Investment Strategy

How cutting edge technology can enhance your wealth with tax savings

As a discerning investor, you recognize the importance of preserving your wealth. Effective tax management strategies can play an important role in preserving your portfolio returns by reducing your tax burden. One such strategy is tax-loss harvesting, which involves selling securities at a loss to lock in capital losses. These losses can then be used to offset realized capital gains elsewhere in your portfolio, ultimately helping you save on taxes on those gains.

Most investors think of loss harvesting towards year-end, or once a month to avoid triggering the wash sale rule.¹ However, you may not realize that it’s now possible to identify loss harvesting opportunities more frequently—as often as daily—and that doing so can potentially help you save even more on your tax bill.

To measure the efficacy of a daily vs. monthly approach to portfolio monitoring for tax-loss harvesting opportunities, we compared the difference in tax savings1 between the two processes over 16 different time horizons between 2018 and 2021. Each scenario started one quarter after the previous scenario, allowing to observe results that began at different points in the year and in different market conditions.

In the daily approach, the portfolio was reviewed on a daily basis and had the flexibility to realize losses when individual positions and the overall portfolio met agreed-upon loss thresholds. The monthly approach used the same thresholds, but only harvested losses every 31 days.

A daily review approach was better: J.P. Morgan Asset Management’s analysis shows that reviewing your portfolio daily for tax-loss harvesting opportunities can yield, on average, about 30 basis points (bps) of additional annualized tax savings compared to the monthly approach. Given the equity market’s natural, ongoing volatility, it’s reasonable to expect that more frequent monitoring would result in incremental tax savings. This chart shows the results in greater detail.

Comparing tax-loss harvesting approaches

Our analysis found that daily monitoring for tax-loss harvesting opportunities consistently generated additional savings.

Source: J.P. Morgan Asset Management. Data as of 12/31/2023. The chart is shown for illustrative purposes only.

Enhancing tax-loss harvesting opportunities

Due to the effort it takes to tax-loss harvest—selling, identifying a suitable replacement stock, being mindful of the wash-sale rule, and tax reporting—most people historically harvested their losses just once a year, usually at the end of the year when finalizing all taxable activity for the tax year, or monthly. But waiting meant they missed harvesting all those intra-year or intra-month dips to capture losses from.

Cutting-edge technology can now continuously identify tax-loss harvesting opportunities, and systematically capture losses to offset gains, now or in the future, all the while staying close to your objectives. This makes it much simpler to ensure that your portfolio is optimized for tax savings on an ongoing basis.

This task can now be automated: Cutting-edge technology can continuously identify tax-loss harvesting opportunities. This makes it much simpler to ensure that your portfolio is optimized for tax savings on an ongoing basis.

Not all providers take this approach, however. Some take a calendar-driven approach, looking for losses at a set time, such as at the end of the month or quarter. Others use a trigger-based approach—waiting to take losses until they reach a certain level—but will only trade on a monthly basis.

A continuous approach reviews accounts every day for tax-loss harvesting opportunities, realizing losses when the predetermined cost-benefit threshold is met—potentially multiple times during a month.

A robust process is critical to success

A continuous tax-loss harvesting approach can optimize the potential for creating tax losses while still delivering an investment experience similar to the index being tracked. However, this approach requires a diligent process that can:

Analyze the cost vs. benefit of every trade: Trading too early can seek to realize a loss that may have quickly reversed into a gain. Finding the optimal threshold for realizing a loss prevents unnecessary turnover in the portfolio.
Control for wash sale violations: Wash sale rules do not allow the same security to be sold and bought again within a 31-day period. Violations result in the loss no longer being eligible for tax purposes. A daily review can often generate opportunities to harvest losses more than once a month, so having a systematic way to monitor the potential for wash sale violations is critical.
Incorporate up-to-date pricing data: Daily opportunities that use pricing data from the start of the trading day provide a more accurate indication of whether a loss should be taken than data from the previous day, which may not factor in news from after the market close.

Loss harvesting strategies improve the potential of capturing losses by increasing the frequency of the process and the volume of opportunities. A daily approach goes a step further. By taking advantage of daily volatility across a larger opportunity set, investors may get more in potential tax savings and keep more of what they earn.

¹Generally speaking, this rule prevents you from claiming a current tax loss if you buy a security considered “substantially identical” within a 30-day period before or after the loss trade date. Internal Revenue Code, Section 1091. Instead if the wash sale loss disallowance rule is invoked, you must adjust basis in the replacement security for the disallowed loss which is effectively deferred until the replacement security is sold.

Important Information

Tax loss harvesting may not be appropriate for everyone. If you do not expect to realize net capital gains this year, have net capital loss carryforwards, are concerned about deviation from your model investment portfolio, and/or are subject to low income tax rates or invest through a tax-deferred account, tax loss harvesting may not be optimal for your account. You should discuss these matters with your investment and tax advisors.

All case studies are shown for illustrative purposes only, and are hypothetical. Any name referenced is fictional, and may not be representative of other individual experiences. Information is not a guarantee of future results.

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Technology can help investors enhance their returns by continually monitoring their portfolios for tax-loss harvesting opportunities.

Garrett Norman

Executive Director, J.P. Morgan Asset Management

Mia Yammine

Associate, J.P. Morgan Asset Management

Evelina Samson

Executive Director, Portfolio Advisory Group

Published Jun 3, 2025

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How cutting edge technology can enhance your wealth with tax savings

Comparing tax-loss harvesting approaches

Our analysis found that daily monitoring for tax-loss harvesting opportunities consistently generated additional savings.

Enhancing tax-loss harvesting opportunities

A robust process is critical to success

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