After-Tax Returns and Why They Matter for Long-Term Wealth

Garrett Fish (00:00):

It's Tax Day, and most investors are focused on what they owe. But the biggest cost to investors often isn't the check they write today. It's how much of their investment returns they don't get to keep over time. Today we're talking about after tax returns and why they matter more than almost anything else for long-term wealth. Welcome to LPL Streetview. I'm Garrett Fish, head of Model Portfolio Management. At LPL Financial right now, investors are navigating a lot geopolitical uncertainty, interest rate questions, rapid technological change. Market swings, volatility grabs the headlines, but taxes, taxes quietly compound year after year in either direction and on Tax Day that reality comes into sharp focus. History tells us markets have always faced uncertainty. The.com bubble, the financial crisis, the pandemic, and in each case, markets recovered. But here's what most people miss. Two investors with the same pre-tax returns can end up with very different outcomes.

Garrett Fish (01:14):

Why? Because where assets are held, how often they're traded and how tax efficient they are. All compound, just like returns do over long periods. What you keep often matters more than what you earn in any single year. Market drawdowns are all a normal part of investing, but taxes, taxes are a certainty. That's why long-term strategy can't just focus on returns. It has to focus on after tax returns. Smart tax awareness isn't about avoiding risk, it's about being intentional about how returns are generated and where they show up. Three principles that hold up, especially on Tax Day. One diversification isn't just about asset classes, it's also about tax treatment, different assets, different accounts, different tax considerations. Thoughtful construction helps manage both market risk and tax risk. Two, income and cash flow matter, but where that income is held and how it's managed can make a big difference in what investors keep.

Garrett Fish (02:25):

And three, context matters more than catalyst. A tax bill in April is a moment in time. The impact of tax efficiency or the lack of it plays out over decades. So what does this mean for you right now? Tax Day isn't just a deadline, it's a checkpoint. Are your assets in the right accounts? Is your portfolio generating unnecessary taxable events? And is your overall strategy aligned with your long-term goals, not just last year's returns? These are the questions worth asking today and worth revisiting every year. The market will keep changing. Headlines will keep coming, and taxes will always be part of the journey. But the principles that drive long-term wealth don't change. Discipline, diversification, and a focus on after tax returns. Short-term uncertainty is the price we pay for long-term opportunity. Smart tax awareness helps ensure more of that opportunity stays where it belongs with you. Check out the latest updates at the LPL Research LinkedIn page. That's the long view. That's our street view.