Don't Pay This Hidden Portfolio Tax

Editor's note: Here at Empire Financial Daily, we've frequently heard from our friend and colleague Marc Chaikin, the founder of our sister company Chaikin Analytics. Today, we're sharing some insights from Marc's colleague Pete Carmasino... Pete's experience spans more than 25 years in the financial-services industry. Before joining Chaikin Analytics, he owned and operated a registered […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Editor's note: Here at Empire Financial Daily, we've frequently heard from our friend and colleague Marc Chaikin, the founder of our sister company Chaikin Analytics. Today, we're sharing some insights from Marc's colleague Pete Carmasino... Pete's experience spans more than 25 years in the financial-services industry. Before joining Chaikin Analytics, he owned and operated a registered investment advisory ("RIA") firm, and he spent most of his career as a portfolio manager for high-net-worth families, individuals, and institutions. At Chaikin Analytics, Pete serves as the chief market strategist. In today's essay, Pete shares the best way to beat a "hidden tax" on your portfolio... --------------------------------------------------------------- Don't Pay This Hidden Portfolio Tax By Pete Carmasino --------------------------------------------------------------- [Changing how we do business]( Empire Financial Research has just changed forever... And we couldn't be more excited. This change has been years in the making, and we're finally ready to begin. [Please click here to see the details](. --------------------------------------------------------------- The mainstream media loves to dwell on our current inflation problem... But these so-called "experts" fail to help us understand the math behind solving it. Folks, the federal government recently released the July update for the Consumer Price Index ("CPI"). It was up 8.5% year over year, slightly lower than the 9.1% in June. Based on that, the media would lead you to believe that earning at least 8.6% on your money will beat inflation. After all, that's a higher return than the CPI increase. But the thing is... that's wrong. In reality, the average American needs to earn more than 11% on their money just to match inflation in a taxable account. You read that right... A formal definition doesn't exist for what I'm talking about, but I call it the "Taxable Equivalent Inflation Return." That's what you need to actually beat inflation. --------------------------------------------------------------- Recommended Link: [The 'inflation-proof' move no one's talking about]( Savvy Americans have found the perfect way to beat inflation. It's easy and [can even be done online for just $4](. --------------------------------------------------------------- Today, I want to explain why this return is so important to investors... Inflation is the "hidden tax." And it seeps into nearly every corner of the supply chain. Fuel is the classic example... American consumerism depends on diesel trucks. And while fuel prices have softened a little in recent weeks, they're still high. Highway diesel costs $5.12 per gallon today, up roughly 50% over the past year. That means moving products around the country is still expensive. And in turn, everything we buy from the store costs more to offset those higher transportation costs. The prices of commodities like steel, copper, lumber, chemicals, and plastics are up, too. And as their prices rise, so do the prices of the end products. That all makes sense. It's simple to understand the process of rising inflation – especially since we're living through it right now. But as investors, the real problem for us is beating inflation... As we learned, inflation is at 8.5%. So you might think that's the hurdle to clear. Unfortunately, with all these compounding costs, it's much higher... To keep pace with inflation, you need to account for an after-tax return. Now, I'm not a tax professional. But the raw math is simple... First, you need to define your tax rate, not the bracket. The tax rate is what you end up paying after all your deductions. Let's say your tax rate is 25%. (Keep in mind that Uncle Sam generally taxes short-term capital gains at your ordinary income rate. And he typically taxes long-term gains at a flat 15%.) Convert that percentage to a number (0.25) and subtract it from the number 1. That equals 0.75 (or 75%). Next, take the target return – in this case, the current inflation rate of 8.5% – and divide that by 0.75. You should get 11.33%. In other words, as I said earlier, many Americans need to earn more than 11% just to break even in today's economy. That's what I call your Taxable Equivalent Inflation Return. And as you can see, it's an incredibly high bar to clear. So where can you get 11.33% returns on your money just to match inflation? The answer is the same today as it was 40 years ago... the stock market. Despite the downturn so far this year, stocks are still your best hedge against inflation. And now more than ever, you need a market strategy capable of producing strong returns. Remember, anything less than 11.33% means you're paying the hidden tax. And that's on top of all the goods and services that you're already paying more to buy. To know where to put my money to work, I turn to Chaikin Analytics' Power Gauge. Our one-of-a-kind system helps everyday investors like us uncover the "best of the best" opportunities in the market at any time. But no matter what tools you use, make sure you don't pay this hidden tax in your portfolio. Regards, Pete Carmasino September 1, 2022 Editor's note: Months ago, Marc predicted that we were about to see a dramatic bearish shift in U.S. stocks. Almost like clockwork, we suffered the worst sell-off in half a century. But even folks who have made the right moves in just the handful of sectors that defied the odds are now in trouble... And if you're wondering where to move your money – and what comes next – you won't want to miss Marc's most urgent warning yet. [Get the full story here](. --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to the Empire Financial Daily e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. 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