Taking taxes into consideration adds value

Source: Wells Fargo Investment Institute, as of September 30, 2021. Forecasts are not guaranteed and are subject to change. 4AG = four-asset group. Strategic hypothetical returns are forward-looking geometric return estimates from Wells Fargo Investment Institute of how asset classes and combinations of classes may respond during various market environments. Hypothetical returns do not represent the returns that an investor should expect in any particular year. They are not designed to predict actual performance and may differ greatly from actual performance. There are no assurances that any estimates given will be achieved.

Key Takeaways

  • When developing tax-efficient portfolios, WFII has taken into consideration state, federal, and capital gains taxes.
  • The tax-efficient allocations are made more tax efficient by swapping from taxable fixed income to tax-exempt fixed income and reducing allocations to tax-inefficient asset classes like hedge funds and emerging market fixed income.