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Definition of 'Tax Drag'
The reduction of potential income due to taxes. Drag describes the loss in returns owing to taxation, usually on an investment. Tax drag is commonly used when describing the difference between an investment vehicle that is tax-sheltered and one that is not. For many individuals, tax drag can have a significant effect on overall investment performance.
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Investopedia explains 'Tax Drag'
Tax-efficient investing techniques are very important for recognizing capital gains, transferring wealth and estate planning.
For example, suppose that an individual can invest $1 million in two securities in either Country A (with a 25% withholding tax) or Country B (with a 15% withholding tax). Both securities pay a 2.5% dividend. Security A would return $25,000 minus $6,250 in taxes, for a total of $18,750. Investment B would return $25,000 minus $3,750 in taxes, for a total of $21,250. Therefore, returns would be 1.875% for Security A and 2.125% for Security B, equating to a tax drag of 25 basis points (the difference in returns between the two securities).
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Search results for 'Tax Drag'
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http://www.investopedia.com/articles/tax/08/asset-location.asp
... after you determine the proper asset mix for your portfolio can you then locate
those investments in the appropriate accounts to minimize the tax drag on your ...
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http://www.investopedia.com/articles/tax/09/offset-capital-gains.asp
... The Bottom Line The biggest drag on investment performance is taxes. For taxable
investors, proper year-end tax planning will allow you to keep more of your ...
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http://stocks.investopedia.com/stock-analysis/2008/Back-to-Basics-For-HR-Block-HRB-INTU1210.aspx
... business sold to Ameriprise had been a "drag on the company for nearly a decade"
and had proved a drain on capital and distraction from the core tax business. ...
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http://www.investopedia.com/articles/retirement/10/top-9-benefits-403b-plans.asp
... account, you will lose a lot of potential earnings due to the significant drag that
taxes can impose. Since you don't have to worry about tax effects in your ...
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http://www.investopedia.com/articles/exchangetradedfunds/11/advantages-disadvantages-etfs.asp
... It should be noted that dividends in unit investment trust ETFs are not automatically
reinvested, thus creating a dividend drag. Capital Gains Tax Exposure Is ...
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http://www.investopedia.com/articles/economics/10/free-market-misconceptions.asp
... Even the government understands that taxes drag on the economy. It admits as much
when it uses temporary (one to five-year) tax cuts or redemptions to ...
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http://www.investopedia.com/video/play/fat-cat-ceo
... opposite. Learn about the fat cats, and how their hefty compensation can drag a
company down. ... Read More ยป; Top 10 Home Business Tax Tips. Starting ...
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http://www.investopedia.com/articles/pf/05/concentratedstock.asp
... From a tax standpoint, you may be retaining the position or delaying a portfolio ...
For the most volatile quartile of stocks, the drag on performance has been ...
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http://www.investopedia.com/exam-guide/series-7/securities-markets/economic-keynesian-theory.asp
... 8.15 Index Options; 8.16 Other Options; 8.17 Tax Treatment of Options. Chapter 9 -
12: ... savings - whatever a consumer earns but does not spend - to be a drag on the ...
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http://www.investopedia.com/articles/retirement/07/mortgages_in_retirement.asp
... portion of a retiree's net worth, it can arguably serve as a drag on income ... the money
in a diversified portfolio that should outperform the after-tax cost of ...
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