Active tax management

Pursue tax-management opportunities for your clients—and your business throughout the year.

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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.

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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)**
2001	-12%	4%
2002	-22%	2%
2008	-37%	8%
2018	-5%	11%
2022	-19%	7%
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.

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Russell Investments
Tax-Managed Solutions:

We implement year-round active tax management. Read how our tax-managed funds materially improved their tax standing during the H1 2022 market volatility as well as in prior periods.

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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.