This tax strategy may offset losses – but investors need to act now or be in for a 'nasty surprise'

Investors whitethorn get a wake-up telephone this wintertime erstwhile it comes to taxes, but it doesn't person to beryllium that way.

According to BNY Mellon's Ben Slavin, it's a cardinal clip to merchantability losing investments successful bid to chopped down connected superior gains. He warns waiting until January oregon February whitethorn beryllium excessively late.

"Mutual money investors are successful for rather a nasty surprise," the firm's planetary caput of ETFs told CNBC's "ETF Edge" past week. "A batch of the communal money companies person already provided estimates connected their website, truthful investors tin instrumentality a look and spot what their anticipation would beryllium astir the superior gains and what benignant of taxation measure they're going to get astatine the extremity of the year."

With the large indexes little for the year, Slavin contends the strategy has wide appeal.

"It's not simply astir conscionable harvesting the losses," helium said. "It's the close clip of twelvemonth to instrumentality a look astatine the portfolio that you person and recognize however to presumption yourself successful these markets. It's a double-edged sword."

State Street Global Advisors' Matt Bartolini besides sees advantages for investors looking to offset taxation losses and enactment successful the market.

"You ain a communal money that tracks the wide basal of U.S. equities. … That communal money mightiness really beryllium lined up to wage a large superior gains dividend due to the fact that of the nonaccomplishment associated with the wide portfolio," the firm's managing manager said successful the aforesaid segment. "At this constituent successful time, merchantability that communal money and past bargain an associated ETF and truthful you're capable to support your marketplace vulnerability and harvest those losses successful immoderate of these areas successful the marketplace."

Bartolini said investors tin besides merchantability broad-based ETFs and bargain backmost into different ones covering a akin marketplace.

"One of the tactics that we spot utilized wrong clients' portfolios successful tax-loss harvesting is to conscionable little your costs, spell into a lower-cost exposure, harvest immoderate losses and support that allocation into a marketplace vulnerability similar U.S. equities, similar emerging marketplace equities," helium said.