Step 8 – Define your Tax Policy

give up uncle samTaxes can affect the investment policy in several ways:untitled.6

untitled.6The determination of appropriate investment vehicles for a portfolio, either taxable, tax-free, tax deferred, tax advantaged or fully taxable. The effectiveness of after-tax returns of all asset classes must be considered as well as the possible taxation due to the imposition of the alternative minimum tax.

Some people have identified their tax policy described as:

  • Seeking tax-free returns.
  • Seeking tax deferred returns.
  • Seeking tax advantaged returns.
  • Seeking returns free from the risk of the imposition of the alternative minimum tax.
  • Seeking fully taxable returns.

An Investment Policy Statement is not a contract, it is intended to be a summary of an investment philosophy and the procedures that provide guidance for the Investor. Investment policies should be dynamic and should be reviewed and revised periodically to ensure they adequately reflect any changes related to the Portfolio, to the Investor or the capital markets.

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