Reducing Your Tax Bill - Part One

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

302
00:15:02.300 --> 00:15:05.700
 in taxes Cemetery Partners. LLC is

303
00:15:05.700 --> 00:15:08.600
 an investment advisor firm registered with the Securities

304
00:15:08.600 --> 00:15:11.600
 and Exchange Commission, The Firm only transacts business

305
00:15:11.600 --> 00:15:14.500
 in states where it is properly registered or

306
00:15:14.500 --> 00:15:18.000
 excluded or Exempted from registration requirements

307
00:15:17.300 --> 00:15:20.200
 registration of an investment

308
00:15:20.200 --> 00:15:23.400
 advisor does not imply any specific level of skill or

309
00:15:23.400 --> 00:15:26.300
 training and does not constitute and endorsement

310
00:15:26.300 --> 00:15:29.400
 of the firm by the commission. No one should assume that

311
00:15:29.400 --> 00:15:33.100
 future performance of any specific investment investment strategy

312
00:15:32.100 --> 00:15:35.300
 product or non-in.

313
00:15:35.600 --> 00:15:38.600
Related content made reference to directly or indirectly

314
00:15:38.600 --> 00:15:40.800
 in this material will be profitable.

315
00:15:41.800 --> 00:15:44.200
As with any investment strategy there is

316
00:15:44.200 --> 00:15:47.900
 the possibility of profitability as well as loss due

317
00:15:47.900 --> 00:15:50.600
 to various factors including changing market

318
00:15:50.600 --> 00:15:53.700
 conditions. And/or applicable laws the

319
00:15:53.700 --> 00:15:56.900
 content may not be reflective of current opinions

320
00:15:56.900 --> 00:15:59.600
 or positions. Please note the

321
00:15:59.600 --> 00:16:02.400
 material is provided for educational and background use

322
00:16:02.400 --> 00:16:05.900
 only moreover. You should not assume that any discussion or

323
00:16:05.900 --> 00:16:09.200
 information contained in this material Services the

324
00:16:08.200 --> 00:16:11.500
 receipt of or as a substitute for

325
00:16:11.500 --> 00:16:14.000
 personalized investment advice.