A switchback occurs when you purchase a correlated replacement security in order to harvest a loss, but switch back to the original security after 30 days, regardless of whether it has lost or gained valued. It’s a common approach for both advisors and DIY investors, and used by other automated investing services. It can potentially trigger short-term capital gains, and undo the benefits of harvesting.
Betterment’s Tax Loss Harvesting+ utilizes a Parallel Position Management system to avoid switching back to the original security unless it is tax efficient to do so. Learn more about the Parallel Position Management in our white paper.