Many investment strategies are not appropriate for investors seeking to maximize after-tax returns.  High-turnover and tactical strategies that may liquidate a portfolio inefficiently generate short-term gains, and others invest in asset classes that may be less desirable to taxable investors.  Tax-sensitive strategies were marketed to overcome these limitations, but tax-efficient investing is rarely properly implemented.  Typically, these tax-sensitive portfolios are merely repackaged standard portfolios with municipal bonds substituted in—trading may be limited to once per year, but equity positions remain identical.

There’s room for improvement.

Recent market volatility after years of stable growth in US markets has shaken the faith of some investors. However, our analysis shows that historically, staying invested through volatile periods has provided superior returns when compared to selling when volatility rises and reinvesting later. Some of the greatest upside returns have happened shortly after volatility spikes, and investors who have pulled out have missed out on important opportunities for portfolio gains.