Harvesting those losses nets you an additional 0.32% gain.
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At $5K a position and $7 a trade, the tax advantage of the harvesting well outweighs the 0.14% commission you're paying, and since most of your winners you'll hold on to for multiple years, that 0.14% gets amortized away pretty fast. Regardless, you should only do with if you have enough capital to buy enough stocks to diversify and big enough positions that the commission fee is negligable.
You don't gain 0.32%, the IRS loans you 0.32% until you pay it back. The goal is retirement, at which point you start selling appreciated assets and paying tax. So the benefit isn't 0.32%, it's the gains you make (after tax) on that 0.32%.
And that assumes 15% of your assets lose -10% and are taxed at 22%. Most people have held stocks more than a year, which means a capital loss taxed at -15%, not their top tax rate.
What happens after a few years? After a stock or fund has gone up +50%, what's the chance it drops enough to realize a loss? Tax loss harvesting only works at first... once your assets have all doubled, there isn't much that can wipe away those gains and allow a taxable loss.
And all this assumes you replicate the S&P 500 with a $5,000 allocation to each stock, for a total portfolio of $250,000. Which means you lack international, which reduces your diversification. Plus international had some losses last year, so someone indexing could have taxable losses while you don't. They could beat your tax loss harvesting while paying $0/trade.
Also, if you actually sell within 1 year, that's one purchase ($7 of $5,000) and one sell (another $7 of $5,000) plus then you have to reinvest in something else ($7 of $5,000). So all told, you're looking at 0.42% commissions, not 0.14%.
Well this post has so many misconceptions I have to tackle them 1 by 1
"You don't gain 0.32%, the IRS loans you 0.32% until you pay it back. The goal is retirement, at which point you start selling appreciated assets and paying tax. So the benefit isn't 0.32%, it's the gains you make (after tax) on that 0.32%.
And that assumes 15% of your assets lose -10% and are taxed at 22%. Most people have held stocks more than a year, which means a capital loss taxed at -15%, not their top tax rate."
If you're accumulating, you're only selling losers. You're not offsetting with long term capital gains, you're offsetting with ordinary income. No way is this a loan.
"What happens after a few years? After a stock or fund has gone up +50%, what's the chance it drops enough to realize a loss? Tax loss harvesting only works at first... once your assets have all doubled, there isn't much that can wipe away those gains and allow a taxable loss."
When you're accumulating over your working life, you will have new losers every year.
"And all this assumes you replicate the S&P 500 with a $5,000 allocation to each stock, for a total portfolio of $250,000. "
No, why would you want to do that? 20 or so stocks should be fine for diversification.
"Which means you lack international, which reduces your diversification. Plus international had some losses last year, so someone indexing could have taxable losses while you don't. They could beat your tax loss harvesting while paying $0/trade."
Why can't you buy international with my strategy?? And what does last year have to do with anything?
"Also, if you actually sell within 1 year, that's one purchase ($7 of $5,000) and one sell (another $7 of $5,000) plus then you have to reinvest in something else ($7 of $5,000). So all told, you're looking at 0.42% commissions, not 0.14%."
That's more than offset by the winners in the account you hold for 20 years, which would be $0.35/year for that commission.