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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.