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• Keep brokerage commissions and fees under control (under 1%).
• Don't let the tax tail wag the dog.
  • If you've decided you should sell (or replace) a stock, the need to pay capital gain taxes on any gain shouldn't usually be a reason to change your mind.
  • Most stocks you buy will be sold eventually.  It's a question of when (not if) you'll pay capital gain taxes.
  • It doesn't take a tremendous amount of improvement in actual return to make up for paying taxes sooner rather than later (i.e., the loss of tax deferal).  However, the situation is more complicated when you're evaluating potential return (i.e., return as shown on the SSG).
• The SSG shows you only one potential return.
  • Your actual return will likely be different than the potential return shown on an SSG.
  • Remember that an SSG also shows a potential for loss.
  • Don't sacrifice quality to improve potential return.
  • Don't replace an otherwise good stock for no other reason than to improve potential return by a small amount (one or two percentage points).
• A traditional NAIC "Cost to Switch" comparison can be misleading.
  • It's like comparing one person's assets (the value of a stock before you've sold it) with another person's net worth (the value of the cash you'll have after selling that stock and paying taxes) to determine who's "richer".  You seem "richer" when you ignore your liabilities (i.e., when you look at your assets rather than your net worth).  But, your liabilities are there whether you ignore them or not.
  • At present (April 2005) NAIC Toolkit version 5 is alone among official NAIC software in providing (as part of its Challenger tool) a "cost to switch" comparison that consistently accounts for capital gain taxes.  In the comparisons provided by NAIC Stock Analyst and earlier versions of Toolkit, capital gain taxes are not accounted for in a consistent manner.