Tax Drag Matters More Than Investors Think

Columbia Threadneedle’s Seth Buks examines how tax friction can quietly erode compounding and why asset location deserves a more strategic role in portfolio construction.

• A 1.5% annual tax drag can reduce a $1 million portfolio growing at 8% by more than $250,000 over 10 years.
• The report argues that traditional location rules are often too simplistic, and that investors should weigh tax efficiency alongside expected returns.
• Higher-upside assets with similar tax treatment may be better placed in tax-free accounts to preserve more after-tax alpha.

How much return is being lost not from asset selection—but from where assets are held? The full note explores the compounding implications.