Investing for the long‐term is critically important and can have life‐changing benefits for disciplined savers and investors. The approach we examine below is simple and straightforward, and the results are profound – maximize your contributions to tax‐advantaged accounts and invest wisely.

Tax‐advantaged accounts provide two significant benefits:

  1. Money is not taxed on the way in (Traditional) or on the way out (Roth)
  2. Money is not taxed along the way (an extremely important yet often overlooked benefit)

These tax savings can be tremendous when added up for a sufficiently long time period. Not only do you enjoy significant tax savings on the contributions and withdrawals, but you also don’t pay taxes along the way (“tax drag”). This “tax drag,” which occurs as investments shift around in the portfolio and gains/losses are realized, creates taxable events that would normally reduce the returns produced in the portfolio.  Tax‐advantaged retirement accounts avoid these taxes altogether, adding significantly to returns over long time horizons.

If you are still working, either as an employee or as self‐employed, step number one in long term investment planning is always to maximize the available tax‐advantaged account contributions. There are many tax‐advantaged accounts available, and the benefits of utilizing them through disciplined and consistent contributions can be massive over time. At Athos Capital Advisors, we’ve crunched the numbers below to illustrate how important this can be to building wealth.

Investment Growth - Maxing out 401(k) Contributions over 30 Years and Investing in the S&P 500 with Full Company MatchSource: Bloomberg

The chart above shows the results if you maxed out the entire contribution to your 401k, with the full company match, every year for the past 30 years and systematically invested the funds into the S&P 500 on a monthly basis. The end result: by the end of 2020, you would have $6.7 million.

If you employed the same disciplined approach but didn’t receive the full company match, the end result would be $2.1 million.  There are no free lunches in finance and economics. However, it is clear that disciplined saving in a tax-efficient way, combined with smart, sound investing, produces very favorable outcomes.

Investment Growth - Maxing out 401(k) Contributions over 30 Years and Investing in the S&P 500 with No Company MatchSource: Bloomberg

Invest Wisely – Equity Bias For Long Time Horizons

As the above charts illustrate, investing in U.S. stocks has produced attractive returns over the past 30 years. If you look back over any 30-year time period, the results are similar: you were able to compound capital at 11.1% on average. Compare this to bonds, where the returns have averaged 5.7%.

30 Year Annualized Rolling Returns for Stocks (S&P 500) vs Bonds (Intermediate Government Bond)

There are many advantages to including fixed income in a portfolio (see our white paper on The Importance of Fixed Income), however, when investing with a sufficiently long time horizon, having greater exposure to equities has a higher likelihood of producing superior returns. Take the same example as above – had you invested the same contributions all in bonds (Barclays US Agg), your returns would have been nearly ¼ as much as fully investing in equities.

Fixed income can provide diversification benefits and dampen volatility, so its importance cannot be overlooked. Additionally, in most cases, it is essential to include some fixed income to protect the portfolio from significant drawdowns (see chart below). A portfolio is only effective if the investor can hold on to it and weather the inevitable drawdowns that occur to stocks. The 60/40 Portfolio (60% stocks / 40% bonds) provides a strong starting point for most investors.

As the chart below shows, the 60/40 Portfolio would have ended up with $5.1 million as compared to $7.2 million for the 100% equity portfolio today. What is important to note, however, is that the difference between the two wasn’t achieved until after 25 years in the investment plan, and, along the way, the 60/40 Portfolio experienced drawdowns half as dramatic as the worst drawdowns in the all stock portfolio (Dotcom Bubble and the Great Financial Crisis).

100% Stocks vs 60/40 Balanced Portfolio 30 Year Returns when Maxing Out Contributions with Company MatchSource: Bloomberg

Drawdowns Will Occur

Volatility is inevitable when investing in the stock market, so it is paramount to design a portfolio with a risk profile that you can live with and to be prepared to weather the drawdowns when they occur. In the example below, comparing the 100% Stock Portfolio to the 60/40 Portfolio, two ‐40% drawdowns occurred for the 100% Stock Portfolio. The 60/40 Portfolio experienced less dramatic drawdowns and consequently recovered much more rapidly.

Drawdowns of S&P 500 vs 60/40 Balanced Portfolio over Past 30 YearsSource: Bloomberg

Adding fixed income to portfolios, and gradually increasing its portfolio weight as the investor ages, is an important risk management tool to make sure you can stick to the plan. The charts below show how strongly fixed income performed during the last three major stock market drawdowns.

Fixed Income Performance in Past Major Drawdowns (Dotcom Bubble Burst, 2008 Financial Crisis, COVID-19 Shock)Source: Bloomberg

Table Comparing the Different Tax‐Advantaged Accounts

Below is an overview of the tax‐advantaged retirement and savings accounts. For a complete version of the table, please contact us.

Table Comparing Tax-Advantaged Retirement and Savings Accounts (401(k), IRA, SEP-IRA, SIMPLE IRA, etc.)

*Traditional: Pre‐tax contributions, withdrawals taxed as ordinary income; Roth: After‐tax contributions, withdrawals tax free


Long term wealth creation is available to everybody who has the discipline to save and invest wisely. The starting point is maximizing contributions to tax‐advantaged accounts, saving money on taxes now and in the future. Investing these savings wisely over long time periods has historically resulted in significant wealth accumulation. At Athos Capital, we work with our clients to make sure we are taking full advantage of these powerful accounts.

Contact us today to learn more about how we can help you reach your long term wealth goals.

Best Regards,

Henry A. Miketa

Athos Capital Advisors Small Logo



Athos Capital Advisors



Historical 401(k) Contribution Limits based on Company Match Level and Returns when Maxing Out Contributions