We are acutely aware that income
taxes are the greatest costs of investing. For wealthier,
high- tax-bracket clients, the importance of reducing
investment related taxes is even more important.
The design and management of an investment portfolio
have a dramatic effect on how large of a bite taxes
take out of investor returns each year.
Here are five reasons why our clients have higher
after-tax investment returns:
1) Passive mutual
funds have inherently low “turnover” of
securities and thus experience fewer realized capital
gains.
2) Many passive
funds have “tax managed” versions which
use sophisticated techniques for reducing capital
gain distributions still further.
3) Client portfolios
are designed from the ground up with tax consequences
in mind. For example: we place the least tax efficient
funds in tax-deferred accounts, such as IRAs.
4) We actively
seek to “harvest” significant unrealized
losses that may result in a client’s taxable
portfolio during the year.
5) We maintain
complete, organized tax basis information so that
our client’s tax accountant can prepare an
accurate Form 1040 at year-end.
