Practical Applications For Financial Planners

Given that index management has outperformed active management in most U.S. asset classes, financial planners can use index funds to improve their clients' pre-tax and after-tax performance, in addition to lowering portfolio expenses. (Please see Table 2.7, which contains the average expense ratios for the U.S. Large-Cap, Mid-Cap, Small-Cap, International Large-Cap and International Mid/Small-Cap asset classes.) For example, while the average expense ratio in the actively managed Large-Cap Blend asset class is 1.35 percent, diversified index funds managed by high-quality organizations can be accessed with expense ratios as little as .09 percent. Financial planners with clients in higher marginal tax brackets may also find that tax-managed index funds or separate accounts are attractive alternatives. While tax-managed index funds and separate accounts typically possess higher investment minimums (for example, $10,000-$1 million) as well as modestly higher expense ratios than typical index funds, many of these vehicles have successfully avoided capital gains distributions through active tax-loss harvesting.

TABLE 2.7 Average Net Expense Ratios for U.S. and International Asset Classes (Funds with minimum investment levels less than $1 million)

Active Mgmt Index Mgmt. Index Mgmt. Category Category Lowest 10th

Average Average Percentile

The Force Of Fulcrums

The Force Of Fulcrums

Learning About The Force Of Fulcrums Can Have Amazing Benefits For Your Life And Success! How simple shifts in your thinking will make you rich forever! If you wish to grow beyond your current state of being, you'll need to learn about the fulcrum precept. A fulcrum is the pivot point for a lever. Therefore, whenever you wish to properly utilize leverage, then, you'll need to place the fulcrum in the right place. Many people have never heard if this and have no idea how to go about figuring out where they are or how to change it.

Get My Free Ebook


Post a comment