After-Tax Return: The Only Return That Actually Compounds
A decision stub for measuring portfolio outcomes by after-tax compounding, not stated gross return.
Applies to
Investors comparing taxable portfolio strategies where dividends, turnover, capital-gain distributions, and final sale taxes can change the real outcome.
Skip if
You are comparing assets only inside tax-advantaged accounts where annual taxable distributions do not apply.
Decision this article should answer
Is the portfolio still attractive after annual tax drag and final liquidation tax?
Calculator connection
Use the After-Tax Portfolio Drag Analyzer to compare pre-tax ending value, after-tax ending value, annual drag, and effective after-tax return.
Stub outline
- Define gross return, pre-tax return, and after-tax return.
- Separate avoidable drag from unavoidable tax cost.
- Show why small annual drag differences compound into large terminal value differences.
- End with a decision memo template and assumptions checklist.
Guardrails
This article should not recommend transactions or claim current-year tax treatment. It should explain the framework and point readers to professional review for state rules, NIIT, phaseouts, and tax-lot details.
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