As legendary investor Sir John Templeton said, “For all long-term investors, there is only one objective—maximum total return after taxes.” We couldn’t agree more!

In the past, the investment industry and academia have largely ignored tax implications and instead focused strictly on risk and return. Tax-efficient investing incorporates tax ramifications as the critical third leg to the investment management stool (risk/return/taxes). This is a complex concept. A host of factors are considered when developing a tax-efficient investment strategy, including current tax law, tax types and rates, and the effects of state and local taxes. We suspect it is both the complexity of these factors and inherent conflicts of interest that have led the industry to largely ignore taxes.

Our approach to investing is known as “tax-efficient investing,” with the ultimate goal of increasing after-tax returns. We can’t overstate the importance of after-tax returns.

Concepts and Actionable Strategies for Investors

  • Be open to tax education
  • Active management is inherently tax-nasty
  • Avoid gimmicky tax-advantaged products
  • Tax laws are continually changing
  • Evaluate your portfolio as a whole
  • Proper asset location = tax efficiency
  • Harvest losses
  • Be wary of outdated beliefs
  • Weigh tax benefits against marginal risk/cost
  • Only after-tax returns matter

Approaching Zero Taxes

To learn more about tax-efficient investing strategies and tools, read our “Approaching Zero Taxes” white paper. Of critical importance, the paper incorporates the tax law changes legislated in the Tax Cuts and Jobs Act of 2017.

Read the whitepaper

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