What are the tax benefits of a separately managed account (SMA)?

YOU decide when to take your distributions

A mutual fund must pay out a portion of its gains to shareholders each year. It doesn’t matter if you want or need the distributed income—you’ll receive it and pay taxes on it. Every type of investment is subject to capital gains tax and tax on dividends or distributions, but with an SMA, you control the timing.

Offset gains with losses

Because SMAs transact individual securities, Portfolio Managers have the ability to match some capital gains with losses, otherwise known as tax-loss harvesting.

Fewer transactions

As we like to say, “We trade less because we believe more.” Transactions in your portfolio may be subject to capital gains tax, whether from an individual security or a pooled vehicle. However, historically SMAs at Fool Wealth have tended to hold fewer securities than pooled vehicles. And with Fool Wealth’s penchant for buy-and-hold investing, they may transact less frequently than other funds. That’s because each of our equity strategies is concentrated in about 20-35 high-conviction stocks that we aim to hold for several years or more.

For more guidance on your tax strategy, we recommend consulting with a tax advisor.