How could a 5% return be better than a 7% return?
You’re about to enter a new dimension, a dimension of sound, a dimension of sight, a dimension of mind . . .
Want to impress your friends and advisors? Want to make more money?
This lesson is for you.
The question is can a 5% return be better than a 7% return? The answer is a resounding yes!
How is that possible?
It’s actually rather simple. I’ll show you.
There’s an old saying: it’s not how much you make; it’s how much you keep. It doesn’t matter what your return is. Rather, what matters is your return after you pay any taxes. That’s where the rubber meets the road. It’s this after-tax return that is real. That’s the money you can put in your pocket.
So don’t be confused or misled by promises of high returns.
Many mutual funds or advisors will say, “We got our clients a 10% return last year.” Okay, but that is a bit meaningless. What they don’t say is, “To get the 10% return last year, we generated a lot of taxes, so your after-tax return is probably more like 5%.” Doesn’t sound as impressive now, does it?
Look at after-tax returns. That’s the true return you received.
The proceeding blog post is an excerpt from Get Money Smart: Simple Lessons to Kickstart Your Financial Confidence & Grow Your Wealth, available now on Amazon.
About the Independent Financial Advisor
Robert Pagliarini, PhD, CFP® has helped clients across the United States manage, grow, and preserve their wealth for nearly three decades. His goal is to provide comprehensive financial, investment, and tax advice in a way that is honest and ethical. In addition, he is a CFP® Board Ambassador, one of only 50 in the country, and a fiduciary. In his spare time, he writes personal finance books. With decades of experience as a financial advisor, the media often calls on him for his expertise. Contact Robert today to learn more about his financial planning services.
