3 Advanced Investing Moves Experts Use to Minimize Taxes and Help Boost Returns
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When it comes to investing, it’s not just about what you earn — it’s also about what you keep. While taxes shouldn’t be the sole focus of your investment strategy, they can take a serious chunk out of your returns if you’re not careful.
That’s why the most seasoned investors focus on advanced strategies designed to minimize their tax bill and help boost what stays in their portfolio.
Keep more of what you earn with Betterment’s tax-saving tech. You may not notice Betterment’s tax-saving tech at work, but your after-tax returns will. Help minimize your tax impact and maximize your investment returns. Be a tax-smart investor. Learn more.
If you’re a long-term investor who wants to grow your wealth the smart way, consider using these six strategies:
1. Tax Loss Harvesting — Helps Offset Capital Gains
The stock market ebbs and flows. It can’t be predicted. So it’s inevitable that even the best portfolios will experience losses. That’s where tax loss harvesting can be a smart strategy.
Tax loss harvesting is the practice of selling a security that has experienced a loss. By realizing, or “harvesting” a loss, investors are able to offset taxes on both gains and income. The sold security is replaced by a similar one, ideally maintaining an optimal asset allocation and expected returns.
The losses can then be used to offset capital gains and potentially reduce ordinary income by up to $3,000 annually, with remaining losses carried forward.
Turn market losses into potential tax wins. Betterment’s automated tax tools use investment losses to help offset gains, potentially lowering your tax bill. Make the most of market dips. Learn more.
2. Tax-Coordinated Portfolio — Make Sure You’re as Tax-Efficient As Possible
If you’re investing across different types of accounts — say a traditional IRA, Roth IRA, and a taxable brokerage account — it’s wise to strategically organize your assets according to their tax efficiency. You generally want to place less tax-efficient assets in tax-advantaged accounts and more tax-efficient assets in taxable accounts.
The goal here is to minimize the taxes you’ll pay on investment growth. But this can be complicated to do on your own.
Invest like a tax pro. Betterment’s asset location strategy is designed to improve your after-tax returns year round — helping you keep more of what you earn. Save on taxes. Learn more.
3. Charitable Giving Made Tax-Efficient
Planning to give back? Donating appreciated securities can reduce your capital gains taxes and allow you to deduct the full value of the donation, assuming you itemize.
It’s a powerful way to support causes you care about while getting a potential tax break in return.
Bottom Line
Taking advantage of tax-smart strategies can help maximize your investment returns and keep more of your returns in your portfolio.
You may think about your taxes one day a year. Betterment thinks about them all year. Smarter investing starts with tax-saving tech that works all year round. Keep more of what you earn. Learn more.
Betterment is not a tax advisor, nor should any information herein be considered tax advice. Please consult a qualified tax professional. Tax Loss Harvesting+ (TLH+) is not suitable for all investors. Consider your personal circumstances before deciding whether to utilize Betterment’s TLH+ feature. Investing involves risk. Performance not guaranteed.
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