This approach involves working with carefully selected outside money managers and offering Separately Managed Account options to provide an added layer of tax-efficiency in the investment plan.
Every investor’s financial goals have different attributes: priorities, time horizon; and the need for liquidity, income, or growth. As a result, each goal has a unique investment objective – and a distinct combination of assets that is most likely to achieve the goal. Establishing this strategic allocation of assets is a vitally important investment decision because it’s one of the biggest determinants of portfolio return variability (the year-to-year variation in returns).
The more informed you are about the spectrum of investments available to you as an investor, the more confident you should become about embracing a variety of asset classes for a diversified portfolio. Being more informed about different types of investments and their roles in your portfolio can help you establish reasonable expectation and help you plan accordingly. Longer-term risk and return assumptions can be estimated based on the historical and current performance of different types of investments. When combined into your portfolio (the strategic allocation), reasonable expectations about future portfolio returns can be established. While expected returns are just that – expected – they can help you plan for an uncertain future.
Different asset classes – stocks, bonds, money market, etc. – have different reactions to the same economic news. Events that have a positive effect on one market may have an adverse effect on another. As your investments expand and contract with the market, your original allocation will shift. For example, stocks can grow to a larger percentage of your portfolio than you originally allocated and expose you to more risk than you find comfortable. It is important to review your allocation on an ongoing basis to ensure you are maintaining the right balance between risk and reward for your objectives, market conditions and “time horizon’ for reaching your goals. In addition, assessing and updating your investment plan, if necessary, should allow you to reposition your portfolio and take better advantage of opportunities market volatility make create.
While there are many different tax management strategies to consider – such as tax loss harvesting, charitable giving, exemptions, and deductions – the ideal place to start is determining the changes that will be best for your overall portfolio. With your overall portfolio strategy and long-term objectives in full context, there are several proven tactics you can use to potentially help reduce tax liabilities.
Our team coordinates with your tax advisor to discuss and test various tax mitigation strategies available to you, ensuring that the solution put in place is the ideal strategy for your situation. We also can draw upon the resources of the Estate Planning Strategies Groups to provide you with an independent perspective on various actions you may be considering.
Wells Fargo and its affiliates do not provide legal or tax advice.