Of all the expenses investors pay, taxes have the potential for taking the
biggest bite out of total returns-as much as 2 to 3 percentage points a
year for domestic stock funds, according to Vanguard® studies.
That's why it pays to be sensitive to taxes as you build and monitor
your investment portfolio. The goal is not necessarily to eliminate
taxes. You could have an investment that produced a zero return and no tax
bill -- but it's doubtful you'd be happy about that! Instead, your goal
should be to maximize your after-tax return on a portfolio that
meets your needs, risk tolerance, and time horizon. By taking advantage of
tax-deferred investment opportunities, organizing your investments in the
right accounts, and using other strategies, you can keep more of your
investment returns.
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