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Investment Management: Policy Formulation
TAX EFFICIENCY
In seeking to enhance portfolio rates of return, Investors Trust strives to maximize after-tax returns so the tax burden of our clients can be minimized to the greatest extent possible. Tax-efficient portfolio management requires diligent monitoring of the consequences of each investment decision along with awareness of long-and-short-term strategy. For example, when an investment is sold can make the difference between paying the higher taxes associated with a short-term gain or the more modest tax rate of a long-term gain. And, when there are gains it is incumbent upon us to look for ways in which to offset them with potential losses. This is called tax harvesting and is a core discipline of our investment decision-making.

Tax-efficient portfolio management also incorporates long-term factors. For example, a crux of the decision-making process is which asset class one may hold across multiple accounts such as for an individual that has an IRA and trust or agency. Determining which asset class to hold is not an easy decision and a broad recommendation can not be made as each case is different and will vary from client-to-client. Variables that influence this are the investor’s age, the current impact of the tax code, how much is the expected return, and the tax impact of changes to the portfolios. Some of these variables are more certain than others, but they are a starting point for the multi-portfolio asset allocation decision. As one ages, it is normal to see future changes in portfolio structure among the accounts.

Tax-management can be a complicated process, and we track each account’s capital gain and loss situation over the course of the year. With each investor presenting a unique set of circumstances, we seek feedback from our clients to ensure that we are managing their portfolios as tax-efficiently as possible. In doing so we strive to maximize after-tax rates of return, and honor the adage that states, “It isn’t how much you make, it is how much you keep!”.

Tax Efficiency

Diversified Mutual Fund Service

Performance Measurement

 

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