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Principle #7: Income Tax Efficiency

How you implement your asset mix and construct your investment portfolio is as important as determining the proper asset mix, and proper implementation will greatly impact your overall performance.

For most investors, income tax is always going to be a large expense, so saving tax is one of your greatest opportunities to increase the size of your portfolio.

Most investors can save more than they expect by following an income tax awareness strategy. Income tax awareness includes simple steps such as holding interest producing assets inside the RRSPs and the riskier equity assets outside the RRSP. It also includes having the higher income spouse pay expenses while the lower income spouse invests. There are also more complicated strategies that involve insurance and estate planning. Investors should always look for tax loss harvesting opportunities.