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If a new investment mix is available, how does Wealthfront minimize taxes when updating my taxable portfolio to a new investment mix?

For taxable portfolios, we still strive to minimize any tax consequences that arise from transitioning to a new investment mix.

For example, if we need to sell any of your existing investments in the transition process, we will first sell any share lots that generate losses followed by lots that only generate a tax-favorable long-term capital gain followed by lots where only a small (typically no greater than 5%) short-term capital gain is generated.

If we cannot find enough such lots to complete the transition, then we will wait until more short-term capital gain lots turn into long-term capital gain lots, thus allowing them to be sold in a tax-efficient manner. Meanwhile, we will use recent deposits or dividends to move your portfolio closer to the new investment mix. As a result, although we may transition the majority of taxable portfolios to the new investment mix immediately in a highly tax-efficient manner, some portfolios may take as much as a year to fully transition.

Nothing in this blog should be construed as tax advice, a solicitation or offer, or recommendation, to buy or sell any security. Financial advisory services are only provided to investors who become Wealthfront Inc. clients pursuant to a written agreement, which investors are urged to read carefully, that is available at www.wealthfront.com. All securities involve risk and may result in some loss. For more information please visit www.wealthfront.com or see our Full Disclosure. While the data Wealthfront uses from third parties is believed to be reliable, Wealthfront does not guarantee the accuracy of the information.

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