E*TRADE (ETFC) recently announced results of StreetWise, which is a quarterly tracking study of experienced investors. In this study, E*TRADE looked at the tactics of tax-conscious investors. With tax time here once again, StockBrokers.com thought now would be a good time to look over the results of the findings.
The results from the study show that trading more frequently in tax-advantaged accounts is the top tactic used by investors. How common is it? In the study, 45 percent of participants reported using this tactic. It is more than twice as popular as selling losing positions (18 percent of respondents), which was the number two most common tactic used. Holding investments for at least one year to get taxed at a lower rate was third at 17 percent. Surprisingly, only four percent of investors in the study said they invest in funds with low portfolio turnover to help with tax efficiency.
Lena Haas, SVP of Retirement, Investing and Savings at E*TRADE Financial, said, “Understanding tax implications is key to successfully executing an investment plan and, if overlooked, can hinder overall returns. Like contributions and investment choices, tax implications deserve considerable attention and thoughtfulness.”
The main takeaway from this study is many investors aren’t using all the tools at their disposal to be tax-conscious investors. By improving even a small amount in this area, investors could see a big difference in their accounts over the long run.
Click here for the full results of this study.