Tax management

How an advanced tax loss harvesting strategy may reduce taxes

October 16, 2025 - 3 min

Chief Executive Officer, Chief Investment Officer, and Portfolio Manager – Gateway Investment Advisers, LLC

Gateway market perspective

Experts from Gateway Investment Advisers, specialists in options-based investment solutions and quantitatively driven equity strategies, examine key trends and risk management ideas to help investors stay invested for the long run.

Harvest season for taxes, extended

Many investors are unaware that the "hidden" cost of taxes can be one of the largest drags on long-term returns.
However, there is a next-generation strategy that goes beyond traditional tax loss harvesting that can be used to help reduce the tax burden an investor may face.
For example, an extension tax loss harvesting strategy – such as a 130% long and 30% short portfolio that actively seeks out negative correlations in the market – may provide a consistent source of potential capital losses that can be harvested to offset gains.
This strategy can also generate additional capital for implementation through the short portion of the portfolio, allowing for a more robust approach to tax consciousness and diversification, which may significantly improve after-tax returns.
By maintaining a steady supply of harvested losses, extensions can help investors retain more of their returns and keep more capital compounding over time.

Key takeaways:

Taxes can seriously erode an investor’s returns over time.
Employing a strategy to generate taxable losses may help protect an investor's return through various market environments.

Gateway market perspective – Harvest season, extended

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All investing involves risk, including the risk of loss of principal. Investment risk exists with equity, fixed-income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

Past performance does not guarantee future results.

Diversification does not guarantee a profit or protect against a loss.

Short selling is speculative in nature and involves the risk of a theoretically unlimited increase in the market price of the security that can, in turn, result in an inability to cover the short position and a theoretically unlimited loss.

A long position is the purchase of a security with the expectation that the asset will rise in value.

A short position is the sale of a borrowed security with the expectation that the asset will fall in value.

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