Our clients will be receiving annual reports, prospectuses, and statements of additional information from their fund families over the next several weeks. Despite most people's general disinterest in these documents, the reports can provide hidden gems of information that can help us to add incremental returns to clients' investments. In particular, I like to look for information on after-tax returns, tax-loss carryforwards, and tax overhang. For taxable investors, these tidbits can be very instructive about their fund's relative tax efficiency.
Why should we care about taxes? In a 2012 study, Lipper showed that for the 10-year period ended Dec. 31, 2011, taxable equity fund investors surrendered an average of at least 75 basis points of their returns each year to Uncle Sam for doing nothing more than buying and holding their funds. Taxable fixed-income fund investors handed in some 186 basis points of their returns.
Register or login for access to this item and much more
All On Wall Street content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access