The
term "silent partners" refers to the
numerous parties who silently share in the realized
and unrealized gains on an investment. Fees,
expenses, taxes, and inflation are silent partners
that can set an investor back before returns
even begin. The investment costs alone of the
average active fund can consume nearly fifty-five
percent of its gross wealth. By investing in
index funds, however, high costs and high taxes
can be avoided. In this case, the only uncontrollable
partner is inflation.
Step 7 : Program Overview
Index
funds can be tax-managed as well. Index
funds have natural advantages from a tax
standpoint. Managers of index funds employ
tax-managed trading strategies, while managers
of active funds manage money as though taxes
do not matter.
