Tax Return Results and Portfolio Results

Each year, we are all required to file our taxes. Your portfolio's unrealized gains or losses have little impact on what you'll pay in taxes. However, you get what we call "a taxable event" when you sell an asset. When sold, the investment becomes realized and requires calculation in your tax return.

To help us understand gains, losses, and tax impacts, we are joined by senior wealth advisor Joe Grochowski. He discusses the relationship between tax returns and portfolio results and how healthy rebalancing can lead to taxable events.

In 2021, for example, market returns were above the historical average. As a result, investors had opportunities to sell high in one asset to buy low in another. However, it is also worth noting that some years see their share of volatility--where investors could realize losses providing a tax offset for gains realized elsewhere. We call this tax-loss harvesting or tax swapping.

Understanding how taxable events are related to tax returns is important when optimizing investment portfolios.

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