After-tax returns

Although you may be happy that your stock has given you an 11 percent
return on your invested dollars, remember that unless you held your investment in a tax-sheltered retirement account, you owe taxes on your return.
Specifically, the dividends and investment appreciation that you realize
upon selling are taxed, although often at relatively low rates. The tax rates
on so-called long-term capital gains and stock dividends are lower than the
tax rates on other income. In Chapter 3, I discuss the different tax rates that
affect your investments and explain how to make tax-wise investment decisions that fit with your overall personal financial situation and goals.
If you’ve invested in savings accounts, money market accounts, or bonds,
you owe Uncle Sam taxes on the interest.
Often, people make investing decisions without considering the tax consequences of their moves. This is a big mistake. What good is making money if
the federal and state governments take away a substantial portion of it?
If you’re in a moderate tax bracket, taxes on your investment probably run in the
neighborhood of 30 percent (federal and state). So if your investment returned 7
percent before taxes, you’re left with a return of 4.9 percent after taxes.