Vanguard warns investors of double whammy
Come tax time, plenty of investors may be hit with a “double whammy”, according to Vanguard Investments, which released a new after-tax returns analysis today warning Australians to brace for capital losses and a hefty tax bill.
Vanguard manager of retail products and technical services Michael Houlihan said Morningstar data points to major funds that are on track hitting investors with this tough combination.
“During periods of market volatility, investors tend to concentrate on their absolute returns.
“But when the volatility settles, the after-tax impact of their investment becomes the most important number for investors,” he said.
Vanguard compared the average income and growth returns for the top 20 Australian equity wholesale funds by size and total market for the year ended December 31, 2007.
The financial services group found that, while the top 20 Australian equity funds delivered a sound 13.7 per cent headline return for the 2007 calendar year, the growth and income components told a different story, 3.9 per cent delivered in negative growth and 17.6 per cent in income.
This compares to the total market, which delivered almost no growth while income levels effectively matched the total return.
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