Investing - Theory, News & General • Silly TLH games

You just proved above with your own post that no matter the amount of harvesting done in a month it would typically only result in a single additional fund. It's after some years go by that TLHing will add another fund to the portfolio due to gains on the previous two funds.

The OP asked about a general strategy for TLH. Presumably not a strategy to be used once and then forgotten, but rather a strategy to consistently employ over a lifetime of investing.

It is true that frenetic TLH, if employed only once in a lifetime, will result in holding only two funds. The “once in a lifetime” restriction does not seem particularly relevant to the original question however.

That is why it’s pointed out that frenetic TLH, if consistently followed, will result in many more than two funds eventually being held.

I think he understand what we're saying now. At any rate, I'm done saying it.

I understand that you are wrong, and I've been doing my best to try to agree with the part that you are right about. That TLHing over long periods of time could result in many additional funds, I've been very clear and specific about that.

Let me give one more try at explaining exactly how you are wrong, using the following example of Investor A and Investor B who have been investing for a very long time and magically have identical portfolios.

Jan 1, 2050 - Feb 1, 2050: The market drops 50%

• Investor A doesn't know when the bottom of the decline will be, so they wisely tax loss harvest at every 10% increment.
  VTI -> ITOT = -10%
  VTI + ITOT -> SCHB= -10%
  VTI + SCHB -> SPTM = -10%
  VTI + SPTM -> SCHX = -10%
  VTI + SCHX -> VOO = -10%
  
  At any given time during this TLHing, they could have stopped and held only two funds out of the original one.
  
  But they finished with the end result of: Portfolio of VTI + VOO. Market decline captured = entire 50%.

• Investor B is a market timing expert, and knows exactly when the market will hit bottom, and tax loss harvests once at exactly the right moment.
  
  VTI -> VOO = -50%
  
  End result: Portfolio of VTI + VOO. Market decline captured = entire 50%.

Investor A and B now both have the exact same portfolio of VTI + VOO, in the exact same ratios.

So please explain to me how "frenetically" tax loss harvesting during this 30 day period would have had these results for Investor A, and I quote:

If you do that you could end up with 5-10 funds per asset class in your portfolio eventually. That's a lot of complexity just to eke out a few more losses.

Statistics: Posted by White Coat Investor — Tue Mar 26, 2024 12:11 am — Replies 40 — Views 3415