What Are You Thankful For?
Thanksgiving is my favorite holiday. We get four days off, gather with our family and friends, and prepare and eat (hopefully) good food. All of this without the extra “stresses” of the 4th of July or (at our house) Christmas.
Once everyone is seated around the dining room table, we wait for my father-in-law to ask the question “Can we go around the table and each share what we are thankful for?” This is a longstanding tradition and another reason why I enjoy the holiday. It’s great to hear answers ranging from “our family’s health” and “Uncle Russ has joined us” to “cranberry sauce!” and “the turkey is not a charred mess.”
Well, I must have been thinking too much about the CapGainsValet, because here’s how I answered the question this year:
“I’m thankful for:
- A smaller Doghouse List. CapGainsValet has been running for the last three years, so we can start to make distribution comparisons. This year we are definitely seeing fewer of the massive (20%+ of NAV) distributions.
- Fewer distributions higher than 10%. While 20%+ distributions are truly painful, distributions in the 10% to 20% range also increase our tax bills. Although many planned for another large year for capital gains distributions, I’m guessing this year will be one of the most tax-efficient years we’ve had in a long time.
- Asset Location. When building out an investment portfolio, we think not only about what goes in the portfolio, but also where those assets should go. Having the “right” holdings in tax-deferred and tax-free accounts makes capital gains distribution season less worrisome. Owning active equity managers, alternative funds and many bond funds in taxable accounts creates unnecessary tax drag and reduces long-term after-tax wealth. (Michael Kitces has excellent tips on asset location – and many other topics – at kitces.com.)
(realizing my wife and kids were rolling their eyes…)
- Oh – and, I’m thankful for my lovely wife, my amazing children and the fact that we all recognize we should be thankful!”
I hope you all had a great Thanksgiving.
Mark Wilson, APA, CFP®