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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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The danger of inflation and taxes on a portfolio
Lagging investments can outpace when inflation, taxes, costs factored in |
By Sam Mamudi, MarketWatch
NEW YORK (MarketWatch) -- Most investors have heard of real returns -- returns calculated after inflation -- but perhaps not enough have considered what one investment manager calls "real real returns" -- the impact that inflation, investing costs and taxes can have on a portfolio.
Adding in the damage these factors cause might change how investors look at certain asset classes.
For example, over the past 30 years, municipal bonds have delivered average annual nominal returns of 7.5%, the worst of any bond category. But once inflation, costs and taxes are taken into account, munis prove to have been the best fixed-income investment, with an average annual return of 3.3%, according to a study by Thornburg Investment Management.
The difference in nominal returns and what Thornburg terms "real real returns" is important because it's likely that both inflation and taxes will eventually rise.
"The factors that impact nominal returns aren't going away," said Johnathan Burnham, managing director at Thornburg. "Tax rates certainly aren't going down from here."
Thornburg has long argued that investors need to look at their portfolios with an eye on returns adjusted for inflation as well as taxes and investing costs. While everyone's circumstances are different -- different tax brackets and investment expenses, for example -- the firm believes its numbers can be broadly applied.
"The general picture is pretty clear," said Burnham.
Thornburg developed its so-called "real real return" study in the mid-1980s using a proprietary formula. The figures it provides may surprise investors, and illustrate just how much inflation and taxes affect returns.
In the latest study, released this week, Thornburg found that $100 invested in the S&P 500 stock index (SPX 1,085, -4.03, -0.37%) at the end of 1979 would on Dec. 31, 2009 have been $2,440 -- an average of 11.2% a year over the period. But using their calculations, returns after inflation, taxes and expenses would have been $459, or 5.2% a year.
For the complete article visit MarketWatch
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| Stuff to look at |
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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