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 FAQ

Atlanta Money Manager, Financial Advisor, Financial Planner

Should I be concerned about trading costs and tax implications?

Principal Matters MostTrading costs and taxes are always relevant. However, let's assume you had a $1,000,000 portfolio invested in the S&P 500 Index in October 2007. If your primary objective was to minimize taxes and trading costs, you would have lost 58% before the stock market bottomed on March 9, 2009. A loss of 58% equates to $580,000 in principal. Do you know how many trades we could pay for with $580,000? If you pay $4.95 per trade, the answer is over 117,000 trades. No one will ever approach anything even remotely close to 117,000 trades using a rules-based system for investors. Moral of the story, principal protection is infinitely more important than trading costs or tax implications. Many investors worry about pinching pennies rather than protecting dollars. Trading frequency and taxes are important, but they are not nearly as important as protecting your hard-earned principal. Net worth-destroying bear markets are not rare events. It is not a question of if another devastating bear market is coming, but simply when the next devastating bear market is coming. If you focus on minimizing trades, you may regret that decision a few months into the bear market episode. It is best to build your shelter during a bull market; our market model is a form of probabilistic shelter for your investments.

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