Fidelity® Tax-Managed U.S. Equity Index Strategy

A separately managed account that seeks to provide long-term growth of capital while leveraging Fidelity's tax-sensitive investment management1 capabilities in an effort to enhance after-tax returns

Investment strategy: Seeks to deliver index-like performance with enhanced after-tax returns


Types of investments: Primarily US large-cap stocks

Investment minimum: $200,000


Gross annual advisory fee: 0.20% – 0.65%2 (varies based on total assets invested)

Your account will be managed in an effort to harness the long-term growth potential of US large-cap stocks while seeking to enhance after-tax returns through active tax management.1


For example, with tax-loss harvesting, even when the market's up there may still be pockets of volatility within certain asset classes or categories. This volatility creates potential opportunities to harvest losses in an effort to offset gains. Knowing when to act can dramatically impact an investor's plan.


When investments held in an account have lost value, we may sell those investments, thereby "realizing" the loss. That loss can be used to offset ordinary income (up to $3,000 per year). If an investor has losses of more than $3,000 in any given year, that investor may be able to carry those losses forward and use them to offset gains in a future year.


Understanding the optimal time to realize gains and losses can often mean monitoring up to hundreds of different tax lots on a daily basis. Our investment managers are continuously on the lookout for potential opportunities for each investor in light of their particular situation.


A hypothetical example of how tax-loss harvesting works

Graphic shows a hypothetical situation highlighting the benefits of tax-loss harvesting. If an investor has a $5,000 long-term gain from investment A and a $4,000 loss from investment B, if the gain and loss are realized in the same year, the loss can be used to partially offset the gain, thereby resulting in a net long-term gain and federal capital gains tax liability.


This illustration is hypothetical and is not intended to represent the performance of any security in a Fidelity® Tax-Managed U.S. Equity Index Strategy account. Investing in this manner involves risk, including the risk of loss, and will not ensure a profit.

This hypothetical illustration assumes the investor met the holding requirement for long-term capital gains tax rates (longer than one year), the gains were taxed at the current maximum federal rate of 23.8%, and the loss was not disallowed for tax purposes due to a wash sale, related party sale, or other reason. It does not take into account state or local taxes, fees, or expenses, or the net gain's potential impact on adjusted gross income, which could impact exemption and deduction phaseouts and eligibility for other tax benefits.

Tax-loss harvesting is a way to reduce the taxes associated with capital gains. Let's assume an investor has a long-term capital gain of $5,000 in Investment A, and a long-term capital loss of $4,000 in Investment B. If that investor sells Investment A, they would have a federal capital gains liability of $1,190 (assuming a $23.8% federal tax rate).


However, by selling Investment B and realizing the $4,000 loss during the same tax year the investor sold Investment A, they can use that loss to partially offset the gain in Investment A. By doing this, they net long-term capital gain from $5,000 to $1,000, which would reduce their tax liability from $1,190 to $238.

How we manage your account for taxes


Your account will be managed in an effort to boost your after-tax returns throughout the year—not just at year end. Your account is evaluated each business day and uses one or a combination of the following techniques to seek enhanced after-tax returns


Four techniques we use to manage taxes are tax loss harvesting, which looks to offset gains in order to save on taxes over time; managing tax lots, when possible, in an effort to build a more tax-efficient portfolio; deferring realizing short-term gains when possible; and possibly transitioning your existing holdings when you fund your account.

We take a disciplined and thoughtful approach to building and maintaining your portfolio by applying a number of tax-sensitive techniques designed to help reduce the impact of taxes and enhance after-tax returns in an effort to help you achieve your financial goals.


The three elements of our investment process for this SMA are investment universe, portfolio construction, and ongoing tax-sensitive management. a. In searching for potential investments, we conduct a broad review across the universe of US large-cap stocks, which can be customized based on investor preferences in order to restrict specific positions. b. When building portfolios, we generally use 250 to 300 stocks, tailoring our selections to your current holdings and tax rates, which can help us build a portfolio around stocks you already own. c. When managing your SMA, we may apply a number of tax-sensitive techniques throughout the year, based on your personal situation.