bodhisattva

Thanks, I totally forget how to calculate tax drag.

TaxDrag_w(TD_w)=(G_BT-G_AT)/G_BT=1-([(1+R)(1-tw)]^N-1)/((1+R)^N-1)

The above will look much neater on paper, so no worry.

Here is a trick I got today: no need to memorize anything, as long as we know TD%.

1). as Investment horizon increases => Tax drag increases?
-- set N=large number, then
TD_w ?? 1-(1-tw)^N ==> TD_w increases as N increases.

2). as Investment return increases => Tax drag decreases?
-- set N=1, then
TD_w = tw+tw/R ==> TD_w decreases as R increases.

I tried the partial derivative approach, it's just not worth it.