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1/ Talking to many US investors over the years, one thing stands out to me:
Tax planning is probably at the top, if not the #1 consideration when making a new investment or keeping an old one.
This is why so many US investors have a “never sell, hold forever” mentality.
Tax planning is probably at the top, if not the #1 consideration when making a new investment or keeping an old one.
This is why so many US investors have a “never sell, hold forever” mentality.
2/ Conversely, consider the position other non Northern American private investors such as HNWs & FOs are in.
In places like Dubai, Singapore, HK, Caribbean islands, Puerto Rico, Malta, Cyprus, Channel Islands, Luxembourg, Switzerland, Estonia, Czech Republic, Malaysia...
In places like Dubai, Singapore, HK, Caribbean islands, Puerto Rico, Malta, Cyprus, Channel Islands, Luxembourg, Switzerland, Estonia, Czech Republic, Malaysia...
3/ ...there are either no capital gains or they are ways to reduce them to extremely low levels,
thus investing becomes a complete and total focus on whether or not an asset should be bought, sold or kept based on many factors, including if a better investment is at hand.
thus investing becomes a complete and total focus on whether or not an asset should be bought, sold or kept based on many factors, including if a better investment is at hand.
4/ In other words, investing remain a decision making process which takes into consideration many factors impacting your principal at risk, potential returns & the opportunity cost of doing a more attractive deal elsewhere.
Taxes rarely, if ever, come into consideration.
Taxes rarely, if ever, come into consideration.
5/ On the other hand, discussing the US investing process it becomes obvious,
some investors know the market conditions are closer to a selling opportunity of a lifetime,
rather than a buying one and yet due to taxes, their hands remain tied.
The 2006/07 is a perfect example.
some investors know the market conditions are closer to a selling opportunity of a lifetime,
rather than a buying one and yet due to taxes, their hands remain tied.
The 2006/07 is a perfect example.
6/ The counter argument is buy&hold works & there is no reason to ever sell.
We acknowledge that buy&hold has ONLY worked since 1981 due to falling interest rates. However...
Rates have probably bottomed & conditions will change thanks to extreme monetary & fiscal policies.
We acknowledge that buy&hold has ONLY worked since 1981 due to falling interest rates. However...
Rates have probably bottomed & conditions will change thanks to extreme monetary & fiscal policies.
7/ Consider financial history, instead of just our personal history (i.e. most Wall Street desk traders never ever seen rates rise).
Apart from the period during 1940s & 2010s, rates were above 4% almost regularly.
Average rate since in US history are around 6%.
Apart from the period during 1940s & 2010s, rates were above 4% almost regularly.
Average rate since in US history are around 6%.
8/ The Fed & Congress are desperately trying to create inflation.
And throughout history periods of swift inflation spikes almost never benefit stocks, bonds & real estate.
How will investors holding overvalued assets fair, while trying to protect their tax bill?
And throughout history periods of swift inflation spikes almost never benefit stocks, bonds & real estate.
How will investors holding overvalued assets fair, while trying to protect their tax bill?
