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On screen disclosures:
Please read important information including definitions of tax-aware investing at the end of this program. Recorded on 3/24/2026.
Chris Hyzy
Every tax season, we're reminded of an important investing truth. What you earn matters, but what you keep matters more.
On screen copy:
Chris Hyzy
Chief Investment Officer
Merrill and Bank of America Private Bank
Chris Hyzy
Hi, I'm Chris Hyzy, the Chief Investment Officer for Merrill and Bank of America Private Bank. Today, we're discussing the latest thinking and tools that can help enable investors to seek that all-important balance of performance and tax efficiency in their portfolios, which is known as tax-aware investing. Joining me to break it all down are Joe Curtin, head of Portfolio Management for the Chief Investment Office, and Mitch Drossman, head of CIO National Wealth Strategies.
Joe, Mitch, thanks for joining me today. Let's start right at the top, Joe. Tax-aware investing. What does it mean to you?
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Joe Curtin
Head of Portfolio Management
Chief Investment Office
Merrill and Bank of America Private Bank
Joe Curtin
As an investor, there's many benefits that you have provided through our tax laws. So you could chug along and build, you know, decent returns. But you may not be able to keep all those returns, because if you're not taking advantage of all these things that the tax law allows, you could actually degrade that return a little bit.
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Tax-aware investing considerations:
- Holding periods
- Tax-advantaged investment vehicles
- Types of accounts
Joe Curtin
By utilizing all the tools in the toolkit, such as, you know, holding periods, right, holding things for at least a year, when things decline in value harvesting losses to offset against gains from other things. Think about things from an income perspective that have favorable tax advantages like municipal bond income, qualified dividends. And then think about the various types of accounts — nontaxable, taxable, tax-deferred — that you could utilize to minimize your overall tax base. These little increments that you lose to taxes, when they compound over time, it could mean a lot of money.
Chris Hyzy
Yeah. That's the power of compounding. You mentioned individual solutions. You mentioned the portfolio approach, types of different vehicles, traditionally. What's new today?
Joe Curtin
What's new today is, is many innovations in terms of product development. The first is the exchange-traded fund or what's known as the ETF.
So traditionally with mutual funds you had something where you inherited the cost basis of others, and then you built into that pool. So you got a lot of adverse tax consequences coming out of the mutual fund.
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In general, ETFs are less likely to trigger "taxable events" compared to mutual funds.
Chris Hyzy
Right. Mitch? Joe talked about along the way. We often talk about investing in markets is about over time, not at a point in time. From a wealth structuring perspective, how should clients and investors think about the whole asset location paradigm?
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Mitch Drossman
Head of CIO National Wealth Strategies
Mitch Drossman
It's a quite simple premise. It's that marrying the investment that you have with the type of account.
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Account types to know
- Taxable
- Tax-deferred
- 401(k)
- Traditional IRA (individual retirement account)
- Tax-free
- Roth IRA
- 529
- HSA (health savings account)
Mitch Drossman
And so let me just tell you in terms of types of account, most people think of a taxable account, and tax-deferred accounts such as a retirement account, a 401(k), an IRA. But there's more. There's now tax-free accounts such as Roth IRAs, 529 plans, health savings accounts. And there's also trust accounts. So when you have these multiple accounts, you can really, you can think about the types of investments that you're making and what you want to do is just marry the kind of investment with the type of account, and you can get greater efficiency out of that.
Chris Hyzy
We used to talk about harvesting losses or protecting gains at one point in time in the year, which would typically be right at the end of the year. How does it, how is it done now?
Mitch Drossman
That used to be quite a common way, but I think, really, it's awareness, is that people realize is that the markets fluctuate throughout the year. And if you can take a look at it at any point in time and say that there's a loss that I'd like to take, it's just a, it's a more savvy way of managing not only a portfolio, but also managing the, the taxes that, that are a byproduct of the portfolio.
Joe Curtin
And then what happens with that, as what Mitch is talking about, traditionally people wait till November, December to start recognizing gains and losses. And as you start getting into the holiday season, the markets become more illiquid.
Chris Hyzy
Right.
Joe Curtin
So you're trying to do a lot of transactions at the same time everyone else is. With the technology now, you could actually manage that throughout the year and alleviate that burden, so that you're spreading it out throughout the year and not just waiting for that one period.
Chris Hyzy
Now let's talk about what's new. We mentioned a little bit of new solutions. Are there, are there other things that are new? Is it harder to get losses today?
Joe Curtin
I think it was. Well, you know, the paradigm right now is the markets are kind of trading on noise right now. But the last several years, there's no secret, there's been a very narrow leadership within the equity market. So a lot of people have embedded gains in fewer stocks, and that tax burden has become harder to manage. It's like the enviable dilemma. You got these gains. That was your success. If you sell the stock, you pay a preferential taxable gain on those stocks. So that's that enviable dilemma. But you can, through proper tax management, mitigate how much friction you're losing to income taxes by managing that better.
Chris Hyzy
Mitch, Joe talked about dilemma. We've heard over the years a lot about, it's not what you earn, it's what you keep. You want to talk a little bit more about that?
Mitch Drossman
We know that a tax drag on a portfolio could compound over time. And so it could be a little bit each year. But if you have a long investment horizon, it could materially change returns. So I think it's, you know, you've you have to focus on not just the strategies — asset allocation, asset location, different kind of products where perhaps you can harvest losses — but take a more holistic approach to it.
Chris Hyzy
Joe, let's talk risks.
Joe Curtin
Yeah.
Chris Hyzy
Let's talk, what are the risks out there that, you know, are kind of right there in the back of our mind, but should be in the front of our mind?
Joe Curtin
Yeah. There's a building level of concentration in fewer securities, and that's built up over years. And by not dealing with the tax dilemma, right, you're leaving yourself exposed to concentration risk. The second is because the tax laws are so favorable toward certain investments; you could end up with an overconcentration of things and take on other risks like illiquidity.
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Risks to watch out for:
- Concentration
- Illiquidity
- Tax policy changes
- Over-emphasis on tax minimization
Joe Curtin
Right. So then there's always regime shifts. Every administration comes in. They have a new policy agenda. They may use the tax laws to stimulate the areas that they want to stimulate, and then kind of forget about other areas. But I think the most important thing is, you know, if you let the tax tail lead the investment dog, you may end up with not a great portfolio. And that's by accident. But you can be much more deliberate, right? So the time to deal with concentrations is really at the top of the markets or at the highest level for a stock, not waiting for it to decline because you could lose your taxes pretty quickly.
Chris Hyzy
Now that's a great point. How about you, Mitch?
Mitch Drossman
Yeah, if you kind of sit on a portfolio in a much more passive manner, those gains are going to build up, possibly going to skew the asset allocation. It's going to do, you know, long-term potential damage to a portfolio. Whereas if you take a more active approach, active in terms of strategies, investment strategies, active in terms of thinking about what to do with some of those gains, whether they are, you know, charitable gifts or, or transfers to others.
Chris Hyzy
Okay. So we covered a lot here, from solutions to direct indexing. What is it. How to think about tax awareness, tax efficiency. Any final thoughts?
Joe Curtin
At the end of the day, right, the tax laws really do benefit investors. And having a very deliberate approach in terms of incorporating tax management into an overall plan could really enhance after-tax outcomes.
Chris Hyzy
Excellent, Mitch.
Mitch Drossman
I'd say at the end of the day I think markets are less predictable than taxes. So if you focus a little bit more on taxes I think the, something that you could control. The outcome long term is going to be a greater, efficient portfolio.
Chris Hyzy
That's great. Joe Mitch, thank you for being here.
Chris Hyzy
Markets move. Tax policy evolves. As investors, your priorities can change and your portfolio needs to keep pace. Taking a proactive, tax-aware approach across asset selection, portfolio management, account placement and structuring can help you remain aligned to meet your long-term goals. We encourage you to continue the conversation with your tax professional. And talk to your advisor, if you work with one, in and out of tax season. Thanks for watching. We'll see you next time.
On screen disclosures:
Important information
The opinions expressed are as of March 24, 2026, and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions. This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory and other services. Additional information is available in our Client Relationship Summary.
"Tax Aware" refers to the process by which we develop strategic benchmarks using forward-looking assumptions about generalized tax-adjusted returns. However, "Tax Aware" does not imply investors can avoid taxes on investment income, such as dividends, interest, and capital gains generated from investments held in the portfolio or resulting from active portfolio management decisions. The portfolio does not offer personalized tax advice or management for an investor based on their individual circumstances. Investors should consult a qualified tax professional in all instances for personalized tax advice.
Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., ("Bank of America") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S" or "Merrill"), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp.").
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[End of transcript]
Several years of strong market gains have made tax efficiency an increasingly influential — and often undervalued — factor in a portfolio's overall performance. Today, tax considerations come into play in and out of filing season, and call for a more deliberate approach to asset choice, how the asset is purchased and where it is held.
"Tax efficiency isn't a single strategy — it's a mindset," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Investors who focus on after-tax outcomes throughout the portfolio construction lifecycle may be better positioned to reduce tax drag over time.
But in a market environment with a recent history of positive returns, are there other ways to improve after-tax outcomes?
In the video above, Hyzy is joined by two members of the Chief Investment Office (CIO) team, Joe Curtin, head of Portfolio Management, and Mitch Drossman, head of CIO National Wealth Strategies. The three discuss how building strategies into your portfolio can help support predictable after-tax results. "Tax policy and markets will continue to change," said Drossman. "Portfolios built with intention and flexibility are better equipped to adapt." For investors, starting with the most tax-efficient assets and vehicles, and placing them in the most appropriate accounts, remains foundational — especially for higher-taxed investors.
"When all else is equal, the more tax-efficient option should be the default," said Curtin. "Any deviation needs a clear reason, because taxes could quietly compound just like potential returns do."
Watch the full conversation to hear how asset location, tax-aware investment vehicles and disciplined loss harvesting can work together to help reduce tax liability — and why coordination across portfolio management, wealth structuring, and tax planning is increasingly important.