I had a couple of bucks laying around that I needed to invest. I probably fell for a sales pitch from my Fidelity advisor. Since this money isn't in a tax deferred account, I opened a new account for a Tax Managed Fund. Honestly, I'm too lazy to manage my own accounts. I typically pick a couple of index ETFs and mutual funds.

Supposedly, through AI, computer monitoring and human advisor, they will create a mini index account (I picked large growth) that they will manage with tax consequences highly considered. I assume that means they will try to offset gains with some losses, minimal dividends, etc. The expenses were kinda high at .6%

Any thoughts?

Sounds like they are essentially selling you tax loss harvesting for .6%, which means they will sell one index fund/ETF when it has losses and buy a very similar replacement. The index funds/ETFs are most likely very tax efficient to begin with. Loss harvesting works great when you have losses to harvest but typically the opportunity to take advantage of it diminishes over time as stocks long term returns are expected to be positive.

The operative question you may want to pose is what is your "advisor's" incentive to sell you this product versus a lower cost option.

Thanks for the reply. I think you are right probably right. I was thinking they would do individual stocks, but index ETFs are probably more realistic.

I don't think my "advisor" is getting anything significant. He's just the Fidelity advisor that pumps Fidelity funds over others. I didn't bring any new money into Fidelity. I was just trying to place money that was sitting in cash.

Hard to tell based on what you described. It could also very well could be a direct indexing strategy, which can add much more than 60bps of tax alpha if done right. It also can help keep unrealized gains in check so you're not facing a huge tax burden in the future.

mosdefn14 said:

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Hard to tell based on what you described. It could also very well could be a direct indexing strategy, which can add much more than 60bps of tax alpha if done right. It also can help keep unrealized gains in check so you're not facing a huge tax burden in the future.

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Well, he said the product costs 60 bps so I guess getting 60 bps of tax alpha will be a breakeven!

The managed account invested the money today. They purchased 199 individual stocks.