Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Bio
X •  LinkedIn
 

  One Way To Make Investing A Bit Less Taxing
Posted Under: Conceptual Investing
Supporting Image for Blog Post

 

View from the Observation Deck

  1. The Obama Administration pushed hard for Congress to raise taxes on the wealthiest Americans following last year's presidential election. Congress did.
  2. The discussion, however, did not end with the passage of the American Taxpayer Relief Act. The Obama Administration continues to push for addition sources of revenue.
  3. While the new tax law raises the top federal marginal rate from 35% to 39.6% starting in 2013, income levels below the top rate were permanently extended, including the 15% maximum tax rate on qualified stock dividends.
  4. One of the ways that investors can position some of their capital to potentially generate a more tax-efficient total return is to combine dividend-paying stocks with municipal bonds (see chart).
  5. The two indices referenced in the chart were chosen simply for illustrative purposes. The Dow Jones U.S. Select Dividend Index is one of the original dividend-paying stock indices.
  6. Looking ahead, we believe the demand for municipal bonds will remain strong as more and more Americans are forced to seek out ways to offset any future tax burdens.
  7. We see the demand for dividend-paying stocks actually rising in the years ahead as approximately 10,000 baby boomers, on average, turn 65 years old every day for the next 20 years, according to the Federal Reserve.
  8. With Americans living longer, we believe retirees will need greater exposure to growth and income-oriented securities, such as dividend-paying stocks, to cover living expenses.
  9. Combining dividend-paying stocks with municipal bonds in a buy and hold strategy is one way of navigating through a challenging tax climate, in our opinion.


This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The Dow Jones U.S. Select Dividend Index represents the most widely traded of the market's highest-yielding stocks, while the Barclays Capital Municipal Bond: Long Bond (22+) Subindex tracks the four main sectors (state and local general obligation bonds, revenue bonds, insured bonds and pre-refunded bonds) of the USD-denominated long-term tax exempt bond market.

To Download a PDF of this post, please click here.

Posted on Tuesday, May 7, 2013 @ 3:45 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Market Commentary Video
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
Profits! Not the Prophets of Doom.
Nothing To Fear But Fear Itself So Far In 2013
Even Volatility Is Relative
It Was Short And Sweet For Bond Investors In Q1
The Epicenter Of The Stock Dividend Story
More Jobs The Key For Equity REITs
Dollar’s Strength Has Not Derailed U.S. Bull Market In Stocks
Discretion Is The Better Part Of Valor
Six S&P 500 Subsectors Have The “Big Mo”
Why Investors Are Playing It Safe
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.