MarketMoodz
BoA study: Tax-aware 60/40 portfolios beat tax-insensitive over 30 years
Bank of America’s analysis finds a tax-aware 60/40 portfolio outperforms a tax-insensitive counterpart over a 30-year horizon. The post-tax annualized returns are 7.4% versus 5.9%, highlighting the impact of tax strategy on after-tax results.
Key Takeaways
- 7.4% post-tax annualized return for the tax-aware portfolio over 30 years vs 5.9% for the tax-insensitive version
- Both portfolios maintain a 60% stocks / 40% bonds allocation across a 30-year horizon
- Tax-efficiency ideas highlighted: buybacks over dividends, municipal-bond exposure, and direct ownership of certain energy partnerships
- Findings come from BoA's internal analysis as reported by CNBC; methodology not disclosed; April 15, 2026 tax deadline noted
People Involved
- Darla Mercado CNBC Contributor
- Jared Woodard Bank of America Investment and ETF Strategist
Entities Involved
- Bank of America (BoA) Banking and financial services company
- CNBC Cable business news network
MarketMoodz Analysis
The takeaways for investors are clear: after-tax performance can diverge meaningfully from pre-tax returns when taxes are front and center. BoA’s analysis shows a tax-aware framework can compound to higher after-tax gains over decades, potentially narrowing the gap between taxable and tax-advantaged outcomes.
Historically, tax efficiency has mattered for portfolio outcomes, with strategies such as buybacks over dividends, municipal bonds, and direct ownership of energy partnerships illustrating how security structure and policy shape returns. As tax rules evolve, investors should watch policy shifts that affect dividend taxation, capital gains, and the availability of tax-advantaged vehicles; the next test will be how these ideas perform under different market regimes and regulatory changes.
Source: Original Article
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