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Many of us are resistant to change and, in many cases, look for ways to avoid it. In investments, this aversion is complicated by the fact that near term costs – such as capital gains tax – are offset with future gains which are uncertain in terms of both timing and magnitude. In addition to this uncertainty, the expected future gain as a result of making a change may not even materialise!
However, for well-considered investment decisions, we believe there are material long term benefits in making changes to an investment portfolio, but where capital gains tax needs to be paid upfront.
In this month’s comment we step through the typical thought process to understand the implications of making portfolio changes, and importantly the implications of avoiding changes.