in case in helps, I just did this very simple example: + portfolio = 100 + annual growth rate = 10% + tax = 35% + annual growth after tax = 10% x (1-35%) = 6.5% + in 10 years, I will have 100 x (1+6.5%)^10 = 188 if, instead, I only pay taxes at the end (deferred) + portfolio = 100 + annual growth rate = 10% + in 10 years, i will have 100 x (1+10%)^10 = 259 + This means a profit of 259 - 100 = 159 + Tax = 159 x 35% = 56 + So I end with 259 - 56 = 203 203 Vs 188, because I defer taxes and compound a higher positive performance each period I know it is too simplistic, but this one helped me today when reviewing portfolio management of individual investors… ciao
Just remember the longer you defer, the less in taxes you pay…its that easy 