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Seeking Alpha

Lessons From 2013: Part III

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Day three of our lessons from 2013, we'll dive right in with an examination of hedge fund returns. This one holds the title with the most repeat performances, appearing most years. The HRFX Global Hedge Fund Index earned just 6.7 percent. The table below shows the returns for various equity and fixed

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Start Paying Attention to Tax Efficiency

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Much attention has been paid to expense ratios of mutual funds. Yet, despite the fact that taxes have a substantial impact on the long-term performance of taxable mutual fund investors, far less attention has been paid to the impact of taxes on after-tax returns. And while the evidence is clear that it's difficult for active fund managers to create superior investment performance by picking stocks or by timing markets, it's relatively easy to avoid destroying value for taxable fund investors by managing investment taxes. For example, tax-aware funds might attempt to reduce the tax burden by avoiding the intentional realization of any short-term gains and by accelerating the realization of capital losses. Tax management strategies might not only reduce the tax burden, they might also generate lower trading costs. For example, tax-efficient investment strategies exhibit relatively low turnover, generating lower trading costs. In addition, liquidating stock positions with embedded capital losses and holding on to positions with capital gains might generate superior before-tax returns due to the momentum effect.

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Lessons From 2013: Part IV

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Over the last few years we've seen a dramatic increase in interest in dividend paying stocks. The heightened interest has been fueled by both the media hype and the current regime of interest rates that are well below historical averages. The low yields available on safe bonds led even many once conservative investors to shift their allocations from safe bonds to dividend paying stocks. This is especially true for those who take an income, or cash flow, approach to investing - as opposed to a total return approach, which I believe is the right approach.

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Lessons From 2013: Part I

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Every year the markets provide us with lessons on the prudent investment strategy. Many times markets provide remedial courses covering lessons it had provided in prior years. That's why one of my favorite statements is that there's nothing new in investing, only the investment history you don't know.

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