How Well Have Taxable Investors Been Served In The 1980’s and 1990’s?
- Topics:
- Commercial Lending
- Tags:
- Finance,
- Financial Planning,
- First Quadrant,
- Free Trade,
- Investor,
- Taxes
- Source:
- First Quadrant
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Overview: Management of taxable investment capital is carried out with very little regard for the consequences of after-tax returns. Frequently, taxable investors not only pay hefty fees, but also face active trading which triggers massive tax consequences. One reason investors have not given tax considerations their appropriate due is, of course, the tremendous bull market, which masks all but the worst errors, compounded by the dearth of pertinent after-tax performance information. In short, the way that taxable assets are managed poses a very serious problem for the taxable investor. Most mutual funds do a disservice to their clients by ignoring or dismissing the taxes triggered by their trades. The importance of “getting it right” on taxable investing is magnified by the fact that most investors face taxes on their investments and there is more taxable investment capital than tax-exempt. There is a need to change the mindset, a change in paradigm, both among fund managers and among their clients. • Instead of spending client assets on certain taxes in the quest for uncertain returns, fund managers can choose to minimize the known taxes and, only to the extent that one can do so without incurring unnecessary taxes, pursue possible gain. • Instead of seeking the hottest new funds, clients can choose to consider embedded tax consequences in either retaining or changing their mix of funds. Often, this will mean a more loyal, lasting relationship between client and fund, and active management of an investor’s mix of funds only by redirecting cash flows.
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Format: PDF | Size: 215KB | Date: Jan 2003 | Pages: 17
