.By Solomon G. Teller, CFA, Chief Investment Strategist, Green Harvest Asset Management
“Acknowledging what you don’t know is the dawning of wisdom” – Charlie Munger
Taxes and inflation are two critical watchwords for investors – see chart below highlighting the cost of both.
In the financial world, the return on an investment after inflation is referred to as a real return. Last week, investors witnessed a number of events perhaps best described as surreal. Over the weekend there was Bitcoin 2021, the in-person crypto conference that’s already generated much discussion for fans and anti-fans alike. The meme stock phenomenon, where securities’ price movements are seemingly divorced from fundamentals, continued to crescendo last week as well, as the near bankrupt movie chain AMC more than doubled in price, only to fall by half and nearly double again.
For experienced investors, perhaps they’d be better served focusing on what’s “real.” Some possible examples are: actual sales, profits, and cash flows. And in terms of investment returns, what is most real arguably is what investors ultimately keep, namely their returns after both inflation and their largest investment cost, taxes.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when the portfolio is liquidated. Current performance may be higher or lower than that quoted. Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.
GHAM does not provide tax advice. Although GHAM does not employ a Certified Public Accountant on its staff, we have, and continue to work with outside accounting firms and outside tax counsel that provide ongoing guidance and updates on all relevant tax law. Federal, state and local tax laws are subject to change. GHAM is not responsible for providing clients updates on any changes in tax laws, rules or statutes.
Reasons to harvest capital losses, sources of capital gains and the suggestion that mutual funds distribute capital gains are for example purposes only and not meant to be tax, estate planning or investment advice in any form or for any specific client.
All performance and estimates of strategy performance, after tax alpha, after tax alpha opportunities and other performance figures are derived from data provided from multiple third-party sources. All estimates were created with the benefit of hindsight and may not be achieved in a live account. The data received by GHAM is unaudited and its reliability and accuracy is not guaranteed.
The availability of tax alpha is highly dependent upon the initial date and time of investment as well as market direction and security volatility during the investment period. Tax loss harvesting outcomes may vary greatly for clients who invest on different days, weeks, months and all other time periods.
All estimates of past returns of broad, narrow, sector, country, regional or other indices do not include the impact of advisor fees, unless specifically indicated. Past performance and volatility figures should not be relied upon as an indicator of future performance or volatility.
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