Many types of investments come with taxes. While there is nothing wrong with that, it is sometimes frustrating to think that many of the potential returns from your hard work go directly to taxes. If your goal is to invest and earn more, you should look into investments that are tax-efficient and offer you the potential for attractive after-tax returns.
Fortunately, several alternative investments allow you to enjoy tax-efficient investment, helping you strive to improve your financial gains through completely legal means. These let you work to boost your wealth instead of letting a huge amount of it go to tax authorities.
If you are interested in alternative investments, here are two investment options you can consider:
Alternative Investment #1: ETFs
Exchange-Traded Fund (ETF) is one of the more popular alternative investments available on the market. It is a marketable security that holds several assets, including stocks, bonds, and commodities, designed to keep its trading as close as possible to its net asset value. Although ETF generally attracts lower costs compared to traditional mutual funds, it is not entirely tax-free. The difference with this is that it has a significant advantage in how its tax liabilities are structured.
The key things to remember about ETF:
- Any gains you make through alternative investments in an ETF are taxed only when you sell.
- ETF has significantly fewer tax liabilities compared to mutual funds
If you want to create a tax-efficient long-term portfolio with an ETF, it would be best to seek expert advice and assistance from trusted and reliable financial experts. They will help you reap the most tax-deferral benefits of such an alternative investment.
Alternative Investment #2: MLP
Master Limited Partnership (MLP) is also one of the most practiced alternative investments wherein you can receive a combination of the tax benefits of private, limited partnerships alongside the liquidity of publicly traded securities. Although its tax implications may be complex to individual investors, it is worth exploring this alternative investment as this can give you similar advantageous tax benefits to those you can get from a Real Estate Investment Trust (REIT).
The key things you need to have to qualify for MLP:
- Your MLP income should be from a qualifying source, either extracted, explored, or produced from alternative fuels and mining
- No less than 90 percent of your income should be derived from IRS-recognized qualifying sources
Conclusion
Investment is always a priority for people who want to grow their wealth in general. However, if you want to legally avoid losing a significant portion of your potential returns to tax authorities, you may consider entering the alternative investments industry. These alternatives allow you to enjoy tax-efficient investments, potentially enabling you to earn more.
Two of the alternatives that you can get are the Exchange Traded Fund (ETF) and the Master Limited Partnership (MLP). The key to holding on to more of your returns is by keeping a close eye on how various taxes impact and influence your investments.
If you want to try various alternative investments, get in touch with us today. Our team provides comprehensive and expert financial planning services and investment management to family estates and high-net-worth individuals!