Loss Harvest Trades

It’s business as usual at PDS this week. While we have been enjoying photos and stories of the newest PDS family members, Drew Potosky and Beth McCampbell’s newborn sons, we’ve also been meeting with clients and helping alleviate their concerns over inflation, stock market volatility, and how it affects their ability to retire successfully.

Our focus on financial planning allows us to not only make informed investment decisions but gives our clients the peace of mind that we have a plan, designed for moments just like this. As long-term investors for our clients, we prefer to buy broad-based, low-cost, tax-efficient index funds. By doing so, we try to eliminate the additional risks, expenses, and tax burdens that come with actively-managed mutual funds. In fact, we focus a great deal of time and attention on taxes.

This week, the investment team placed trades for clients and harvested $2.5M in capital losses (gasp!) across 345 unique accounts. Because we are long-term investors for our clients, we could just hold our index funds through the volatility and wait for the full recovery back to previous higher balances. But if we did that, we would miss the chance to gather these capital losses that can be used to offset other capital gains or potential income to reduce taxes.

We know what you are thinking, “But what about the idea of staying invested through the highs AND lows of the market?” Simultaneous to our loss sales, we bought similar investments for our clients so they were never out of the market. And now these losses can be used to offset future gains. Imagine if your Federal and Ohio tax rates on capital gains are 18%. That would mean $2.5M of losses offsetting $2.5M of gains would be worth $450,000 of future tax savings!

Just another day at the office for the PDS team. At PDS, we embrace the true fiduciary responsibility we have for our clients. Our focus is on creating tax-efficient solutions to enhance our clients’ wealth, not our own. By charging our clients a flat, fixed dollar fee, we avoid the inherent conflicts of asset-based pricing models, which is the industry norm.

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