You're wasting 5-10% of your money every year.

Hey there!

Welcome to the WOLF Financial Newsletter.

If you want to join over 12,500 other investors who want to build wealth and learn advanced investing strategies live on Twitter Spaces, subscribe below:

I guarantee you're wasting 5-10% of your money every year.

Financial freedom isn't about being a great investor, it's about being 𝗲𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝘁.

Here are the 4 biggest wealth transfers working against your money (and how to minimize them):

𝟭. 𝗜𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗹𝗼𝘀𝘀

Look at Warren Buffet’s famous investing rules:

Rule #1: Don’t lose money.

Rule #2: Don’t forget Rule #1.

If you start with a loss, it's extremely difficult to recover.

Never buy into something you don't fully understand.

The misconceptions of average vs. actual returns:

Here’s an example...

You start with $10,000 invested.

• Year 1 = +100% return

• End balance = $20,000

• Year 2 = -50% return

• End balance = $10,000

Average return = +25%

Actual return = 0%

Over 2 years, your average return of 25% led to an actual return of 0%.

Average returns do NOT equal actual returns.

𝗛𝗼𝘄 𝘁𝗼 𝗺𝗶𝗻𝗶𝗺𝗶𝘇𝗲: When you make an investment decision, do your research and play the long game.

The fastest way to lose money in the stock market is to play short-term games.

𝟮. 𝗧𝗮𝘅𝗲𝘀

“There are two things that are certain in this world, death and taxes.”

While you can’t avoid taxes completely (that would be fraud), you can find ways to minimize them.

First, let's start with the different types of investment-related taxes to be aware of:

Capital gains tax.

A capital gain is a profit from the sale of an asset.

If you hold the asset for longer than one year, it’s taxed at the long-term capital gains rate of either 15% or 20%.

If you sell the asset within one year of owning it, it’s considered short-term and taxed at your ordinary income tax rate, which for many, is a higher rate.

Taxes on dividends.

If your money is in a taxable account, any dividends that get kicked back into the portfolio (or distributed out to you) are treated as taxable income.

Income tax.

Everyone’s biggest expense… income tax. As a W2 employee, it's difficult to minimize your tax bill, but if you own your own business, you can write off many of your expenses.

𝗛𝗼𝘄 𝘁𝗼 𝗺𝗶𝗻𝗶𝗺𝗶𝘇𝗲: Use tax-loss harvesting to lower your capital gains tax, hold investments for at least 1 year, and look to itemize your deductions on your taxes rather than taking the standard deduction.

𝟯. 𝗙𝗲𝗲𝘀

Often referred to as the “hidden tax” of investing.

There are 3 main types of fees causing a significant drag on your investments.

Management fees / Broker fees.

Whether you are working with a financial advisor or doing your own investing, always be aware of what the management fees are.

The industry average is around a 1% annual fee if working with an advisor. If investing on your own, there are likely still annual fees through the broker-dealer you use.

Expense ratios.

With almost all funds (mutual funds and ETFs), there is an expense ratio, which is an annual operating expense to own the fund.

For ETFs, it’s somewhere around 0.02% to 0.15% per year. And for mutual funds, they range all over the board from 0.25% to 1+%.

Commissions / Sales loads.

When buying or selling funds, there’s typically a sales load or commission that gets charged on the transaction.

Always know what these are before placing trades through your broker-dealer.

𝗛𝗼𝘄 𝘁𝗼 𝗺𝗶𝗻𝗶𝗺𝗶𝘇𝗲: If working with an advisor, always ask if there are any upfront sales charges for investing and what the ongoing annual and maintenance fees are for the account.

If doing your own investing, there are plenty of platforms out there that have minimal annual and trading fees.

𝟰. 𝗖𝗮𝗿𝗲𝗹𝗲𝘀𝘀 𝗦𝗽𝗲𝗻𝗱𝗶𝗻𝗴

Wasting money through unnecessary spending is easily one of the biggest drags on efficiency.

The more you spend on meaningless junk, the less you have to save and invest for your future.

Instead of buying the latest trend, take that money and invest it.

Most people aim to save at least 15-20% of their income. But for many, that’s a stretch.

𝗛𝗼𝘄 𝘁𝗼 𝗺𝗶𝗻𝗶𝗺𝗶𝘇𝗲: Always pay yourself first by setting up an automatic monthly deposit that goes into your investment account. Treat it as an expense.

Create a budget. Make a plan for every dollar you have coming in.

And that’s a wrap! The 4 biggest wealth transfers eroding your investment returns and how to minimize them.

Thanks for reading!

If you enjoyed this thread, smash that repost button and follow me @WOLF_Financial for more.

If you liked this issue, be sure to get all future issues by subscribing below: