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A Tax-Smart Strategy for Periods of Market Volatility

Tax-loss harvesting can add value to your portfolio over time by strategically selling certain investments when they’re in a loss position. Financial markets are inherently volatile. Over long periods of time, we generally expect them to rise but, in the short-term, they tend to fluctuate and move sharply in either direction. Tax-loss harvesting is a strategy that seeks to take advantage of this volatility over time. In a perfect world, if investing was easy, we would simply put money into the market and then watch it grow over time at a nice, steady, smooth ascent – so that at some point in the future, we’ve earned a rate of return and we have more money than we originally put into the market.

Now, as anyone who’s invested before knows, the path to growth never follows a nice, smooth trajectory. Instead, there’s a lot more volatility in the process, and the path to growth over time often sees the markets go sideways, down, and have a lot of volatility in recovery. Ultimately, at the end of the day, if we’re patient and we stick with our strategy, we can grow our money. But, we have to withstand this type of volatility along the way.