Several strategies can help investors capitalize on tax-saving opportunities, including portfolio composition. To optimize a portfolio for tax-saving benefits, advisors and clients must decide on an equity or bond benchmark. The benchmark may be found within an existing index or used as a customized benchmark. After the benchmark is set, portfolio managers must determine how far they can deviate in pursuit of tax-saving opportunities without taking on undue risk.

Tax-loss harvesting is another impactful strategy. Portfolio managers must monitor investments for losses throughout the year, a process that may involve the sale of failing investments at a loss, but with the knowledge that these losses can offset or reduce capital gains taxes. Investors must ensure that the transaction costs do not exceed the tax savings prior to the sale.

Tax-loss harvesting is only one example of tax-efficient transitions. Many additional strategies allow investors to move assets without taking on increased tax burdens. Investors should discuss transition strategies with portfolio managers who have experience transitioning assets from active to passive, as well sa navigating the related tax complications.

Finally, charitable gifts can help an investor reduce taxes. Investors can explore different gift options with advisors until they determine the ideal value and asset type.