Providence Society of Financial Analysts

Investment Strategy Implications From the Impact of Taxes and Inflation
Most mean-variance efficient frontiers are created using pre-tax returns. This ignores the impact that taxes and inflation have on both return and portfolio risk, producing misleading results along with inappropriate and inefficient portfolios. The combined effects of taxes and inflation are often devastating as the real after-tax returns on investment portfolios are substantially lower than clients (and investors) realize while the risks are often higher. No wonder that investors feel that they are not making the gains they should and are not really achieving their financial goals. The good news is that understanding these significant impacts opens the door to more meaningful conversations with clients, more appropriately allocated portfolios, a higher likelihood of meeting and exceeding client goals, and a greater chance of retaining client assets over the long term. Using market returns adjusted for taxes and inflation each individual year since 1928, Mr. Campisi looks at the individual and combined impacts of inflation and taxes on asset returns. Then, using these adjusted numbers we will create strategies that are truly efficient for both institutional and individual clients.