How to reduce the effect of taxation on your portfolio

[OohPooPahDoo]

You will need to buy X shares and Y synthetic or real futures on the underlying.

If your tax rate is R, then you will need Y = (R/(1-R))*X

E.G. suppose you are buying a short term investment and your tax rate is 28%.

You buy 10000 shares of SPY and 39x100 synthetic futures.,

Say the stock gains 10%. Your total gain is 10% on the stock and 3.9% from the futures, for 13.9%. The government gets 0.28 * 13.9% = 3.9% of it in taxes, and you're left with 10% - the original gain from the stock.

If it loses 10% - everything is reversed.

The scheme needs some tinkering to account for the fact losses might not be immediately deductible.


Opinions. Comments. Do any investors use a strategy like this?

 

[Mr. H.]

Y + Ru so fucked up to the power of x?

 

[OnePercenter]

If you are lucky enough to have a member of the clergy in your family, place your portfolio in a family trust that the clergy member is headed. NO TAXES!

 

[whitehall]

Get a job with the federal government and you don't have to worry about stuff the common people have to be concerned about.

 

[OohPooPahDoo]

Get a job with the federal government and you don't have to worry about stuff the common people have to be concerned about.

Like what?

 

[jwoodie]

Get a job with the federal government and you don't have to worry about stuff the common people have to be concerned about.

Like what?

Guaranteed defined benefit retirement with automatic COLA.

 

[SteadyMercury]

I don't believe having a retirement with automatic COLA means there is no need to invest for retirement.

As of 2012 the average fed pension was $32,824. Obviously everyone has their own lifestyle and income needs, but I sure wouldn't be comfortable knowing that would be my future income stream especially if you have large enough gap between retirement and social security age.

Point taken though! I understand a fed retiree has far less concerns about retirement investing, I just don't believe it completely absolves one from that aspect of financial planning.

 

[OohPooPahDoo]

Get a job with the federal government and you don't have to worry about stuff the common people have to be concerned about.

Like what?

Guaranteed defined benefit retirement with automatic COLA.

The "common people" can achieve the same in the private market by purchasing an inflation protected life annuity.

 

[OohPooPahDoo]

I don't believe having a retirement with automatic COLA means there is no need to invest for retirement.

As of 2012 the average fed pension was $32,824. Obviously everyone has their own lifestyle and income needs, but I sure wouldn't be comfortable knowing that would be my future income stream especially if you have large enough gap between retirement and social security age.

Point taken though! I understand a fed retiree has far less concerns about retirement investing, I just don't believe it completely absolves one from that aspect of financial planning.

If I own my home, the kids are out of the house, I have social security on top of that, and my wife has the same - that's not a bad life.