Don’t Fall for the Cost Trap: The Other Factors You and Your Advisor Should be Considering When Making Investment Decisions

Investing is a crucial aspect of personal finance, and it’s essential to make informed decisions when it comes to managing your portfolio. When it comes to investing, cost is an important factor that affects your returns but it’s not the only one. Sure, the lower the cost, the more money you keep in your pocket. However, there are other aspects of investment management that you need to consider, such as performance, risk, asset location, and tax mitigation. Improving any one of these specifically should not debilitate the other 3-4.

Performance is the measure of how well your investments are doing over time. It is a crucial factor that determines your returns. The higher the performance, the more money you make. However, performance is not guaranteed, and it can vary depending on the market conditions and the type of investments you choose. Therefore, we believe it’s essential to diversify your portfolio and invest in different asset classes with the goal of mitigating the risk of underperformance.

Risk is the measure of how much uncertainty or volatility your investments have. It is another crucial factor that determines your returns. The higher the risk, the more chance you have of losing money. However, risk is also related to reward. Generally, the higher the risk, the higher the potential return. Therefore, it’s essential to balance your portfolio between high-risk and low-risk investments according to your risk tolerance and investment goals.

Asset location is the strategy of placing your investments in different types of accounts, such as taxable, tax-deferred, or tax-free. The goal is to optimize the tax efficiency of your portfolio and reduce the amount of taxes you pay over time. Investors should be considering the tax implications of your investments when making asset allocation decisions.

Tax mitigation is the strategy of using various tools and techniques to help minimize your tax liability and maximize your after-tax wealth. Some examples are tax-loss harvesting, charitable giving, Roth conversions, and estate planning. Tax mitigation can be an important aspect of investment management that can significantly impact your returns over time. Therefore, it’s essential to work with a financial advisor or tax professional to help develop a tax-efficient investment strategy.

In the words of Peter Lynch, “Know what you own, and know why you own it.” This quote emphasizes the importance of understanding your investments and the reasons behind them. By working with a financial advisor or tax professional, you can gain the knowledge and expertise you need to optimize your portfolio and achieve your financial goals.

At LaCour Wealth Management, we understand the importance of a comprehensive investment strategy that aligns with your goals and preferences. Our experienced team offers sophisticated wealth management services to serve your individual needs. We craft strategies using our experience and prudent management approach to help you discover new opportunities and achieve success. Our robust capabilities cover all aspects of investment management, from investment research to strategy and oversight. Everything you need to help you raise the bar when it comes to your financial affairs.

When it comes to investing, it’s essential to look beyond just the cost and consider all the factors that affect your investment success. For example, focusing solely on cost could mean subpar performance and higher risk than necessary; or there may be a situation that creates capital gains taxes but could lower risk enough without impacting long term return expectations that could make it worth paying the taxes. Therefore, it’s essential to consider all the factors that affect your investment success, including performance, risk, asset location, cost and tax mitigation. By doing so, you can help optimize your portfolio and maximize your returns.

Don’t fall prey to the dominant narrative that cost is the only thing that matters when it comes to investing. Instead, take a step back and look at the big picture. Remember, investing is a long-term game, and it’s essential to make informed decisions that will help you achieve your financial goals in the future. If you’re interested in getting a second opinion on your investment management, please contact us at LaCour Wealth Management today. We would love to hear from you to show you where we can help.

This blog post was created with the help of Bing Chat Enterprise, an AI-powered chatbot developed by Microsoft. Raymond James is not affiliated with and does not endorse the opinions or services of Bing Chat Enterprise or Microsoft.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of LaCour Wealth Management and not necessarily those of Raymond James.

Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.