Reducing Your Tax Bill - Part One

Unfiltered Finance

The “Tax-Man” cometh! As this tax season proceeds ever forward, many investors are asking themselves the same question - “am I going to take a large tax-hit this year?” We cannot say how much you’ll be taxed on your present investments. But, we believe it’s possible to structure your portfolio in a manner that mitigates tax-loss, and, leaves more money in your respective pockets. Joining us today is Philip McDonald, CFA, CAIA, Symmetry’s Managing Director of Research and Investments & Glenn Shirley, CAIA, Head of Investor Relations for Quantinno, to explain how investors can more effectively structure their portfolios and avoid an excess of taxation.

If you have any questions or would like more information, reach out to us at https://symmetrypartners.com/contact-us/

You can also find us on Facebook, YouTube, Twitter, and LinkedIn. As always, we remain invested in your goals.

Symmetry Partners, LLC, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered, excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. No one should assume that future performance of any specific investment, investment strategy, product or non-investment related content made reference to directly or indirectly in this material will be profitable. As with any investment strategy, there is the possibility of profitability as well as loss. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Moreover, you should not assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. Transcript:

00:00:01.800 --> 00:00:07.400 Hello everyone.

1 00:00:07.400 --> 00:00:10.800 Welcome to unfiltered Finance. This is your host Tom Romano.

2 00:00:10.800 --> 00:00:13.800 I want to welcome you all back. We have a very

3 00:00:13.800 --> 00:00:17.100 interesting topic to discuss with you today. It's

4 00:00:16.100 --> 00:00:19.400 the notion of investors keeping more money in

5 00:00:19.400 --> 00:00:22.900 their pockets by bringing tax management into

6 00:00:22.900 --> 00:00:25.300 their investment Holdings. Not only are

7 00:00:25.300 --> 00:00:28.200 we going to talk about tax management, but some of the things investors should

8 00:00:28.200 --> 00:00:31.200 be considering in terms of how they view Capital markets how they should be

9 00:00:31.200 --> 00:00:34.400 investing and then we have a couple of special guests

10 00:00:34.400 --> 00:00:38.000 to talk about some additional strategies that investors should

11 00:00:37.400 --> 00:00:40.700 consider in terms of bringing tax

12 00:00:40.700 --> 00:00:43.700 Alpha if you will to the table so joining

13 00:00:43.700 --> 00:00:46.100 us is Phil McDonald who is the

14 00:00:46.100 --> 00:00:49.400 president of the panoramic trust and managing director of

15 00:00:49.400 --> 00:00:52.700 research of symmetry Partners as well as Glenn Shirley

16 00:00:52.700 --> 00:00:55.700 who is a principal and head of investor relations

17 00:00:55.700 --> 00:00:58.200 at quantino Capital Management Glen and

18 00:00:58.200 --> 00:01:01.500 Phil. Thank you so much for joining us here today. Thanks for having me tone. Thanks Tom.

19 00:01:01.500 --> 00:01:01.800 It's great.

20 00:01:01.900 --> 00:01:04.900 be with you, you know at quantino 100% of

21 00:01:04.900 --> 00:01:07.200 our focus is on taxable investors and

22 00:01:07.900 --> 00:01:10.500 We're managing portfolios while also seeking

23 00:01:10.500 --> 00:01:13.300 to generate really consistent and strong tax benefits

24 00:01:13.300 --> 00:01:16.800 for clients. And that goal is to maximize their

25 00:01:16.800 --> 00:01:19.400 after-tax wealth to help them keep as much return as possible

26 00:01:19.400 --> 00:01:22.200 year to year and we couldn't be more thrilled to partner with Symmetry and

27 00:01:22.200 --> 00:01:25.200 the incredible advisors that you serve. So thanks

28 00:01:25.200 --> 00:01:28.300 for having us pleasure to have you both. I look forward

29 00:01:28.300 --> 00:01:31.300 to to the today's dialogue. Sometimes taxes aren't the

30 00:01:31.300 --> 00:01:34.300 most interesting topic. However, I think that

31 00:01:34.300 --> 00:01:37.300 there's some very important information that investors should

32 00:01:37.300 --> 00:01:40.700 be considering in terms of how they invest their assets. And

33 00:01:40.700 --> 00:01:43.000 so thank you both for joining us. There's a couple

34 00:01:43.100 --> 00:01:46.100 of different angles. I want to take this conversation, right? And the first

35 00:01:46.100 --> 00:01:49.000 one I think I want to to go towards is

36 00:01:50.100 --> 00:01:53.500 Specific investment philosophies, right? So Phil we adhere

37 00:01:53.500 --> 00:01:57.300 to what we refer to as an evidence-based investment philosophy allowing

38 00:01:56.300 --> 00:01:59.200 markets to produce the returns that

39 00:01:59.200 --> 00:02:03.300 are investors are entitled to at the end of the day. So talk

40 00:02:02.300 --> 00:02:05.700 to us a little bit from a tax standpoint

41 00:02:05.700 --> 00:02:08.200 the benefits of an evidence-based investment

42 00:02:08.200 --> 00:02:09.500 philosophy versus

43 00:02:10.500 --> 00:02:13.500 Paying for Alpha or active

44 00:02:13.500 --> 00:02:16.600 money management. Mm-hmm. No, you raise a erase.

45 00:02:16.600 --> 00:02:19.700 Very good point Tom. So our investment philosophy all

46 00:02:19.700 --> 00:02:22.800 often refer to it as multi-factor investing. It

47 00:02:22.800 --> 00:02:27.300 involves specific rules quantitative indicators

48 00:02:26.300 --> 00:02:29.800 that research for

49 00:02:29.800 --> 00:02:32.100 a very long time has indicated, you know

50 00:02:32.100 --> 00:02:35.400 might create a premium over time. So following, you know,

51 00:02:35.400 --> 00:02:38.900 a value and small and momentum and high quality

52 00:02:38.900 --> 00:02:41.600 High profitability type of strategy you might

53 00:02:41.600 --> 00:02:44.700 expect to do a little bit better than just a cap weighted

54 00:02:44.700 --> 00:02:47.300 index over time what you get with

55 00:02:47.300 --> 00:02:50.900 that again is, you know, rules-based very Diversified. So

56 00:02:50.900 --> 00:02:53.700 for the most part low turnover right there,

57 00:02:53.700 --> 00:02:56.300 there are there are some strategies that have

58 00:02:56.300 --> 00:02:59.000 a little turnover specifically momentum. You probably have a little

59 00:02:59.100 --> 00:03:02.600 bit higher turnover than a market capitalization way to index but

60 00:03:02.600 --> 00:03:05.600 generally speaking, you know, these signals are relatively slow

61 00:03:05.600 --> 00:03:08.500 moving you're very diverseified. Each holding is

62 00:03:08.500 --> 00:03:10.200 a small percentage of your portfolio.

63 00:03:10.700 --> 00:03:13.300 So for the most part, you don't have to turn over

64 00:03:13.300 --> 00:03:16.400 the portfolio very often. You don't have to trade a lot sell a

65 00:03:16.400 --> 00:03:19.200 lot to reposition into the into the next

66 00:03:19.200 --> 00:03:22.700 Holdings you would want. I mentioned momentum alone has has a

67 00:03:22.700 --> 00:03:25.900 higher turnover as an individual strategy. There are

68 00:03:25.900 --> 00:03:29.100 benefits in putting it together with other factors specifically

69 00:03:28.100 --> 00:03:31.100 momentum and value work very well

70 00:03:31.100 --> 00:03:35.000 together because they're negatively correlated and in the same portfolio,

71 00:03:34.600 --> 00:03:37.000 the the turnover momentum can be

72 00:03:37.600 --> 00:03:41.000 somewhat counteracted in reduced by having other factors

73 00:03:40.200 --> 00:03:43.200 in there specifically value. So the

74 00:03:43.200 --> 00:03:46.400 pairing of factors can help with the tax efficiency of

75 00:03:46.400 --> 00:03:49.200 the portfolio, right momentum by definition is a high

76 00:03:49.200 --> 00:03:53.100 turnover strategy. Meaning there's a lot of trading right now this

77 00:03:52.100 --> 00:03:55.800 this signal is you know, essentially a year

78 00:03:55.800 --> 00:03:58.300 or so a little less than a year. So you would

79 00:03:58.300 --> 00:04:01.200 expect and that's the

80 00:04:01.200 --> 00:04:04.400 standard kind of academic one year price momentum type of

81 00:04:04.400 --> 00:04:07.700 indicator quantitative rule. So you'd

82 00:04:07.700 --> 00:04:10.400 expect momentum to lead to changes at about

83 00:04:10.800 --> 00:04:14.500 Near Horizon your portfolio, which is especially inconvenient

84 00:04:13.500 --> 00:04:16.300 to with regard to tax

85 00:04:16.300 --> 00:04:19.600 law because you know, you have the short-term long term type of

86 00:04:19.600 --> 00:04:22.300 cap gain consideration as well. Sure. So I

87 00:04:22.300 --> 00:04:25.400 mean we've had a lot of conversations about on this podcast about

88 00:04:25.400 --> 00:04:28.100 a fishing markets diversification Buy and Hold

89 00:04:28.100 --> 00:04:31.600 stay the course, but what I'm hearing you say is that just from a

90 00:04:31.600 --> 00:04:34.500 tax standpoint it almost sounds like it's a convenient byproduct of

91 00:04:34.500 --> 00:04:37.300 it hearing to a buy an old strategy. That's a

92 00:04:37.300 --> 00:04:40.700 great way to think about it and you you mentioned relative to

93 00:04:40.700 --> 00:04:43.400 other strategies. So I want to respond directly to

94 00:04:43.400 --> 00:04:46.300 that as well. So let's just call, you know,

95 00:04:46.300 --> 00:04:49.300 multi-factor Diversified investing as a strategy

96 00:04:49.300 --> 00:04:52.400 and investment philosophy relative to you know,

97 00:04:52.400 --> 00:04:55.800 kind of old-fashioned active management where a

98 00:04:55.800 --> 00:04:58.500 manager is picking and choosing you were stocks

99 00:04:58.500 --> 00:05:02.000 maybe reacting to Market events

100 00:05:01.100 --> 00:05:04.400 making predictions turning the portfolio over,

101 00:05:04.400 --> 00:05:07.400 you know, if you know, each position is about 10%

102 00:05:07.400 --> 00:05:10.100 you know, just selling one position creates a lot

103 00:05:10.100 --> 00:05:10.700 of turnover.

104 00:05:10.700 --> 00:05:13.400 Or so typically those actively managed strategies

105 00:05:13.400 --> 00:05:16.500 that are more concentrated and and require more

106 00:05:16.500 --> 00:05:19.300 trading are less tax efficient. Lord know

107 00:05:19.300 --> 00:05:22.800 that absolutely makes sense and Glenn. I know that you share in our

108 00:05:22.800 --> 00:05:25.400 view on how Capital markets work. Do you

109 00:05:25.400 --> 00:05:28.500 care to add anything to fills comments? Well, I think tax laws

110 00:05:28.500 --> 00:05:32.200 harvesting in general is a perfect strategy

111 00:05:31.200 --> 00:05:34.600 to use evidence based investing

112 00:05:34.600 --> 00:05:37.100 and I say that because tax laws are

113 00:05:37.100 --> 00:05:40.300 visiting at its core is you have names in the portfolio that

114 00:05:40.300 --> 00:05:43.300 are essentially winners. They've appreciated we want

115 00:05:43.300 --> 00:05:45.400 to hold those continue to hold those names.

116 00:05:46.300 --> 00:05:49.700 But you're gonna have stocks that have gone down those stocks

117 00:05:49.700 --> 00:05:52.400 in a really simple example you

118 00:05:52.400 --> 00:05:55.400 would sell but at that moment when you sell that

119 00:05:55.400 --> 00:05:55.700 name.

120 00:05:56.500 --> 00:05:58.300 You have to replace it with another stock.

121 00:05:59.300 --> 00:06:02.600 So at that moment, that's a perfect time to utilize

122 00:06:02.600 --> 00:06:05.200 your evidence-based beliefs. If

123 00:06:05.200 --> 00:06:08.100 you want to tilt the portfolio toward cheaper stocks or

124 00:06:08.100 --> 00:06:11.900 stocks with better attributes of quality or profitability. If you

125 00:06:11.900 --> 00:06:14.400 add that in to the stock

126 00:06:14.400 --> 00:06:17.500 selection of replacing that name via, which

127 00:06:17.500 --> 00:06:20.200 you've realized that tax loss then we believe you

128 00:06:20.200 --> 00:06:23.200 can add some nice return Over The Benchmark over

129 00:06:23.200 --> 00:06:23.400 time.

130 00:06:24.100 --> 00:06:28.100 So yeah tax loss harvesting and offering after tax improvements

131 00:06:27.100 --> 00:06:30.200 for clients can type very nicely with

132 00:06:30.200 --> 00:06:31.700 evidence-based investing.

133 00:06:32.400 --> 00:06:35.500 Yeah, I think that intentional turnover if you will with

134 00:06:35.500 --> 00:06:39.000 tasks lost harvesting does open up the door for some creativity

135 00:06:38.500 --> 00:06:41.600 is what I'm hearing. You say Glenn in order

136 00:06:41.600 --> 00:06:45.600 of enhancing returns. I mean I've seen in the past people liquidata

137 00:06:44.600 --> 00:06:47.600 position, they might hold cash for 30

138 00:06:47.600 --> 00:06:49.700 days or might replace it with an ETF.

139 00:06:50.700 --> 00:06:53.400 But Glenn what I'm hearing you say is that when that happens, there's

140 00:06:53.400 --> 00:06:54.600 opportunities to be a little bit more.

141 00:06:55.700 --> 00:06:58.900 Creative I guess the word when it comes to reinvesting those

142 00:06:58.900 --> 00:07:01.400 assets special specifically

143 00:07:01.400 --> 00:07:04.500 through a factor lens, right? That's right. And and

144 00:07:04.500 --> 00:07:07.300 I would also add Tom that's one advantage of

145 00:07:07.300 --> 00:07:10.600 the Symmetry platform versus maybe other tax loss

146 00:07:10.600 --> 00:07:13.700 harvesting options is that you know with with quantino

147 00:07:13.700 --> 00:07:16.600 involved we can add a modest long short extension

148 00:07:16.600 --> 00:07:19.300 to a strategy which gives it some

149 00:07:19.300 --> 00:07:22.400 unique advantages versus long only text less harvesting so

150 00:07:23.200 --> 00:07:26.800 And long only tax loss harvesting. You'll typically have a risk budget.

151 00:07:26.800 --> 00:07:29.500 So to speak, you know, there's only so much

152 00:07:29.500 --> 00:07:32.600 deviation versus The Benchmark the clients willing

153 00:07:32.600 --> 00:07:32.700 to take

154 00:07:33.600 --> 00:07:35.200 but with that risk budget

155 00:07:35.800 --> 00:07:38.300 If you do tilt toward maybe you're

156 00:07:38.300 --> 00:07:41.500 evidence-based beliefs would maybe value momentum

157 00:07:41.500 --> 00:07:44.900 you're taking up a little bit of that rich risk budget. So

158 00:07:44.900 --> 00:07:48.000 by taking up that risk budget, you're reducing the

159 00:07:47.800 --> 00:07:50.300 expected tax benefit because you're a

160 00:07:50.300 --> 00:07:52.400 little bit more constrained and tax less harvesting.

161 00:07:53.400 --> 00:07:56.200 So one disadvantage of perhaps long only text less

162 00:07:56.200 --> 00:07:59.800 harvesting with the long short extension that long

163 00:07:59.800 --> 00:08:02.500 short extension itself is the engine for tax benefit

164 00:08:02.500 --> 00:08:03.100 generation.

165 00:08:03.800 --> 00:08:06.300 So you can do a lot of created them things in

166 00:08:06.300 --> 00:08:09.100 the portfolio. You could tilt toward your your factors and

167 00:08:09.100 --> 00:08:12.900 your in your beliefs, but you're not giving up any expected

168 00:08:12.900 --> 00:08:13.600 tax benefit.

169 00:08:14.600 --> 00:08:17.400 If you're if you're employing that long short extension.

170 00:08:18.300 --> 00:08:22.300 Yeah, I kind of want to hang on that point Glen because we say

171 00:08:21.300 --> 00:08:25.100 and Phil I think would agree with with you

172 00:08:24.100 --> 00:08:27.000 that you know, there's no such thing as

173 00:08:27.100 --> 00:08:29.200 a perfect portfolio, right? Every portfolio is

174 00:08:30.200 --> 00:08:33.500 As it's trade-offs or is

175 00:08:33.500 --> 00:08:37.500 a compromise if you will and if you want tax efficiency

176 00:08:36.500 --> 00:08:40.400 as a main goal Factor investing

177 00:08:40.400 --> 00:08:43.200 might not be the best way to do it. It's a

178 00:08:43.200 --> 00:08:47.000 better way of doing it versus just a beta portfolio. But

179 00:08:46.100 --> 00:08:49.500 what I'm hearing you say Glens you get kind of The Best of Both Worlds

180 00:08:49.500 --> 00:08:52.500 by utilizing things like margin and

181 00:08:52.500 --> 00:08:55.400 short positions. Is that correct? I would

182 00:08:55.400 --> 00:08:58.900 I would agree that I would think the long short extension

183 00:08:58.900 --> 00:09:02.100 itself introduces more creativity in

184 00:09:01.100 --> 00:09:06.000 the portfolio because that

185 00:09:04.500 --> 00:09:07.800 engine of tax benefit generation

186 00:09:07.800 --> 00:09:10.900 is there it doesn't depend on the underlying portfolio

187 00:09:10.900 --> 00:09:13.500 for those strong and consistent text benefits. So,

188 00:09:14.400 --> 00:09:17.400 You have a lot more flexibility to implement the core part

189 00:09:17.400 --> 00:09:20.200 of that portfolio as you see fit. Sure. No, I think that makes

190 00:09:20.200 --> 00:09:24.000 a lot of sense. There's a lot of strategies that we're deploying now the 13030

191 00:09:23.300 --> 00:09:27.200 which you're alluding to Glenn I think is very interesting but filament

192 00:09:26.200 --> 00:09:29.400 in our experience, we've seen our new

193 00:09:29.400 --> 00:09:33.100 favorite word ossification, right which essentially means

194 00:09:32.100 --> 00:09:35.400 that when you own a a basket of

195 00:09:35.400 --> 00:09:39.300 security is whether it's ETS mutual funds are stocks at some

196 00:09:38.300 --> 00:09:42.000 point you get to an area

197 00:09:41.200 --> 00:09:44.300 over time where you can't do anything

198 00:09:44.300 --> 00:09:48.000 with that portfolio because of embedded gains, right

199 00:09:47.300 --> 00:09:51.100 and we've seen that over the years with our portfolios.

200 00:09:50.100 --> 00:09:53.700 Can you comment a little bit on that? Yeah, absolutely and

201 00:09:54.900 --> 00:09:57.200 The the irony in that

202 00:09:57.200 --> 00:10:00.300 situation is you should want to get there right because

203 00:10:00.300 --> 00:10:03.200 you want your portfolio to increase in value. So

204 00:10:03.200 --> 00:10:06.600 the way you you get to the point of having

205 00:10:06.600 --> 00:10:09.500 no unrealized losses in your portfolio to

206 00:10:09.500 --> 00:10:13.100 clip and realize for for tax efficient

207 00:10:12.100 --> 00:10:15.100 repositioning is your portfolio goes up

208 00:10:15.100 --> 00:10:19.200 over time and there's some interesting research on this. I think there's broad

209 00:10:18.200 --> 00:10:21.500 agreement that even in a

210 00:10:21.500 --> 00:10:24.300 diversified long only portfolio. You probably

211 00:10:24.300 --> 00:10:27.200 only have a single digit number of years, you know, some of

212 00:10:27.200 --> 00:10:30.200 it's going to depend on your assumptions and where the market goes and and how

213 00:10:30.200 --> 00:10:33.200 you've invested and how your tax Lots look but, you know,

214 00:10:33.200 --> 00:10:36.600 three four five years. Maybe might be the limit

215 00:10:36.600 --> 00:10:38.400 you have to do.

216 00:10:39.100 --> 00:10:42.900 Efficient tax less harvesting and that type of portfolio before you

217 00:10:42.900 --> 00:10:45.300 have to start to really give on the

218 00:10:45.300 --> 00:10:48.200 risk budget and and we refer to this idea

219 00:10:48.200 --> 00:10:51.700 of tracking error, which is you know, how different returns essentially

220 00:10:51.700 --> 00:10:54.100 will look relative to a benchmark and you start

221 00:10:54.100 --> 00:10:57.600 to to need to accept a lot of a lot of tracking error. If

222 00:10:57.600 --> 00:11:00.700 you're not willing to accept some realization of gains in

223 00:11:00.700 --> 00:11:03.500 in managing that portfolio. So all of a sudden, you know

224 00:11:03.500 --> 00:11:06.400 portfolio you you might be paying somebody to manage and

225 00:11:06.400 --> 00:11:09.700 do tax laws harvesting on becomes something

226 00:11:09.700 --> 00:11:12.400 that might look a little bit more like an expensive

227 00:11:12.400 --> 00:11:15.100 and noisy index. You don't have the ability to

228 00:11:15.100 --> 00:11:18.500 do many transactions in that so, you know, the 1330 that

229 00:11:18.500 --> 00:11:21.100 you and Glenn have started to talk about really frees up

230 00:11:21.100 --> 00:11:24.800 the opportunity to do something with that portfolio sure

231 00:11:24.800 --> 00:11:27.600 and you know, we talked a lot about direct indexing you

232 00:11:27.600 --> 00:11:30.400 and I did a podcast of a few episodes ago

233 00:11:30.400 --> 00:11:31.900 about direct indexing.

234 00:11:32.400 --> 00:11:35.700 And the more names the more tickers the

235 00:11:35.700 --> 00:11:38.200 more opportunity you have to harvest losses, but even

236 00:11:38.200 --> 00:11:41.100 with direct indexing when you hold maybe a hundred or so

237 00:11:41.100 --> 00:11:44.200 underlying stocks you do get it

238 00:11:44.200 --> 00:11:48.300 to a period where you you're eventually going to hold a basket

239 00:11:47.300 --> 00:11:50.600 of very low cost basis with

240 00:11:50.600 --> 00:11:52.900 high embedded gains securities.

241 00:11:53.500 --> 00:11:56.100 And so and the irony is that's the goal.

242 00:11:56.100 --> 00:11:59.100 You had alluded to like we want to see games in our

243 00:11:59.100 --> 00:12:02.100 portfolio. However, you know, we want our investors to be

244 00:12:02.100 --> 00:12:06.500 able to keep more in their pockets through through tax efficiency. So clunky.

245 00:12:05.500 --> 00:12:08.000 We started going down the path of the

246 00:12:08.900 --> 00:12:11.800 1330 strategy, right and in direct indexing

247 00:12:11.800 --> 00:12:14.600 certainly is a step up from a tax efficiency standpoint.

248 00:12:14.600 --> 00:12:17.300 It certainly helps describe for us a little bit about

249 00:12:17.300 --> 00:12:20.500 how that 130 30 works and multiple Market

250 00:12:20.500 --> 00:12:23.400 environments if you will sure that you

251 00:12:23.400 --> 00:12:26.600 Tom so, you know at the end of the day if you

252 00:12:26.600 --> 00:12:29.900 have a hundred dollars of a direct indexing portfolio

253 00:12:31.900 --> 00:12:34.400 maybe assume that direct indexing portfolio maybe

254 00:12:34.400 --> 00:12:37.900 has a 50% cost basis or a 60% cost basis

255 00:12:37.900 --> 00:12:40.200 that tends to be roughly the cost basis where

256 00:12:41.100 --> 00:12:44.700 You're kind of handcuffed from a tax benefit generation perspective.

257 00:12:44.700 --> 00:12:47.600 You know what quantina would do would be take

258 00:12:47.600 --> 00:12:50.800 that $100 portfolio use the the margin inherent

259 00:12:50.800 --> 00:12:52.800 in that account just like clients who

260 00:12:53.500 --> 00:12:56.200 You know borrow us modest amount from their Equity port for

261 00:12:56.200 --> 00:12:59.600 those from time to time use that same margin capability and then

262 00:12:59.600 --> 00:13:03.000 we're going to go long thirty dollars in short

263 00:13:02.400 --> 00:13:05.600 thirty dollars. So we're building a 130/30 strategy

264 00:13:05.600 --> 00:13:09.200 using the margin borrowing of

265 00:13:09.200 --> 00:13:12.700 that account. No other cash is required. That's an important part and

266 00:13:12.700 --> 00:13:15.000 then if you think about that $30 long $30

267 00:13:15.600 --> 00:13:18.400 short, that's gonna be Diversified across hundreds of stocks.

268 00:13:18.400 --> 00:13:21.600 Every tax loss harvesting strategy needs breath. You

269 00:13:21.600 --> 00:13:24.400 need just a lot of stocks to be invested in because you're gonna have winners

270 00:13:24.400 --> 00:13:27.900 and losers and then you think about that portfolios the

271 00:13:27.900 --> 00:13:30.500 market goes up as the market goes down. You have

272 00:13:30.500 --> 00:13:33.400 a little bit of a structural Advantage versus long only long only

273 00:13:33.400 --> 00:13:36.400 will tend to generate great tax benefits When the market dips

274 00:13:37.300 --> 00:13:40.600 But it struggles to generate tax benefits When the market Rises and

275 00:13:40.600 --> 00:13:43.100 you know clients invest in equities because they believe

276 00:13:43.100 --> 00:13:46.400 the Market's going to rise over time. So that short side of that portfolio is

277 00:13:46.400 --> 00:13:49.900 really important in the consistency of

278 00:13:49.900 --> 00:13:52.300 tax benefits over time. So if you have a

279 00:13:52.300 --> 00:13:55.300 long short portfolio on top of

280 00:13:55.300 --> 00:13:58.800 your direct indexing account, you're able to recharge

281 00:13:58.800 --> 00:14:01.300 tax benefits, you know almost immediately after

282 00:14:01.300 --> 00:14:04.400 you apply that long short extension. We can also use

283 00:14:04.400 --> 00:14:07.300 that to clean up the portfolios as

284 00:14:07.300 --> 00:14:10.700 Phil mentioned over time. You're tracking air may rise, you're making

285 00:14:10.700 --> 00:14:13.700 some deviations versus The Benchmark. So the

286 00:14:13.700 --> 00:14:15.500 risk in that portfolio is also Rising.

287 00:14:16.200 --> 00:14:20.300 So if you have an overexposure to say Information Technology,

288 00:14:19.300 --> 00:14:22.100 those names have done really well over the past

289 00:14:22.100 --> 00:14:26.200 five to 10 years. We can use the short book the short

290 00:14:25.800 --> 00:14:28.900 $30 of that portfolio to reduce

291 00:14:28.900 --> 00:14:31.900 some of that overweight which will help clients reduce

292 00:14:31.900 --> 00:14:34.500 risk in those accounts as well. So it's a combination of

293 00:14:35.400 --> 00:14:38.000 You know using that long short extension obviously to

294 00:14:38.400 --> 00:14:41.100 generate great text benefits and a consistent way for clients, but also

295 00:14:41.100 --> 00:14:45.000 to give them a better and less risky Investment Portfolio along

296 00:14:44.300 --> 00:14:47.300 the way. Thank you gentlemen, that that's very

297 00:14:47.300 --> 00:14:50.100 insightful for our listeners. Thank you for for listening to

298 00:14:50.100 --> 00:14:53.000 us. You can access this podcast and all of

299 00:14:53.100 --> 00:14:56.600 our podcasts and our series anywhere you get your podcasts, we're

300 00:14:56.600 --> 00:14:59.400 gonna continue this conversation. So for our listeners, be sure

301 00:14:59.400 --> 00:15:02.300 to tune in for part two on our topic of investing

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