If you’ve spent any time around financial headlines, you’ve probably heard tax-loss harvesting pitched as a secret weapon. Almost like a financial Jedi mind trick: “Lose money on purpose, save a bunch on taxes, everybody wins.”

I wish it worked that way. It doesn’t.

That doesn’t mean tax-loss harvesting is bad. It can be very useful. It just needs to be framed correctly, especially if you’ve built meaningful wealth and want to keep it that way.

What tax-loss harvesting actually is

At its simplest, tax-loss harvesting means selling an investment that’s down, realizing the loss, and using that loss to help offset taxes elsewhere.

Those losses can typically be used to:

  • Offset current capital gains
  • Offset some ordinary income
  • Carry forward into future years

Sounds great, right? And often, it is. But here’s the part people miss…

It’s a tax tool, not an investment strategy

Tax-loss harvesting doesn’t make a bad investment good. It doesn’t turn market volatility into guaranteed returns. And it definitely doesn’t eliminate risk.

It’s best thought of as a small steering correction, not a turbo booster.

You’re still investing in real markets. Markets still move. And volatility, uncomfortable as it is, is not a flaw. It’s the cost of long-term growth.

When it does make sense

Used thoughtfully, tax-loss harvesting can still be a valuable tool. We regularly use it for clients when it fits their broader plan, especially for those with sizable taxable portfolios, changing income, or future liquidity needs.

The key word there is context.

When it’s done well, it’s coordinated with:

  • Your long-term goals
  • Your full tax picture (not just this year’s return)
  • Your portfolio’s risk and diversification
  • Your cash flow and future planning needs

When it’s done poorly, it becomes a series of reactionary moves that feel productive… but quietly create drift.

The hidden danger: “doing something” just to feel better

Market volatility makes smart people restless. Losses feel like failure. And tax-loss harvesting can give the illusion of control in moments when control feels scarce.

That’s where trouble creeps in.

Some of the costliest financial decisions aren’t massive mistakes—they’re well‑intentioned moves made without anchoring back to purpose.

At Legacy Wealth, we spend a lot of time reminding clients that emotional decisions, whether driven by fear or greed, are usually the most expensive ones.

Planning first. Tactics second.

Tax-loss harvesting is just one small tool inside a much bigger plan and it only works well when it’s anchored to the purpose behind your money.

That’s why true financial planning looks beyond a single tactic and brings the full picture together: your investments, your tax strategy, your estate plans, your generosity, and your day-to-day cash flow. And when markets are strong, the need for planning doesn’t disappear (it often grows, because the decisions you make in good times can compound right alongside your returns).

The goal isn’t cleverness; it’s clarity, and ultimately: peace.

A final thought

Tax-loss harvesting has a place. Just don’t expect it to work miracles.

If you’re curious whether it makes sense in your situation—and how it fits into the bigger picture of your plan—we’re always happy to help you think it through. Sometimes a short conversation is all it takes to turn complexity into confidence.

And yes… we’ll keep it in plain English.

These are the opinions of Legacy Wealth Management, LLC and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Dan Funderburk is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice. Copyright ©2026 Dan Funderburk. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.