalent funds to realize an unrealized but existing loss, lowering your cost basis. The amount of stock you own doesn't change at the TLH event. You get a (small) deduction against your taxable income at the cost of more capital gains in the (maybe distant, lower tax bracket) future.

[oplav]

If you participate in charitable donations and are able to itemize deductions, after a period of capital gains you can also donate the low basis shares and then rebuy the shares with cash immediately. This is effectively donating cash while stepping up the basis of the asset.

I’ve been doing this cycle for a bit now and while it doesn’t produce life changing savings, it does motivate me to donate more.

Donor advised funds make donating shares pretty easy to do.

[loeg]

Yes, that's true, and I do donate low basis shares. But it's a small portion of my overall portfolio. Big +1 to DAFs -- I use Vanguard Charitable.