One of the lesser-known tactics to increase equity returns is regular tax harvesting. You can use both gains as well as losses on your investments to reduce the tax outgo, increasing post-tax returns. While tax harvesting does result in guaranteed savings, pulling it off in practice is a little convoluted.

Tax harvesting requires locking in the gain or loss by selling and purchasing the underlying stock or mutual fund in an equal amount. The price or the NAV must be the same to avoid losing money. The only way to guarantee that is to buy and sell on the same day, and therein lies the catch.

When you sell an equity investment, including mutual funds, it takes 3-5 business days for the money to reach your bank account. So one can’t use the sale proceeds for the buying leg — the money needs to be already available.

If you have sizeable gains or losses, you will need a significant chunk of money, to the tune of several lakhs, to fund the purchase. But few of us have such large amounts sitting idle in the bank.

One can get around this limitation by executing several small transactions spread over several days. You will still need to do each buy and sell leg on the same day but can use the sale proceeds from one transaction for the buy leg of the next one. The idle cash required at any point in time will be much less. Multiple transactions do add up to more effort but work well.