I agree with the article. However, when comparing the net returns at the end of year 10 do you recognise that the unrealised gain on the passive portfolio is much larger which results in a large tax impost when realised at the end of the period? When you cash out the portfolios the passive investor is still better off because they have deferred tax, but the tax will be paid eventually (unless you never sell)
Yes, I noted that in the article (that the Government will eventually take its fair share, but obviously you don't lose compounding power through the period). In countries such as the US you don't only defer tax with that strategy but you also pay less due to ST vs LT cap gains tax). I assumed that the 10th year is not the "end" of the experiment but rather a checkpoint. If we were to do this through a 20-year investment horizon then the opportunity cost of not deferring tax is substantially greater too!
This said I agree with you, if the experiment were to end in year 10, the difference would be less substantial after assuming taxes paid by the passive investor
You're right. I spend most of every day thinking about investing, and I'd never stopped to work out how much more I'd actually have to achieve gross to get the same net return - the 23% gross for 15% net with a 100% turnover surprised me.
I agree with the article. However, when comparing the net returns at the end of year 10 do you recognise that the unrealised gain on the passive portfolio is much larger which results in a large tax impost when realised at the end of the period? When you cash out the portfolios the passive investor is still better off because they have deferred tax, but the tax will be paid eventually (unless you never sell)
Yes, I noted that in the article (that the Government will eventually take its fair share, but obviously you don't lose compounding power through the period). In countries such as the US you don't only defer tax with that strategy but you also pay less due to ST vs LT cap gains tax). I assumed that the 10th year is not the "end" of the experiment but rather a checkpoint. If we were to do this through a 20-year investment horizon then the opportunity cost of not deferring tax is substantially greater too!
This said I agree with you, if the experiment were to end in year 10, the difference would be less substantial after assuming taxes paid by the passive investor
You're right. I spend most of every day thinking about investing, and I'd never stopped to work out how much more I'd actually have to achieve gross to get the same net return - the 23% gross for 15% net with a 100% turnover surprised me.
Yep the difference is pretty substantial
Loved it ! very well done !
Thank you!
Almost everyone forgets to include tax implications
Because it doesn't appear in the broker...wonder if people would change strategies if taxes were automatically paid from the broker