Sir John Templeton once said, “For all long‐term investors, there is only one objective – maximum total return after taxes.” We could not agree more with this statement. Traditionally, the investment industry has focused on measures of risk and return while ignoring the tax implications of investing processes. In an effort to address this shortcoming, Savant continuously emphasizes tax-efficient investment strategies.  

In light of recent tax law changes, Savant decided to revisit these strategies and quantify the benefit that they provide to our clients. The strategies that Savant employs fall into three broad categories: permanently eliminating tax, deferring tax, and timing taxes in low income years. Specific tools within these strategies include asset location, tax‐loss harvesting, municipal bonds, charitable giving, and many more. The key to tax‐efficient investing is utilizing the right combination of these tools and strategies based on an individual’s situation. Although this may sound complicated, we believe the rewards can be tremendous. 

A 30 year study commissioned by Charles Schwab supports this idea. The study found that the average mutual fund investor lost 58% of their cumulative return to taxes. While a $1 investment grew to $21.89 for a tax‐free investor, a taxable investor with identical holdings grew to only $9.87.  

This example serves as a reminder of the big impact that small decisions can have. At Savant, we believe having a disciplined, systematic, and integrated process for tax management is one of the most valuable contributions offered by a financial advisor. If you would like to learn more about the best practices in tax management, we encourage you to read our recent Approaching Zero Taxes white paper which can be found on our website.  

Source: JP Morgan, ‘Ranking Mutual Funds on an After‐Tax Basis’ by Joel Dickson and John Shoven

This is intended for informational purposes only and should not be construed as legal, investment or financial advice. Please consult your legal, investment and financial professionals regarding your specific circumstances.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

Savant Wealth Management is a Registered Investment Advisor. Different types of investments involve varying degrees of risk. Savant’s marketing material and/or rankings should not be construed by a client or prospective client as a guarantee that they will experience a certain level of results if Savant Wealth Management is engaged, or continues to be engaged, to provide investment advisory services nor should it be construed as a current or past endorsement of Savant Wealth Management by any of its clients. Please see our Important Disclosures.