What could happen from a tax perspective if an investment is sold?
Tax-Aware Investment Management Serving Chicago
Tax-Aware Investing in Chicago
Investment returns matter. So does how much of those returns you ultimately keep.
Gold Coast Capital Management incorporates tax awareness into portfolio management for Chicago investors by considering the tax consequences of investment decisions alongside risk, diversification and long-term financial objectives.
Work directly with Dragan Mark Filipovic, CFA®, to build an investment strategy around your broader financial circumstances.
01A Deliberate Balance
Tax-Efficient Investing for Chicago Investors
Investment decisions should not be made based on taxes alone.
But taxes should not automatically be ignored either.
For investors with taxable accounts, decisions involving the purchase, sale and location of investments can create different tax consequences. Over time, those consequences can affect the amount of investment wealth that ultimately remains available to you.
The Objective
Make sound investment decisions while being mindful of unnecessary tax costs.
Gold Coast Capital Management takes a tax-aware approach to investing, considering potential tax implications alongside the investment merits of each decision.
Every client works directly with Dragan Mark Filipovic, CFA®, Founder and Chief Investment Officer.
02A Broader Lens
What Is Tax-Aware Investing?
Tax-aware investing is the process of considering taxes as one factor when constructing and managing an investment portfolio. Traditional investment analysis may focus primarily on return, risk and diversification. A tax-aware investment process also asks questions such as:
Where should different types of investments be held?
Are there investment losses that may be useful when managing realized gains?
Is unnecessary portfolio turnover creating avoidable taxable events?
How do taxable and tax-advantaged accounts work together?
Could a portfolio change create a significant capital gain?
The purpose is not simply to minimize taxes in every situation.
Sometimes paying a tax today may still be the appropriate investment decision.
Instead, the goal is to make investment decisions with an understanding of both their portfolio implications and their potential tax consequences.
03Portfolio Considerations
How We Approach Tax-Aware Portfolio Management
Depending on your portfolio and circumstances, several considerations may be relevant.
01
Tax-Loss Harvesting
Investment markets do not move in one direction.
When certain investments decline, realizing a loss may sometimes create an opportunity to offset realized capital gains, subject to applicable tax rules.
Tax-loss harvesting should not be performed simply to generate a tax loss. Any transaction also needs to make sense within the broader investment strategy.
02
Asset Location
Where an investment is held can sometimes matter almost as much as what investment is selected.
Different investments can generate different types of taxable income or gains.
When appropriate, we consider how investments are distributed between taxable and tax-advantaged accounts as part of the broader portfolio strategy.
03
Capital Gains Awareness
Selling a highly appreciated investment can create a significant taxable gain.
That does not necessarily mean the investment should never be sold.
Portfolio risk, diversification, investment fundamentals and your financial objectives may provide good reasons to make a change.
A tax-aware approach simply means understanding the potential tax consequences before the decision is made.
04
Portfolio Turnover
Frequent trading can create transaction activity and potentially taxable events without necessarily improving the long-term investment strategy.
Our investment philosophy emphasizes discipline rather than constant activity.
When portfolio changes are appropriate, we consider both the investment rationale and potential tax consequences.
04Integrated Decisions
Tax Efficiency Is Part of the Investment Strategy
Tax-efficient investing should not exist separately from portfolio management.
A portfolio can be highly tax efficient and still be poorly diversified.
An investor can avoid realizing gains while becoming increasingly concentrated in a single investment.
Or an attempt to reduce taxes can result in a portfolio that no longer reflects the investor's risk tolerance or financial objectives.
That is why Gold Coast Capital Management considers taxes within the broader investment process.
We evaluate:
The objective is not the lowest possible tax bill in isolation.
It is a thoughtful investment strategy that considers taxes as one of several factors affecting long-term outcomes.
Investment Objectives
What does the portfolio need to accomplish?
Risk
How much investment risk is appropriate?
Diversification
Is the portfolio unnecessarily concentrated?
Costs
What are you paying for investments and advisory services?
Taxes
How could investment decisions affect what you ultimately keep?
05When It Matters Most
Who May Benefit From Tax-Aware Investing?
Tax efficiency can become increasingly relevant as an investor's taxable portfolio grows or financial circumstances become more complex. A tax-aware investment strategy may be particularly worth considering if you:
Hold substantial investments in taxable brokerage accounts
Own investments with significant unrealized gains
Have accumulated accounts at multiple financial institutions
Receive investment income from several sources
Are approaching or entering retirement
Recently received an inheritance
Sold a business or experienced another liquidity event
Are considering substantial changes to an existing portfolio
Are transferring assets from another financial advisor
The appropriate approach depends on the individual investor.
There is no single tax-efficient portfolio that is right for everyone.
06Retirement Context
Tax-Aware Investing and Retirement
Tax considerations can become particularly important as retirement approaches.
As the role of the portfolio shifts from primarily accumulating wealth toward supporting future spending, the interaction between those different accounts can become increasingly relevant.
Gold Coast Capital Management considers applicable tax factors as part of the broader retirement investment strategy while remaining focused on portfolio risk, diversification, liquidity and long-term objectives.
Accounts & Assets
Retirees and pre-retirees may own a combination of:
01 Taxable investment accounts
02 Traditional retirement accounts
03 Roth accounts
04 Cash
05 Other investment assets
07Before You Change
Changing Advisors? Review the Tax Impact Before Changing the Portfolio
Moving from one financial advisor to another does not necessarily mean every existing investment should immediately be sold.
Some portfolios contain positions with substantial unrealized gains.
Others may have investments worth replacing but where the timing of the change deserves careful consideration.
Before substantially restructuring an existing taxable portfolio, it can be useful to understand:
Current holdings
Cost basis
Unrealized gains and losses
Portfolio concentration
Existing allocation
Investment costs
Potential tax consequences of proposed changes
Gold Coast Capital Management offers an independent portfolio review for investors who want another perspective before making major investment decisions.
Get a Portfolio Second OpinionInvestment Management, Not Tax Preparation
It is important to distinguish tax-aware investing from professional tax preparation or individualized tax advice.
Gold Coast Capital Management provides investment management and considers relevant tax implications when making portfolio decisions.
We do not prepare tax returns or provide individualized tax or legal advice.
When an investment decision involves issues requiring specialized tax guidance, clients should consult their CPA or other qualified tax professional.
This allows investment decisions and professional tax advice to work together while keeping each professional within the appropriate area of expertise.
08Questions & Answers
Frequently Asked Questions About Tax-Aware Investing in Chicago
Tax-efficient investing means considering the potential tax consequences of investment decisions alongside factors such as risk, expected return, diversification and financial objectives.
The goal is not simply to minimize taxes, but to avoid overlooking taxes when they may materially affect an investment decision.
Tax-loss harvesting generally involves realizing investment losses that may be used to offset certain realized investment gains, subject to applicable tax rules.
Whether a transaction makes sense depends on both the investment strategy and the investor's individual circumstances.
Asset location refers to considering which investments are held within taxable versus tax-advantaged accounts.
Different investments may have different tax characteristics, so account location can sometimes affect the tax efficiency of an overall portfolio.
Not necessarily. Gold Coast Capital Management's tax-aware investing service focuses on considering relevant tax consequences within investment and portfolio-management decisions.
Gold Coast Capital Management does not provide individualized tax or legal advice or prepare tax returns.
Yes. A complimentary portfolio review can include discussion of your existing investment structure, portfolio allocation, investment risk, costs and relevant tax considerations.
You do not have to transfer your investments or change financial advisors simply to request a second opinion.
Schedule a Consultation
Build an Investment Strategy With Taxes in Mind
Your investment portfolio should be designed around more than pre-tax performance.
If you have substantial taxable investments, appreciated positions or simply want another perspective on how your portfolio is being managed, start with a complimentary portfolio review.
Speak directly with Dragan Mark Filipovic, CFA® about your investments, goals and current strategy.
Speak Directly With Your Advisor
(847) 899-7986
info@goldcoastcapm.com
Serving Chicago, IL and clients nationwide.
Gold Coast Capital Management, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Advisory services are offered only to clients or prospective clients where Gold Coast Capital Management, LLC and its representatives are properly registered or exempt from registration. Nothing on this website should be construed as personalized investment, tax, or legal advice. Past performance does not guarantee future results.