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When it comes to investing, there are two things that are really a drag. One is paying taxes on your gains, dividends and interest income. The other is picking the wrong investment and losing money.

Taxes are inevitable and losing money happens to even the biggest gurus. Heck, hedge fund manager Bill Ackman just lost $4 billion on a bad bet, and even Warren Buffett has been known to drop a few bucks or two.

But luckily there is a way to offset the two. It’s called tax-loss harvesting, and the strategy can severely reduce the amount of taxes you owe while taking care of those pesky losses.

That is, if it’s done right. And the analysts at State Street might have the secret to successful tax-loss harvesting.

The Basics

While it may sound exotic, tax-loss harvesting is a pretty simple concept in practice.

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