Sch bk 1, LOS 13i, Pg 367
Under ‘Index tracking with active tax management’ it explains ‘cash from a monetized concentrated stock position is invested to track a broad market index on a pretax basis and outperform the index on an after-tax basis.’
Can anyone please explain the meaning/interpretation of ‘…a pretax basis and outperform the index on an after-tax basis’.
Thank you
you are obtaining tax alpha from the strategy.
Pre-tax returns on your strategy track index returns. - so tracking risk PreTax return on strategy - Return on the Broad market index is minimal.
But after tax returns provide you alpha.
^^ best of luck mate. I hope we clear this year. It’s worth mentioning that completeness portfolio also ends up like an index tracking after concurrent sales w/o triggering tax events.
why does this give you a tax alpha?