私人财富管理ss4刘一群

TopicinCFALevelSSETHICS&PROFESSIONALSSBEHAVIORALSSPRIVATEWEALTHSSPORTFOLIOMANAGEMENTFORINSTITUTIONALSSCAPITALMARKETEXPECTATIONSINPORTFOLIOSSECONOMICCONCEPTSFORASSETVALUATIONINSSASSETSSMANAGEMENTOFPASSIVEANDACTIVE ESSPORTFOLIOMANAGEMENTOFGLOBALBONDSAND SSEQUITYPORTFOLIOSSALTERNATIVEINVESTMENTSFORPORTFOLIOSSRISKSSRISKMANAGEMENTAPPLICATIONSOFSSEXECUTIONOFPORTFOLIODECISIONS;MONITORINGANDSSPERFORMANCEEVALUATIONANDSSGLOBALINVESTMENTPERFORMANCE 100%ContributionBreedsSummaryofReadingsandReading11TaxesandPrivateWealthManagementinaGlobalReading12 nninginaGlobalReading14LifetimeFinancialAdvice:HumanCapital,AssetAllocation,andInsurance 100%ContributionBreedsThePortfolioManagementProcessCreatethe statement(IPS)–erningallinvestmentdecisionmaking,withacentralroleinthewholeportfoliomanagementprocessCreatethestrategicassetallocationPortfolioposition(portfoliomanager) 100%ContributionBreedsThePortfolioManagementProcessrequiredvs.desiredrealvs.nominalpre-vs.post-taxRiskability&

TimeLiquidity•Legal&Regulatory•UniqueR TTLL 100%ContributionBreedsProfilingIndividualInvestorsSourceSourceofEntrepreneurialactivity(actively,normallyabove-averagewillingnesstotolerateInheritance,one-timewindfalls,builtupoverlongperiodsofsafeemployment(passively,below-averagewillingnesstotoleraterisk)MeasureofPositivecorrelationbetweenlevelofrisktolerance& ’sperceptionofwealthStageoflife:(typicallyreducedwillingnesstotakerisk) 100%ContributionBreedsStageof 的不再是增值，而是保值，以确保其现有的生活方式能够维持和延续，加上他们未来的时间较短，他们的风险度一般比之前有所下降。捐赠(distribution)阶段：主要指人逝世以前准备将赠与他人或有关机构的阶段。这个阶段需要考虑影响，需要做好合理的规划。 100%ContributionBreedsInvestor 用。人的投资活动建立在三个具体的假设之上：风险厌恶（Riskaversion）、理性预期(rationalexpectation)和资产整合(assetintegration)。aversion）、有偏预期(biasedexpectation)和资产分割(assetsegregation)。和替代品价格等经济变量决定，也由人的偏好、恐惧等变量决定；资产组合 100%ContributionBreedsProfilingIndividualInvestors CanRisklessNotafraidofmakingdecisionsmadeportfoliostendtohavelowturnover&volatilityRelyonhardDecisionstendtobe 100%ContributionBreedsalityFocusonminimizingDifficultyinmakinginvestmentLowturnover&lowConservativenaturecombinedwithafocusongatheringasmuchdataaspossible.(Lessriskaverse)Dotheirownresearchandrarelyformemotionalattaent;Constantlyonthelookoutfornew,betterinformationDotheirownresearchandconfidentinownability(LessriskSelf-assuredBuylatesthotHighturnover&tradingcosts(Lessrisk 100%ContributionBreedsReturn RRAssetCashFlow 100%ContributionBreedsRisk RRRiskRiskobjectiveTimeTimehorizon&abilitytotakeriskpositivelyrelated.Portfoliosize&abilitytotakeriskpositivelyGoalimportance&abilitytotakerisknegativelySpendingneeds&abilitytotakerisknegativelyrelatedFlexibilitycanincreasetheabilitytotakeriskRelatesto Assetturnover&investmentstylebetweenwillingness&ability,followthenarrowerofthe 100%ContributionBreedsInvestmentConstraints RRTimeNewTimeNewtimehorizoneachtimeaninvestor’scircumstanceschangesignificantly(e.g.priortoretirement/postretirement)LengthofeachtimehorizonisimportantOtherindividualscaninfluencetimehorizonIsinvestorataxpayer?WhetherannualportfolioreturnssubjecttotaxationAlwaysstrivetominimizecurrenttaxes(e.g.,lossharvesting,long-termgains) securitiesattractivesubjecttoyieldtypesoftax:e,capitalgains,wealth-transfer,wealthIftaxtreatmentuncertain,mendationforlegalcounsel 100%ContributionBreedsLegal&TypicallyrelatetoLegal&TypicallyrelatetotaxreliefandwealthaltrustPrudentinvestorBalancetheinterestsoftheebeneficiaryandremaindermenLegalcounselisencouragedLiquidityHowquicklyanassetcanbeconvertedintocashwithoutalossinvalue.Focusisonneedforcashintheshortterminexcessofcashin-flowsfromearningsorportfolioe.UniqueUniqueSpecialinvestmentconcerns(Sociallyresponsibleinvesting)SpecialRestrictiononthesaleofSpecificallyforbidsorlimitsbasedonpastAssetsheldoutsidetheinvestableportfolioDesiredbequestsOngoingexpenses(livingexpenses,on-goingmedicalexpensesforloved nnedoutlays(vacation,newhome,charitabledonations…)Emergencyneeds:3-6mlivingexpenses(medicalexpense,uninsuredlosses,unemployment…) 100%ContributionBreedsChoosingtheOptimalAssetYouaresometimesgivencharacteristicsfor5or6portfoliosandaskedtoselectthebestportfolioforthe Thosethatfailtomeettheafter-taxreturnobjective(calculationsmaybenecessary)expressedas umallowableloss)usingsafetyfirstruleAnyallocationthatfailstomeetliquiditySSratio=r-s 100%ContributionBreedsMonteCarloSimulation 。蒙特卡罗模拟使用路径依赖（pathdependence）的方低，从而导致可能无法实现长期目标。通过蒙特卡罗模拟方法可以获得的信息第三，会对未来的收益产生很大影响，确定性方法一般只能假设固定或单一税率来计算相应收益情况，而蒙特卡罗模拟理论上可以对这一变量进行任意模拟第四，估算未来收益的预期值（expectedvalueoffuturereturns）比估算当前收益的预期值（expectedvalueofconcurrentreturns）要 100%ContributionBreedsMonteCarloSimulation 100%ContributionBreeds6stepstoformulateindividual’s6stepsto alRenewtheobjectivesConstraints

Cashflow Risks 100%ContributionBreedsInvestor’sIPS‐alSourceofSizeoforsizewillbeStageofThereisalsotheperiodafteral 100%ContributionBreedsInvestor’sIPS‐albysalaryinExam

100%ContributionBreedsInvestor’sIPS‐ alinvestorDonationjustonT0orfromT0toNetcashNetCFatT0>0,asapartofNetCFfromT1<0,astheliquidity 100%ContributionBreedsInvestor’sIPS‐ S*Trust/ Total S* S* S*(1+f)*Living L*Down Mortgage Charity Otherone-time Total S*t+L+D+C+ S*(1+f)*t+L*(1+f)+Netcash Totalin–Total Totalin–Total 100%ContributionBreedsInvestor’sIPS‐al

Currentportfolio’sNetCFinatExcludingthehouseandotherunavailableRR=-NetCFsatrR=-NetCFsatT1+ Real 100%ContributionBreedsInvestor’sIPS‐RiskalAbility-TheyhavealongtimeTheyareyoung,withmorehumanTheymaygetinheritanceinTheirjobandeareTheirhealthinsuranceisAbility-After-taxsalarycannotcoverlivingSustainedCashflows(Mortgage)mustbeAssetbaseisOtherBasedon“……”inthe 100%ContributionBreedsThenarrowoneInvestor’sIPS‐TheAneedportfoliotoprovideBfornextyear’sA: B: C:Use(MortgageTimeTheyhavealongtermtwo–stageInthe1ststage,theAmustpayB,andalsopayCfortheirInthe2edstage,theyareinretirement,EyearsfromA: B:Livingexpense,mortgagepaymentC:Educationfee/healthcare D:Children/E:Howmanyyearsfromnow 100%ContributionBreedsInvestor’sIPS‐Thetaxrateis…,thetaxaspectshouldbeThe…‘staxtreatmentisuncertain,theyneedalegalTheprudentinvestorruleisThe…needalegalcounseltocreateatrusttoThe…saytheydonotwanttoinvestinThe…wanttocreateatrusttocareforThe…wanttodonate…tolocal 100%ContributionBreedsInvestor’sIPS‐Mainissue:RenewreturnobjectiveclosetoRe-calculatethenetCFneedannually→Re-calculatetheassetbasenow→Calculatethetargetassetvaluewhenretire→Calculatetherequiredrateofreturn→I/YNewobjectives:SupportlivingexpenseinSupportdonatingmoneytoProvideinheritancefor 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsessionQUESTION1HASFOURPARTS(A,B,C,D)FORATOTALOF36RobertoandMarianaCarvalholiveinalargecityinBrazilwiththeirtwochildren,agesfourandtwo.Robertois30yearsoldandMarianawillbe30yearsoldlaterthismonth.RobertoisamanagerinamanufacturingfacilityandMarianaisamusicianinthelocalsymphonyorchestra.RobertoandMariana’sannualsalariestotal120,000Brazilianreais(BRL)aftertax.Theirsalariesjustcovertheirlivingexpenses.Theaverageannualinflationrateisfourpercentandtheirsalariesandexpensesareexpectedtoincreaseatthisrate.Theyarehealthyandbelievetheirjobsandearningpotentialaresecure.TheCarvalhos’salaries,dividends,andinterestaretaxedat20percent,andcapitalgainsat15Mariana’sparentshavesignificantwealthandfundedanirrevocable altrustforher.Brazilhasawealthtransfertaxthatappliestotransfersintotrustsandtoinheritances.BrazilhasadoptedthePrudentInvestorRulefortheadministrationoftrusts.ThecurrentvalueofthetrustisBRL1,500,000. 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsessionThetermsofthetruststatethatwhenMarianareachestheageof30,shewillreceivea distributionofhalfthevalueofthetrust.Thebalanceofthetrustwillremaininvestedandwilldistributeintotaltoherwhenshereachesage40.Sinceshedoesnothaveaccesstotheremainingbalancefortenyears,thisbalanceisnotconsideredapartoftheCarvalhos’investableassets,butispartoftheirtotalnetworth.Inaddition,Marianaexpectstoinheritasubstantialsumofmoneyuponthedeathofbothparents.TheCarvalhoshaveBRL500,000ininvestableassets,currentlyallinshort‐termbankdeposits.Itistheirintentiontomaintainatleastthisamountininvestableassets,onaninflation‐adjustedbasis,inthefuture.TheCarvalhoscurrentlylivewithMariana’sparents,butarenowpurchasingahome.ThepurchasepriceofthehomeisBRL850,000.Thedownpaymentis30percentofthecostofthehomeandwillbefundedfromthetrustdistribution.TheCarvalhoswilltakeoutafixedratemortgageforthebalanceofthepurchaseprice.Theafter‐taxmortgagecostwillbefixedatBRL55,000(principalandinterest)annuallyfor30years,withthefirstannualpaymentdueoneyearfromnow. 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsessionTheCarvalhos’immediateinvestmentgoalistohavetheirinvestmentportfoliocoverthecostofthemortgage,whilemaintainingtheportfolio’sinflation‐adjustedvalue. ntoretireattheageof60andtheirlong‐termgoalistohaveaninvestmentportfoliothatwillprovideanannualecomparabletotheircurrentsalariesadjustedbyinflation.TheirfamilyhealthinsuranceisprovidedbyRoberto’semployer,bothnowandinretirement.Theyarehopefultheirtwochildrenwillattendthelocaluniversityatnocost.Theuniversitydoesnotchargetuitionfeesforqualifiedstudentswhopassitsentranceexam.Thosewhodonotpasstheexamarerequiredtopayfulltuition,whichishighrelativetotheCarvalhos’livingexpenses.Inordertomeettheirinvestmentgoals,theCarvalhosrealizetheyneedtoconsiderinvestmentsotherthanshort‐termbankdeposits.TheCarvalhoshireLuizOliveira,CFA,tomanageaninvestmentportfoliothattheywillfundwiththeirBRL500,000inbankdepositsandthenetproceedsofMariana’strustdistributionatage30. 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsessioni.PreparethereturnobjectivesportionoftheCarvalhos’investment ii.Calculatetheafter‐taxnominalrateofreturnthatisrequiredforthenextyear.Showyourcalculations.(12minutes) IdentifytwofactorsintheCarvalhos’situationthatincreasetheirabilitytotakeIdentifytwofactorsintheCarvalhos’situationthatdecreasetheirabilitytotake DeterminewhethertheCarvalhoshavebelow‐average,average,orabove‐averageabilitytotakerisk.PreparethefollowingconstraintsoftheCarvalhos’Liquidityii.Time 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsessionThereturnobjectivefortheCarvalhos’portfoliois provideforthemortgagepaymentsfora ‐supporttheirlivingexpensesin ‐maintaintheinflation‐adjustedvalueofthe 100%ContributionBreedsInvestor’sIPS‐ ysisCase–2008CFAlevel3morningsession 100%ContributionBreedsInvestor’sIPS‐ ysisCase–2008CFAlevel3morningsession 100%ContributionBreedsInvestor’sIPS‐ ysisCase–2008CFAlevel3morningsession 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsessionTwenty‐fiveyearshavepassed.TheCarvalhosarenow55yearsoldandtheirtwochildrenaregrownandfinanciallyindependent.Mariana’sparentspassedawayearlierthisyearandleftheraninheritanceofBRL8,000,000after‐tax.TheCarvalhoshavefiveyearsremainingontheirmortgageandtheBRL55,000annualmortgagepaymentwillcontinuetobefundedfromtheirinvestmentportfolio.Theyintendtoworkanotherfiveyearsandthenretireatage60.Theirsalariesareexpectedtocontinuetocovertheirlivingexpensesuntilretirement.Theirinvestmentportfolio,includingtheinheritance,nowtotalsBRL10,200,000.TheCarvalhosex intoOliveirathatinretirement,theywouldliketomaintaintheircurrentstandardoflivingandstartaregularprogramofdonatingmoneytotheirfavoritecharities.TheyalsohopetoleaveaninheritanceofBRL5,000,000toeachoftheirtwochildrenattheirdeath.OliveiracalculatestheywillneedaportfoliovalueofBRL15,000,000whentheyretireinordertosupportthesegoals. 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsession PreparethecurrentreturnobjectivesportionoftheCarvalhos’Calculatetheafter‐taxnominalrateofreturnthatisrequiredfortheportfolio.Showyourcalculations. 100%ContributionBreedsInvestor’sIPS‐

ysisCase–2008CFAlevel3morningsession 100%ContributionBreedsSummaryofReadingsandReading11TaxesandPrivateWealthManagementinaGlobalReading12 nninginaGlobalReading14LifetimeFinancialAdvice:HumanCapital,AssetAllocation,andInsurance 100%ContributionBreedsGlobaltaxationTherearethreeprimarycategoriesofTaxesonPaidbyindividuals,corporations,andotherlegalentitiesonvarioustypesofeincludingwages,interest,dividends,andcapitalgains.Wealth-basedPaidonthevalueofassetsheldandonwealth3.TaxesonSalestaxes:PaidbytheValue-addedtaxes:Paidateachintermediateproductionstepaccordingtotheamountofvalueaddedatthestep;ultima ybornebytheconsumer(addedintothepurchaseprice). 100%ContributionBreedsGlobaltaxationInadditiontoimposingprogressivetaxratesonordinarye,manycountriestaxinvestmentreturnsdifferentlydependingonwhethertheyareintheformofinterest,dividends,orcapitalgains.Forexample,interestanddividendsmightbetaxedatareducedrateortaxedatordinaryratesaftertheyexceedsomeamount.Long-termcapitalgainsareoftentaxedatalowerratethanshort-termcapitalgains,withlong-termdefinitionsvaryingfromonetofiveyearsorso.Inmostcountries,capitalgainstaxesarepaidonlywhencapitalgainsarerealized(i.e.,whentheinvestmentissold). 100%ContributionBreedsSevenglobaltaxOrdinaryeTaxFavorableTreatmentforIntereste?FavorableTreatmentforDividende?CapitalGains?HeavyGainTaxHeavyLightCapitalGainFlatandFlatandThefirstregime,CommonProgressive,isthemostfrequentregimeobservedglobally.Thereis,however,considerablevariationinthespecialtreatmentofinvestmente,withsomecountriesprovidingexemptionforonlypartofinvestmenteandothercountriesprovidingexemptionforallinvestmente.TheUnitedStates,U.K., ,France,Italy,Japan,andmanyothercountriesfallunderthiscategory.TheLightCapitalGainTaxregimeisthesecondmostcommonOnlyonecountry,Columbia,fellundertheHeavyCapitalGainTax 100%ContributionBreeds[(1+R)–RxT]N=[1+R(1-T)FuturevalueAT=PV[1+R(1-Taxesarepaideachperiod,sotheperiodicreturnontheaccountistheafter-taxreturn,R(1-T)Theamountoftaxremovedfromtheaccounteachperioddoesnotearnfuture(compounded)returns Thereductioninreturncausedbythepaymentoftaxesisreferredtoastaxdrag 100%ContributionBreedsTaxdrag:Example:Accountsubjecttoaccrual(annual)taxes$1,000isinvestedfor20yearsandearnsabefore-taxreturnof10%.Assumingtheaccrualtaxrateis30%,calculatetheafter-taxvalueoftheaccountin20years.Notethatifthetaxratewerezero,theinvestmentwouldhavebeenworth:FVT=0=futurevalueassumingnotaxes=$1,000[1+0.10(1−0)]20=$6,727.50gainT=0=totalgainwithnotaxes=$6,727.50-$1,000=$5,727.50FVAT=after-taxfuturevalue(accrualtaxespaidannually)=$1,000[1+0.10(1-0.30)]20=$3,869.68gainAT=totalgainafteraccrualtaxes=$3,869.68−$1,000=$2,869.68gainlosttoThesecalculationshelpillustratethreefundamentalCompoundingofaccrual(annual)taxesmakestheireffectstatedasa%oftotalgaingreaterthanthetaxrate.Thegainlosttotaxes,statedasacurrencyorasa%,isreferredtoastaxdrag.gainlosttotaxes($)=$5,727.50−$2,869.68=$2,857.82=taxdrag$gainlosttotaxes(%)=$2,857.82/$5,727.50=49.9%=taxdrag 100%ContributionBreedsTaxdragVSInvestmenthorizon&Accrual1,Taxdrag%>tax2,Investmenthorizontaxdrag$&%3,Investmentreturntaxdrag$&% 100%ContributionBreedsDeferredcapitalgainUsingTCGasthetaxrateoncapitalgains,theafter-taxfuturevalueinterestfactorfordeferredcapitalgains(FVIFCGT)is:FVIFCGT=(1+R)N–[(1+R)N-1]xTCG=(1+R)N–TCGx(1+R)N+=[(1+R)N(1−TCG)+ 100%ContributionBreedsDeferredcapitalgainSummarizingthesamethreerelationshipsweexaminedforaccrualtaxes,weseethattheyarequitedifferentwhencapitalgainstaxesareappliedonadeferredbasis:Taxdrag%=taxAstheinvestmenthorizonincreases⇒taxdrag%isAstheinvestmentreturnincreases⇒taxdrag%isunchanged.Inaddition,whentaxesaredeferred:Asinvestmenthorizonincreases⇒thevalueofthetaxdeferralAsinvestmentreturnincreases⇒thevalueofthetaxdeferral 100%ContributionBreedsCostWehaveassumedthatthecostbasisforcomputingtaxesistheinvestment’scurrentvalue($1,000),asifweinvestedafter-taxdollars.However,thecostbasisisoftendifferentfromtheinvestment’scurrentvalue.Forexample,thecostbasiscouldbetheoriginalpurchasepriceandthecurrentvalueof$1,000representstheoriginalcostplusunrealizedcapitalgains.Allelseequal,reducingthecostbasisincreasestherealizedcapitalgain,increasestheamountofcapitalgainstaxesdue,andreducesthenetsellingprice.Thuswemodifyourdeferredcapitalgainstaxformulatoaccountforthebasis(B):FVIFCGT,MV≠Basis=[(1+R)N(1−TCG)]+=[(1+R)N(1−TCG)]+TCG–(1- 100%ContributionBreedsWealth‐basedInsomecountries,wealth-basedtaxesareassessedannually(similartoaccrualetaxes)onthevalueofassetsheld.Unlikeaccrualtaxesandcapitalgainstaxes,whicharepaidonjusttheinvestmentreturn,wealth-basedtaxesareappliedtoboththeprincipalandreturn.Theyaremostoftenappliedtorealestate,asintheU.K.Fortuna ythewealth-basedtaxrateisusuallylowerinpercentagetermsthanaccrualandcapitalgainstaxrates.ContinuingthenotationfrombeforeexceptthatTWisthewealth-basedtaxrate,thefuturevalueinterestfactorafterthewealth-basedtax(FVIFWT)is:FVIFWT=[(1+R)(1− 100%ContributionBreedsAccountsubjecttowealth‐basedtaxes‐Continuing,assume$1,000isinvestedfor20yearsandearnsareturnof10%.Assumingtheaccountissubjectonlytoawealth-basedtaxof2%,calculatetheafter-taxvalueoftheaccountin20years.FVT=0=futurevalueassumingnotaxes=$1,000FVWT=futurevalueassumingtaxes=$1,000[(1+0.10)(1-Becausethewealthtaxisappliedtotheentireaccount(bothprincipalandreturns),thisfuturevalueisnotdirectlycomparabletothosewhenaccrualorcapitalgainstaxesareapplied.Notehoweverthattheterminalvalueof$4,491.33isconsiderablylessthanthe$6,727.50before-taxterminalvalue.When2%wealthtaxesarepaidannually:taxdrag$=$6,727.50-$4,491.33=taxdrag%=$2,236.17/($6,727.50-$1,000)= 100%ContributionBreedsWealth‐basedForwealth-basedtaxes,thethreeprimaryrelationshipscanbesummarizedas:Taxdrag%>taxAsinvestmenthorizonincreases⇒taxdrag%andtaxdrag$increase.Asinvestmentreturnincreases⇒taxdrag$increases;taxdrag%decreases.AssumeN=1,whenRincrease,Taxdrag% 100%ContributionBreedsBlendtaxingTocalculatetheafter-taxreturnontheaccount,wemultiplythebeforetaxreturn(R)times1minusrealizedtaxrate,whichconsiderstheproportionofeachformofgainwithitsspecifictaxrate:realizedtaxTherealizedtaxrateisnothingmorethantheweightedaveragetaxratepaidbytheinvestor.Pistheweight(proportion)ofeachtypeofreturn,e,dividend,orrealizedcapitalgain,andTisthetaxrateoneachtypeofreturn.Multiplyingeachtaxratebytherelatedproportionyieldstheweightedaveragetaxrate.Usingthesamesubscriptsforthetaxrates,T,asfortheproportions,P,theannualreturnafterrealizedtaxesonintereste,dividends,andrealizedcapitalgains(RART)is:RART=R(1-realizedtaxrate)=R[1- 100%ContributionBreedsBlendtaxingIx Dx

CGx

UCGx??TECG=UCGx 100%ContributionBreedsEffectivecapitalgainTocalculatetheeffectivecapitalgainstaxrate(TECG)thatadjustsfortheannualtaxesalreadypaidoninterest,dividends,andrealizedcapitalgains,weusethefollowing:Usingreturnafterrealizedtaxes(RART)andtheeffectivedeferredcapitalgainstaxrate(TECG),thefuturevalueinterestfactorconsideringalltaxesaswellasthecostbasisoftheaccount(FVIFT)is:RART=R(1-realizedtaxrate)=R[1- 100%ContributionBreedsEffectivecapitalgaintax–ExampleNoteBeginningoftheyear:MVEndoftheyear:MVTaxTotaltaxesTECG*[10,000-(TI+TD+TCG)]=700 100%ContributionBreedsEffectivecapitalgaintax–FutureUsereturnafterrealizedtaxes(RART)andtheeffectivedeferredcapitalgainstaxrate(TECG)tocalculatethefuturevaluebyconsideringthecostbasis:FVIFT=SeeNoteP240RARTCostbasis=TECG=B=75,000/100,000= 100%ContributionBreedsAccrualequivalentafter‐taxAccrualequivalentafter‐taxreturn:theannualreturnthatproducesthesameterminalvalueasthetaxableportfolio.YoucanthinkitasEffectiveannualreturnUsetheFVIFTinthepreviousexample=PV=N=RAE= 100%ContributionBreedsAccrualequivalenttaxUsingtheaccrualequivalentafter-taxreturn,wecancalculateanaccrualequivalenttaxrate.Theaccrualequivalenttaxrate(TAE)isthetaxratethatmakesthepre-taxreturn(R)equaltotheaccrualequivalentafter-taxreturn(RAE).Thinkofitastheoveralleffectivetaxrateontheaccount,consideringbothaccrualanddeferredRAE=R(1-TAE)⇒TAE=1–

Inouraccrualequivalentreturnexample,theaccrualequivalentafter-taxreturnis7.76%andthepre-taxreturnis10%.Calculatetheaccrualequivalenttaxrate.theaccrualequivalenttaxrateTAE=1–0.0776/0.10=0.224=Thelowertheaccrualequivalenttaxrate,themoretax-efficientthe 100%ContributionBreedsTypesofinvestmentSometimes,thetypesofinvestmentaccountsoverridethetaxtreatmentofaninvestmentbasedonitsassetclass.taxableaccounts:investmentsaremadeonanafter-taxbasisandreturnsaretaxedinavarietyofways.tax-deferredaccumulationofreturns,butfundsaretaxedwhenFVIFTDA=(1+r)n(1-Tax-exemptaccountsdonotallowtax-deductiblecontributions,butallowtax-exemptaccumulationofreturnsevenwhenfundsareFVIFTEA=(1+ 100%ContributionBreedsTypesofinvestment$100,000investedineachfour1,taxed 2,deferredcapitalgainFVIFAT=[(1+R)N(1‐TCG)]+TCG=>$100,000[(1+0.09)303,taxeddeferredaccountFVIFAT=(1+R)N(1‐TN)=>$100,000[(1+0.09)304,taxexempt =>$100,000(1+0.09)30 100%ContributionBreedsTaxdeferredversustaxexemptFVIFTEA=(1‐T0)>>==<< 100%ContributionBreedsTaxandInvestmentInTaxedAccount‐ ernment(taxingauthority)bearspartoftheinvestmentInTax‐exemptaccount–Theinvestorsbearsalltheinvestment 100%ContributionBreedsTaxandInvestmentInTaxedAccount‐ ernment(taxingauthority)bearspartoftheinvestmentInTax‐exemptaccount–Theinvestorsbearsalltheinvestment 100%ContributionBreedsThetaxeffectsoftradingFromstrictlyatax‐managementstandpoint,aninvestorshouldlocateheavilytaxedassetsintaxadvantagedaccountsandholdlightlytaxedassetsintaxableaccounts.thevaluecreatedbytheeffectivetaxmanagementofinvestmentsisreferredtoasthetaxInmostcountriesthestrategywouldbeto ceequityintaxableaccounts,becausetheircurrenteislowerthanthatforbondsandcapitalgainscanoftenbedeferred.Bonds,withtheirhighercurrente,wouldbe cedinatax‐protectedaccount,suchasaTDA.Inadditiontoexaminingassetlocationasasourceoftaxminimization,wecanalsoexamineaninvestor’stradingbehavior.1.Traders—duetofrequenttrading,tradersforgothetaxadvantagesassociatedwithequity.Allgainsareshort‐termandarethustaxedonanannualbasis.2.Activeinvestors—activeinvestorstradelessfrequentlythantraderssothatmanyoftheirgainsarelonger‐terminnatureandtaxedatlowerrates.3.Passiveinvestors—passiveinvestorsbuyandholdequitysothatgainsaredeferredlong‐termandtaxedatpreferentialrates.4.Exemptinvestors—exemptinvestorsholdalltheirstockintax‐exempttherebyavoidingtaxation 100%ContributionBreedsTaxlossharvestingandHIFOTaxLotTaxlossharvestingisthepracticeofusinginvestmentlossestooffsetinvestmentgainsoreandthusavoidtheassociatedtaxes.Highest-In/First-Out(HIFO)TaxLotOvertime,investorsoftenaccumulatelargepositionsinsinglesecuritiesbypurchasingseverallotsatdifferentprices.whenallowHIFOaccounting,investorscangeneratesignificanttaxsavingsbyfirstliquidatinglotswiththehighestcostbases.Liketaxlossharvesting,HIFOallowsthetaxsavingstobereinvestedearlier,creatingataxalphathatcompoundsthroughtime. 100%ContributionBreedsSummaryofReadingsandReading11TaxesandPrivateWealthManagementinaGlobalReading12 nninginaGlobalReading14LifetimeFinancialAdvice:HumanCapital,AssetAllocation,andInsurance 100%ContributionBreeds nningassociatedwithtransferringestatetoothersduringlifetimeoratdeathMostcommontoolisaAlsoknownasa transferringassetsthroughawillisknownasWillsaresubjectto 100%ContributionBreedsCourtdeterminesvalidityofthedecedent’swill,inventoriesthedecedent’spropertyresolvesanyclaimsagainstthedecedentdistributesremainingpropertyaccordingtothewillIndividualsoftentakestepstoavoidExpensive,timeconsuming,CanbeplishedJointownershipwithrightsofLivingtrusts, ns,lifeOthermeansthattransferassetswithouttheneedfora 100%ContributionBreedsSubjecttogiftCanbesubject 100%ContributionBreedsdheirshipSpouseandChildrenhavetherightto Claw-backprovisionscanmakegiftrecipientsreturnportionsofpriorEachspousehasrightto½theother’s 100%ContributionBreedsCoreCoreCapitalistheamountofassets(i.e.,presentvalue)necessarytomeetallfutureliabilities Excesscapitalcanbetransferredtothenextgeneration,charities,CorePVofall 100%ContributionBreeds MortalitytablesshowaverageremainingyearsbasedonattainingagivenageHusbandandwifecurrently79and68.Fromthetablethewifehasa98.31%probabilityoflivingonemoreyear(toage69)and90.25%probabilityofliving5moreyears(toage73).Forthehusbandthepercentagesare93.55and66.86,respectively. 100%ContributionBreedsIndividualandJointMortalityProbabilitiesandCore(2%(2%AgeAge123456 100%ContributionBreeds Usingthetable,determinetheprobabilitythatthehusband,wife,orbothlive6years Usingthetable,calculatecorecapitalforyearsiftherisk- is2% Ifthefamilyhasaportfolioof$1,500,000,determine(basedsolelyontheinformationprovided)the umamounttheycouldgiveto 100%ContributionBreedsFromthemortalitytable,weseetheprobabilityofsurviving6yearsforthehusbandandwifeare60.01%and 87.85%,respectively.Theprobabilitythatoneorbothwillsurvive6years(Comb.Prob.)iscalculatedasfollows:=Prob(husbandsurvives)+Prob(wifesurvives)-Prob(husbandsurvives)*Prob(wifesurvives)=0.6001+0.8785-(0.6001)(0.8785)= 100%ContributionBreedsTheamountofcorecapitalrequiredfor6yearsis：CoreCapital6=

;r=real =P(surv1)(spending1)+...+P(surv6)(spending6) 100%ContributionBreedsExcesscapitalisanyamountabovethecorecapitalBasedsolelyontheinformationprovidedandusinga horizon,theyhaveexcesscapitalof:Excesscapital=totalcapital–corecapital=$1,500,000-$1,153,472Coulddonateto 100%ContributionBreedsMortalitytablesassumethereis0%probabilityoflivingonemorethan100yearsInrealitythereisanon-zero couldlivelongerthantheaveragenumberof 100%ContributionBreedsOftenutilizedinretirement nningtodeterminethesizeoftheportfoliorequiredtomeetadesiredretirementlifestyleTheoutputisadistributionofportfoliosizesalongwiththeirrespectiveprobabilitiesofmeetingthe ’scashflowdesires