Tax-managed investing 101
New to the active tax management concept? Explore this page for the highlights.
What is active tax managed investing?
Active tax-managed investing is an investment approach aimed at minimizing tax drag and maximizing after-tax wealth.
This dynamic approach uses real-time, year-round techniques such as tax loss harvesting, minimizing wash sales, and tax-smart yield management to systematically target sources that may erode investment returns, while helping investors keep more of what they earn.
How does tax management help me?
In a world where investors are fixated on a pre-tax investment perspective, after-tax investment value tends to be an afterthought.
Yet, the compounding tax drag nevertheless continues to weigh down portfolios and reduce returns. Fortunately, this perpetual problem has a systematic solution in the form of active tax management. Designed to target actual problems faced by investors, this dynamic approach carries out real-time, year-round measures aimed squarely at minimizing avoidable losses and maximizing after-tax wealth.
How can tax drag negatively impact my ending wealth?
Even a 2% tax drag can have a massive effect on your portfolio.
Consider the hypothetical growth of a $100k portfolio over 10 years at a 7.5% return each year. If the portfolio's pre-tax return had a 2% tax drag, that portfolio would have an ending value of $171k. With optimal tax drag, that portfolio would have an ending value over $200k.
NOTE: The actual value of your investment will fluctuate based on market conditions. This is a hypothetical illustration and is not meant to represent an actual investment strategy. Taxes may be due at some point in the future and tax rates may be different when they are. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
Where can I learn more about tax-managed investing?
Tax management blog posts from Russell Investments' experts