Is tax harvesting worth is for index funds/ETF?

Sep 17, 2021 9 Comments

Trying to decide if:

1) I should let Wealthfront manage my investments and pay them a fee (hoping to offset it with tax harvesting)

2) Invest directly in ETF in robinhood and let it ride

3) Invest in ETF and Index in Fidelity

Which one is the most efficient?

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TOP 9 Comments
  • KLA-Tencor
    works for๐Ÿฅœ

    Go to company page KLA-Tencor

    works for๐Ÿฅœ
    Careful, these robo advisors will capture you first with low fees, once you get locked in with their funds, they will raise fees on all users eventually. Then your tax efficiency goes out the window as you will be afraid to unwind positions due to tax hit. Do a little research before committing.
    Sep 17, 2021 0
  • New / Eng
    155k

    Go to company page New Eng

    155k
    You could tax harvest yourself, concept is pretty simple. Also, if you want efficiency, which I'm assuming means lower fees, vanguard has some of the lowest fees for etf/index funds
    Sep 17, 2021 0
  • Amazon
    Tp4f78

    Go to company page Amazon

    Tp4f78
    If you go with Schwabโ€™s robot trader, there is no account fee. You just pay the ETF expenses, and you get tax loss harvesting too. Personally I think itโ€™s a great way to offset cap gains from other investments while continuing to hold the same positions.
    Sep 17, 2021 4
    • OP
      Do you like it?
      Sep 24, 2021
    • Amazon
      Tp4f78

      Go to company page Amazon

      Tp4f78
      I really enjoy the tax loss harvesting feature. They do it by switching back and forth between equivalent ETFs, and it has helped me offset other capital gains to save thousands on my taxes. The portfolios are very diversified (10+ ETFs that also include alternative investments like gold) and bond exposure is mostly limited to municipal funds to achieve greater tax efficiency.

      Biggest complaint is the larger than normal cash allocation (about 8% of portfolio in my case), but it is necessary to facilitate quick tax loss harvest without waiting on transactions to settle.

      You do need to invest at least $50K to enjoy tax loss harvesting, so keep that in mind as well.
      Sep 24, 2021
  • Wealthfront etc will say theirs is more efficient than DIY, which might be true on the margins but if you ever want to leave WF you will have a very unwieldy basket of stocks that will be harder to DIY

    Without any data backing it, I suspect you'll get 90% of the benefit by Diy harvesting and you won't be locked in
    Sep 17, 2021 0
  • Amazon
    IlllIlll

    Go to company page Amazon

    IlllIlll
    Number 3 is your best option. Tax loss harvesting only has so much benefit if you don't plan on dying with all of your cash. The robo fees will eat the potential benefit pretty quickly after your portfolio grows. Also, tax loss harvesting can be done well enough manually on big market drops.
    Sep 17, 2021 0