How do your investments impact your taxes?
Taxes can take a significant bite out of your returns, and not just in present.
When your money goes to pay taxes, not only do you lose the money itself, you also lose the growth your money could have generated if it were still invested.
In 2019, the Schwab Center for Financial Research examined the long-term impacts of taxes and other expenses on investment returns and concluded that while investment selection and asset allocation are still the most important factors affecting returns, the study found that minimizing taxes also has a significant effect on returns. [1]
Tax-Aware Investing Strategies
Passport Wealth Management takes a holistic approach to financial planning, which includes looking at numerous aspects of a client’s finances, including taxes. We use tax-aware investing strategies to put the right investments in the right accounts. There are two main categories of accounts: taxable accounts and tax-advantaged accounts.
WHY IS TAX AWARE INVESTING IMPORTANT?
Tax-aware investing is an important aspect of holistic financial planning because some investment strategies are better suited to tax-deferred accounts than to taxable accounts. For example, strategies that target capital appreciation with high portfolio turnover, or that generate a significant amount of investment income, can have heavy tax implications and be less attractive than expected on an after-tax basis. In other words, a higher return on an investment statement may actually be lower than it appears once the tax burden is factored in.
As a financial planning firm that looks holistically at a client’s financial situation, not just their investments, Passport Wealth Management focuses heavily on net after tax return. We work closely with a client’s professional team, including accountants, to determine the right tax planning strategy for each client.
EXPLORE
EXPLORE
This is our opportunity to sit down and discuss what matters to you and the challenges you’re facing. We need to understand who you are and what makes you tick before working with you to develop your plan.
STRATEGIZE
STRATEGIZE
Tell us your goals and recommend how you achieve them from a financial standpoint. This might include changes to how you’ve managed your investments in the past, tax planning strategies and your estate.IMPLEMENT
IMPLEMENT
We take the action steps from the strategy and execute them. Many of these items will be taken care of together. Others may require us to include other professionals, such as your CPA, insurance agent, or your estate attorney.
ADAPT
ADAPT
Over time your goals and needs may change. Your financial plan must adapt to this change. We’ll reassess your strategy together and adapt your financial plan to achieve your new goals. This may include revising estate documents or insurance plans.
EXPLORE
EXPLORE
This is our opportunity to sit down and discuss what matters to you and the challenges you’re facing. We need to understand who you are and what makes you tick before working with you to develop your plan.
STRATEGIZE
STRATEGIZE
Tell us your goals and recommend how you achieve them from a financial standpoint. This might include changes to how you’ve managed your investments in the past, tax planning strategies and your estate.IMPLEMENT
IMPLEMENT
We take the action steps from the strategy and execute them. Many of these items will be taken care of together. Others may require us to include other professionals, such as your CPA, insurance agent, or your estate attorney.
ADAPT
ADAPT
Over time your goals and needs may change. Your financial plan must adapt to this change. We’ll reassess your strategy together and adapt your financial plan to achieve your new goals. This may include revising estate documents or insurance plans.
To learn more about the before-tax and after-tax benefits of smart, tax-aware investing, or holistic financial planning with a Fee-Only CERTIFIED FINANCIAL PLANNERTM Professional, please contact Passport Wealth Management at (704) 457-0060. We work with clients around the world from our offices in Cornelius, NC. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.
[1] Charles Schwab. “The Importance of Tax-Efficient Investing.” Accessed August 31, 2020.
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