Ok wait what..? I know I know allow me to explain what I mean by this ridiculous sounding sentence.
“Don’t let the tax tail wag the investment dog” is a phrase I heard repeated across our trading floor from one of our Senior Partners during my first years in portfolio management. I was understandably confused by this insane sentence, but I did not want to be “that guy” and ask. What I went on to learn was that he meant that we could not allow tax consequences to dictate our portfolio management strategy. Managing a portfolio in a tax efficient matter was critical, however there would be moments when a portfolio would need to be rebalanced and that sale would trigger capital gains taxes. In essence he acknowledged that paying taxes was of course never fun, but that we could not allow that to intrude into our portfolio management.Read More