Are you calculating your after-tax returns properly?
Measuring performance before taxes is pretty straight forward, but when you are measuring after-tax performance there are many factors that come into play.
- Taxes are usually the largest cost of investing
- Pre-tax, we typically consider three types of investor fees/expenses: trading costs, management fees, administrative fees
- Taxes are a fourth category – arguably the most important!
- After-tax returns more accurately reflect the investor’s true realized return
- Consistent with client reporting recommendations
- Goals-based investing
- Increasing investor awareness and demand
- Tax customization is part of value proposition of many separate accounts
- For broadly distributed pooled funds in the USA – it’s the law!
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