Anyone use Fido Tax-Managed U.S. Equity Index Strategy?

[JohnnyBGoode]

I have my accounts at Fidelity and though I manage my own investments they have an advisor that calls once or twice a year to check up on things. I have a fair bit of cash coming into my taxable account right now and he suggested taking advantage of Fidelity's Tax-Managed US Equity Index Strategy SMA (Separate Managed Account).

https://www.fidelity.com/managed-ac...tax-managed-US-equity-index-strategy/overview and
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/Taxed-Managed-SMA.pdf

The fees are 0.35% for what I've got to invest and basically, they model the S&P 500 but they are aggressive about tax-loss harvesting and he said it ends up being 1.5pts better than a regular passive index fund when taking into account of the tax implications of capital gains and dividends.

Does anyone have any experience/pros/cons with this Fido account? Thanks!

 

[capjak]

I am also looking at it as they absorb all the trading costs and do tax loss harvesting to increase the after tax yield.

 

[mrfeh]

Why not invest in a low-cost total market fund and do the TLH yourself?

 

[JohnnyBGoode]

Well, I think the argument goes that with a low-cost total market fund (which is what I primarily invest in - FSTVX) you can't do the individual tax-loss harvesting for the different stocks. Their value proposition, as I understand it, is they will individually purchase stocks comprising most of the S&P 500 and then do the individual buy/sell of the stocks within that portfolio to minimize the tax hit. That just isn't possible if you own a single fund.

My thought it they are probably right, but it seems over time you might get kind of far away from the S&P 500 if you are always trying to outstmart the tax man. But I can't tell for sure.

 

[OldShooter]

... he said it ends up being 1.5pts better than a regular passive index fund when taking into account of the tax implications of capital gains and dividends. ...

That's a big number. It's double, for example, what Betterment claims for tax loss harvesting. I'd want to see some backup data.

Also, I personally do not want to overemphasize the S&P/US Large Caps in my portfolio. I seems like all of the robo-visors also offer tax loss harvesting with more diversification and usually at a lower fee level. So I would shop there too.

Finally, DFA offers a number of tax-managed funds. Even if you don't want to pay an advisor (necessary to access DFA), reading their story might be helpful in making your decision.