Solutions No Estate Estate Asset Core and Tax Loss Plan Plan Location Satellite Harvesting The Jones Family         Children's Expected Wealth         in 20 Years         Nominal ($ millions) 37.3 47.5 51.6 53.2 53.7 Real ($ millions) 20.6 26.3 28.6 29.5 29.8 Annualized Return Net of         Income and Estate Taxes         Nominal 1.26% 3.26% 3.69% 3.85% 3.90% Real -1.69% 0.25% 0.67% 0.82% 0.87% Mr. Smith         Foundation's Expected Value         in 15 Years         Nominal ($ millions) 305.9 324.9 348.8 351.6 359.1 Real ($ millions) 196.4 208.6 223.9 225.7 230.5 Annualized Return Net of         Income and Estate Taxes         Nominal 4.64% 5.06% 5.56% 5.61% 5.76% Real 1.59% 2.00% 2.48% 2.54% 2.68% and estate structure to the investor's long-term goals. Figure 32.6 demonstrates the optimal efficient frontier for each of the two investors we studied. The efficient frontiers are very different. 4. Implement portfolio strategies in a tax-efficient manner. This is particularly true of equities because investors can control the timing of capital gains tax liability. The tax code makes it difficult to add value from active management in directly taxed accounts. A broadly diversified core portfolio enhanced with tax loss harvesting is likely to provide the best results in the presence of taxes. Investors should seek ways to shift less tax-efficient strategies into entitites that reduce or eliminate taxation. The concept of a tax-efficient core portfolio residing in the investor's directly owned account complemented with aggressive satellites in the tax-advantaged entities is likely to derive the most benefit from the equity allocation. This modeling process allows investors to analyze many issues on the basis of the impact on long-term results. Some examples of how this can be applied: II Portfolio management. Managers generally seek to change the expected return, risk, or correlation matrix. They seek additional return per unit of risk, or they seek to reduce correlation to other asset classes. Expectations regarding portfolio management can be captured in terms of revisions to the expected return, risk, and correlation matrix. The model can then be used to identify how the