Re: Tax Efficient Investing
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The idea is correct, but I should have clarified. I was talking about taking an index fund and making it a tax efficient index fund, not comparing a tax efficient fund to some other random index.
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The idea is based on a faulty premise that indeces are perfectly efficient. If anything, I'd bet that tax management adds alpha compared to the normal approach even before taxes are considered: 1. It avoids index reconstitution arbitrage that plagues major indeces like S&P 500, Russell 2000. 2. It can reduce turnover and thus transaction costs. Managers of normal index funds worry more about reducing tracking error(negative tracking error sends investors to other providers) than providing maximal returns.
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