The Oxford Club’s fourth investing principle is keeping expenses to a minimum. Most people do not realize how much money they lose when they put their capital into a mutual fund that charges front-end and back-end loads.
But that’s not the only trap investors must avoid. Taxes are a major problem. That’s why the Oxford Club pays particular attention to tax avoidance strategies. That is, legally incurring as few taxes as possible. They advise their members to take full advantage of tax-deferred retirement options. They also advise members to hold investments for at least a year before selling, so they pay the lower long-term capital gains tax rates on their profits. That is one of the secrets to Warren Buffett’s success. He says his favorite holding time is forever because he doesn’t like to incur taxes by selling his winners. He will sell losers to cut his losses, but only when he has to. He’s so successful because he is the idea long-term investor, and that keeps a lot of money inside Berkshire Hathaway instead of the IRS.
And when you do incur capital losses by selling a stock on which you failed to make money, you can put that to good use to offset a capital gain. The Club explains that strategy to its members.
A few expenses are inevitable, but the article points out if you keep your expense ratio down to 0.3% and minimize your tax requirements, that can add 4% to your annual returns. That may sound small, but over 20 years it means the difference between $386,000 and $806,000. That’s a lot, and yet it’s what most investors give up to help their brokers and the Internal Revenue Service.
The Oxford Club has over 157,000 members around the world. They publish emails and newsletters, hold symposiums and even host overseas excursions.
Read more from the Oxford Club: https://www.investmentu.com/cache/homepage.html