Bob Seawright: Tax Efficiency Should Be Your Default Setting

My friend and fellow advisor Bob Seawright, the knowledgeable proprietor of Above the Market, has a post up about what your “investing default settings” should be.

These 10 rules are more valuable than any stock idea or trade of the day, so please make time for them. Bob likes to write these amazing, epic posts – if I were him these 10 rules would have been 10 separate posts and then a master one reprinting them all together, lol…

Here’s what he says about tax-efficient investing:

Tax efficient is better. Experienced money managers routinely argue that you shouldn’t “let the tax tail wag the investment dog.”  And it’s true that a poor investment isn’t often salvaged by good tax treatment.  However, the difference between having a $1,000 gain taxed at the long-term capital gains rate of 20 percent versus the income tax rate of 35 percent would save the investor $150 before considering state taxes and without even using the top income tax rate or noting that other new provisions could hit investment income as well.

Individuals with adjusted gross income over $200,000 ($250,000 for joint-filing couples) will face a 3.8 percent Medicare surtax on investment income. Singles who earn over $400,000 (joint filers over $450,000) will face a new top marginal tax bracket of 39.6 percent. Those same people will see their tax rates on dividends and long-term capital gains go up to 20 percent from 15 percent. And limits on itemized deductions and personal exemptions will start to kick in on incomes over $250,000. Details on recent tax law changes are available at the fine blog of Michael Kitces (here).  Taxes matter a great deal.

Moreover, tax efficiency has not generally hindered performance.  According to Lipper, for example, over the 10 years ended December 31, 2012, tax-managed large cap core stock funds returned an annual average of 5.82 percent after taxes while the entire category (which includes hundreds more funds) returned 5.71 percent after taxes.  Tax efficiency is the appropriate default setting.

Hit the jump for the whole thing:

Establishing Your Top 10 Investment Default Settings (Above the Market)

Follow Bob on Twitter: @RPSeawright

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. w88 commented on Sep 21

    … [Trackback]

    […] Read More on to that Topic: […]

  2. eatverts commented on Sep 23

    … [Trackback]

    […] There you can find 33500 additional Info on that Topic: […]

  3. immediate edge reviews 2020 commented on Sep 23

    … [Trackback]

    […] Here you can find 61370 more Info to that Topic: […]

  4. 918kiss commented on Sep 28

    … [Trackback]

    […] Find More here to that Topic: […]

  5. bitcoin loophole review commented on Sep 29

    … [Trackback]

    […] Read More here to that Topic: […]

  6. DevOps framework commented on Dec 01

    … [Trackback]

    […] Find More to that Topic: […]

  7. DevSecOps commented on Jan 17

    … [Trackback]

    […] Info on that Topic: […]