Portfolio Maintenance: Four Important Tasks to Understand
At Savant, our team of investment professionals works with your advisor to help ensure your portfolio reflects your long-term goals. That includes making occasional adjustments to manage taxes or re-align your portfolio’s asset allocation to compensate for market volatility.
Here are some key tasks your advisor may recommend to keep your investments optimized and aligned with your goals:
1 – Execute Tax-Loss Harvesting
In a well-diversified portfolio, it’s natural for some assets to underperform. It’s possible to turn these losses into advantages through tax-loss harvesting. By selling underperforming securities, you can offset gains elsewhere in your portfolio. Reinvesting in similar, but not identical, assets can maintain your allocation while avoiding the wash-sale rule, which disallows repurchasing the same security within 30 days. At Savant, we regularly review your portfolio for tax-loss harvesting opportunities to help reduce your tax burden. Consult your Savant advisor and CPA to optimize your tax strategy
2 – Rebalance Your Portfolio
Market volatility can create imbalances in your target allocation and increase risk. Rebalancing restores your desired asset allocation by selling high-performing assets and buying underperforming ones. This helps manage risk and can potentially enhance returns by adhering to the principle of buying low and selling high. At Savant, our goal is to minimize transaction and turnover costs, recognizing their impact on long-term returns. Our team monitors your portfolio regularly to help ensure it remains diversified and aligned with your risk tolerance.
3 – Anticipate Mutual Fund Capital Gain Distributions
Mutual fund managers often realize capital gains throughout the year, leading to year-end distributions that can cause unexpected tax liabilities. You can mitigate this by timing your mutual fund share transactions carefully. Buying shares before a distribution can result in a taxable event, even if the fund’s value hasn’t increased. Review mutual fund gains estimates and plan transactions accordingly. At Savant, we evaluate manager turnover and tax management to avoid unexpected gains. Consult your Savant advisor about outside mutual fund holdings to help avoid unexpected tax impacts.
4 – Evaluate Your Asset Allocation
The stock portion of your portfolio is the biggest determinant of long-term investment performance. Ensure your portfolio is allocated to meet your financial goals, risk tolerance, and time horizon. Reflect on any changes in these factors over the past year and evaluate whether your asset mix is still suitable. At Savant, we integrate financial planning with your investment strategy to determine the right allocation for you.
These proactive tasks are part of our evidence-based approach, designed to help optimize tax management and create alignment with long-term goals. These steps are essential year-round, not just at year-end. We follow a disciplined approach to help you navigate the market and help you position yourself for success in 2025 and beyond.
Chip Kalousek
Senior Investment Strategist / Client Advisor
CFA®