Mon. Dec 4th, 2023

Another somewhat subtle cost is that you’ll lose the opportunity to tax-loss harvest in taxable accounts. Tax-loss harvesting refers to locking in the loss of a losing investment and applying it against a locked-in gain from the sale of another investment. In effect, tax-loss harvesting reduces your tax bill.

When you hold a LifeStrategy Fund, you only hold a single ticker — this means that you won’t have any opportunity to offset losses as markets fluctuate. Still, the effect of tax-loss harvesting can be limited depending on your tax bracket as well as your investment selection. Indexed portfolios won’t have much opportunity for tax-loss harvesting if markets continue to collectively rise over the long term.

A great option with some costs

Only you can determine if a LifeStrategy Fund is right for you, but if you’re willing to commit to a specific asset allocation for a period of many decades, it’s not a bad idea. This type of fund, when held in a retirement account, is a great one-size option for investors without an appetite for investing and managing their own portfolios.

Be aware, however, that you’ll pay a small price for access and you’ll also be limited in your tax strategy, especially if you hold one of these funds in a taxable account. No matter which route you choose, know that the single fund option will ultimately get you where you need to go.

By senior