Capital gains taxes can severely erode investment performance over time. Effectively managing portfolio gains through strategic tax loss harvesting can create significant annual tax savings and increase real portfolio returns over the long term. Tax loss harvesting involves selling investments at a loss to offset taxable gains in an investor's portfolio, thus reducing annual tax liability. Capital losses that exceed capital gains each year (in excess of the $3,000 generally allowed against ordinary income) can be carried forward to offset gains realized in future years.

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