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.
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