The Hidden Cost Of Investment Income
•February 3, 2026
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Why It Matters
Understanding the hidden costs of forced income is crucial for affluent investors seeking to maximize after‑tax returns, especially as tax rates remain high and investment products evolve. The episode highlights actionable strategies—like dividend‑avoiding ETFs—that can materially improve wealth preservation, making the insights timely for anyone managing taxable portfolios.
The Hidden Cost Of Investment Income
For decades, investors have viewed bond interest and REIT dividends as desirable portfolio features. But a new analysis from Longview Research Partners challenges this assumption, revealing that forced investment income may be costing high‑net‑worth investors over 1% per year in after‑tax wealth.
What The Authors Examined
The paper examines a fundamental question: what if investors could access the returns of fixed income and other high‑yielding assets without receiving forced distributions? Using innovations in the ETF space—specifically, strategies that rotate between similar funds before dividends are paid—the authors analyzed the total impact of income avoidance on after‑tax wealth.
Their analysis breaks down the benefits into four quantifiable categories: eliminating cash drag, deferring taxation, converting ordinary income to capital gains, and unlocking financial planning flexibility. Each benefit was calculated separately, then combined to show the total advantage for investors in high tax brackets managing taxable accounts.
Key Findings: The Four Hidden Costs Of Forced Income
1. Cash Drag Costs More Than You Think
You can read the rest of the Financial Advisor article here.
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