Seek to Minimize Your Clients' Tax Bills With ETFs | ETF Trends

While picking the right investments for your clients based on their investment goals is critical, it is equally important to apply an effective tax management strategy to help them maximize their portfolio’s return potential.

In the upcoming webcast, Seek to Minimize Your Clients’ Tax Bills With ETFs, John Q. Frank, head of ETF specialists at Invesco; Nick Kalivas, head of factor and core equity ETF product strategy at Invesco; and Brad Smith, director of ETF research at Invesco, will outline effective tax management practices that can potentially assist in adding additional value to your clients by helping them keep more of what they earn.

Financial market observers have highlighted the potential for tax-loss harvesting to maximize the benefits of their investment portfolios.

Tax-loss harvesting is the act of selling securities at a loss, or in this case underperforming mutual funds, to offset the amount of capital gains tax due on the sale of other profitable securities. Furthermore, this helps preserve the value of the investment portfolio since the investor can then use the proceeds to purchase a similar asset, security, or low-cost ETF, which adheres to the IRS rule against buying a “substantially identical” investment within 30 days.

For example, the popularly observed Invesco QQQ Trust (NASDAQ: QQQ), which tracks the Nasdaq-100, 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market, has been the go-to play to access some of the largest innovative companies in the U.S. markets.

Short-term investors who prioritize liquidity could still find the attributes of QQQ most appropriate. However, longer-term “buy-and-hold” investors may be more focused on cost savings and prefer the Invesco NASDAQ 100 ETF (QQQM), which costs 5 basis points less than QQQ.

Investors can also turn to something like the Invesco S&P 500 Equal Weight ETF (RSP) to stay well diversified in the current environment. The S&P 500 Equal Weight Index is a size-neutral version of the S&P 500, weighting each constituent company equally so that a small group of companies does not have an outsized impact on the index — a methodology that has paid off in the current market environment, characterized by higher volatility and wide disparity among sectoral performance.

Financial advisors who are interested in learning more about ETF investment strategies can register for the Wednesday, September 7 webcast here.