Active tax management
Pursue tax-management opportunities for your clients—and your business throughout the year.Request a meeting with one of our experts
Tax drag can hold you back in up and down markets
Every year in February investors receive their 1099 tax forms in the mail. Congrats! You have taxes due.
When markets are up we tend to be okay with having to pay the tax man something. But when markets are down, "Oh no. Why should I pay taxes when I'm losing money?" is what most of us would say.
Let's see what actually happens. This chart shows you U.S. Equity Market return for each year going back to 2001. This chart also shows you the average mutual fund capital gain distribution for each year. My question to you: How many times do you see the numbers represented with the red line hit zero? Never.
Whether the market is up or the market is down, capital gains are reality for investors. Just like individual portfolios when stocks with gains are sold, mutual funds are required to pay out to shareholders their net realized gains each fiscal year. Even in flat or down years. For most investors this distribution is automatically reinvested back into the fund, but in the eyes of our friends at the IRS a distribution is a distribution is a distribution. Taxes are due.
You can do better. Investors don't have to accept this level of tax costs. Russell Investments actively manages taxes throughout the year to reduce the impact of taxes. It's not what you make. It's what you get to keep that matters.
Let us help you keep more of what you make. Visit our website to learn how tax managed investing may help investors keep more of what they make.
Explore the benefits of tax-managed investing
Negative returns ≠ zero taxes.
Taxes can be a major headwind for taxable investors—even during down markets.
Many investors in U.S. equity mutual funds and ETFs experienced this painful truth in the four years that the market posted negative returns since 2000. As the table below illustrates, despite the negative returns, capital gains were still distributed and taxed.
|Year||Market Return*||Average Capital Gains Distribution
(% of NAV)**
|*Russell 3000 Index. **Morningstar U.S. OE Mutual Funds and ETFs.
% = Calendar Year Cap Gain Distributions / Year-End NAV. See disclosure section for more details.
It’s easy to transition:
If your clients hold tax-inefficient investments, consider switching to a tax-efficient investing approach when it fits your client's situation. At the very least, stop reinvesting the distributions back into those same tax-inefficient investments.
Build your tax-smart prospect list
Identify clients who may benefit from tax-managed investing and prioritize them depending on their current situation. Consider the client’s cost basis, marginal tax rate and their specific situation in your evaluation.
Clients with loss harvesting opportunities
Clients who have cash on the sidelines and/or have come into large cash distributions
Taxable trusts: They cross the top marginal tax rate at just $12,951 of taxable income
Follow these steps to switch to tax-efficient investing
Take action now.
It's about more than tax-loss harvesting. It's about creating long-term wealth for clients—and for your business.
Try our tax-management tools.
Demonstrate the value of tax management to your clients.
Investment Proposal Tool
Create a tax-managed proposal for your clients with our Investment Proposal Tool (formerly known as MAP Builder).
Value of Tax Management
See how much more return you may gain with a tax-managed portfolio.
Compare investment products on a tax-adjusted basis and quickly assess the tax implications between products and categories.
Connect 1:1 with your dedicated regional team at Russell Investments.