Taxable investors have an additional layer of complexity on top of the already multifaceted investment decision process. In this paper, we will focus on common techniques or maximizing after-tax returns. Tax considerations can come in many different forms, but among the most distorting tend to be:
Assessing an investment depends on more than just performance, but more importantly how much of an investment gain the investor can actually keep
The individual circumstances of the investor matter greatly, so general guidance can sometimes lead to worse outcomes.
Each asset class has a mix of different taxable characteristics. This means you cannot just construct a portfolio with a ‘tax efficient bucket,’ but must consider the implications of every investment on the after-tax outcome.