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**tl;dr:** Based on the past 20 years, tax-loss harvesting can work well for index fund investors, but only for “young” tax lots (owned for <3 years). After that, you are unlikely to get any further benefit.
Ever since the rise of roboadvisors (over a decade now!) and their promises that tax-loss harvesting can offset the fees they charge, I have been curious about how much an index fund investor can actually benefit from tax-loss harvesting. It seems to me that
1. an index fund averaging 500 (or more) stocks will have fewer deep losses than any one of those stocks, and
2. if you purchased your shares long enough in the past, then it becomes very unlikely that you will experience a loss.
I finally got around to running some analysis. What I have so far doesn’t completely answer the question, but I thought other Bogleheads might find it interesting.
To do this, I used Python and downloaded the last 20 years of data from Yahoo Finance for some major index funds. This is split- and dividend-adjusted. Using dividend-adjusted prices makes my results a bit conservative, since your actual cost basis doesn’t shrink when you receive dividends, but Yahoo’s historical prices do.
I focus here on S&P 500 (SPY, Jan 2006-Jan 2026) and FTSE Global All Cap Index (VT, June 2008-Jan 2026).
So far, I have run two analyses. First, what is the probability of a loss for different magnitudes in the three years after a purchase? I found it is quite common for a purchase to be down by 10% or more at some point.
Loss Magnitude Distribution (3-year window)
| Threshold | VT | SPY |
| :--- | :---: | :---: |
| ≥5% loss | 67% | 60% |
| ≥10% loss | 51% | 44% |
| ≥15% loss | 34% | 31% |
| ≥20% loss | 21% | 21% |
| ≥30% loss | 3% | 15% |
| ≥40% loss | 2% | 13% |
| ≥50% loss | 0% | 5% |
SPY shows more deep losses because it includes the 2008 crash, while VT started mid-2008 and missed the worst of it.
Second, if a purchase hasn’t already had a 10% loss in XX months, what are the odds it would in the following year? I found that once you have reached two years without a 10% loss, you are very unlikely to experience on in the next year.
TLH Probability Decay (chance of 10% loss in next 12 months)
| If no 10% loss in first... | VT | SPY |
| :--- | :---: | :---: |
| 3 months | 33% | 26% |
| 6 months | 26% | 19% |
| 12 months | 16% | 8% |
| 18 months | 5% | 7% |
| 24 months | 6% | 6% |
| 36 months | 0% | 0% |
| 48 months | 0% | 0% |
The way I am interpreting these results is that tax-loss harvesting can work well for index fund investors, but only for the first two or three years of owning a specific tax lot. After that, you are unlikely to get any further benefit.
A few standard caveats:
1. Unless you donate the shares or leave them to your heirs, tax-loss harvesting defers taxes rather than eliminating them (it also arbitrages the difference between your marginal tax rate on ordinary income and capital gains)
2. Tax-loss harvesting only helps in taxable accounts, not IRAs or 401ks.
3. This is a historical analysis, past performance is no guarantee of future results.
I also ran results for VTI, VXUS, and a few others. I am happy to answer questions in the comments, and am open to suggestions for improving. If there’s interest, I can share the results for my full set of tickers and even my Python script.