An April 15 “Win-Win” | Financial Planning Chapel Hill l Old Peak Financial Advisors

An April 15 “Win-Win”

April 26, 2014

2014_april 15 win win

An April 15 “Win-Win”

April 26, 2014

2013 was a great year to invest in the US stock market. But many investors paid a big chunk of their gains to the IRS several weeks ago. If your tax bill was higher than you had hoped, here’s how to avoid that in the future.

First, the evidence. The fund I use most in client accounts, and in my own account, gained 36.6% in 2013. Investing in virtually every US stock, it beat the overall market, as it has in the past 3, 5 and 10 years. One share increased in value from $12.08 to $16.54, including dividends — a per share gain of $4.46. The total 2013 federal tax bill? $0.07, even at the highest tax rates.

Okay, okay. There will eventually be a tax due on the gains, when you sell. But if you are a long-term investor, you could delay that tax for 10, 20, 30 years or more … even forever, if your kids inherit the shares. The worst case, for a long-term investor: tax at lower, long-term gains rates.

Compare that to the typical US stock fund, which trades 50% of its holdings each year, passing the tax bill onto you. Even if you don’t sell your shares, you can easily lose 15-20% of your gains to taxes. The government wins — they get more tax revenue — while you lose.

If you seek a “win-win” — where you win as an investor and you win on April 15 — I can help you identify funds that will do well without bankrolling the IRS.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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