Improve your net worth with proper accounting methods

Improve your net worth with proper accounting methods

Published: February 28, 2014.

Investors can improve their net worth by selecting the proper accounting methods to manage their investments. Lewis University finance professors Dr. Robert Atra, CFA, and Dr. Yuntaek Pae, CFA, coauthored a study about the benefits from Highest In, First Out (HIFO) accounting. The article was published in January 2014 issue of the Journal of Financial Planning.

The authors explained in their study that an investor can increase their total wealth at the point of retirement by between .5 percent and 1 percent by selling off high basis assets first. If an investment scenario also involves above average tax rates and/or greater returns, then the potential for increasing one’s wealth by utilizing HIFO accounting practices is even greater.

“Part of it is explained as a result of the time value of money, making it more valuable to an investor to receive tax benefits sooner rather than later,” Atra, chair and professor of finance at Lewis University, said.

Pae, associate professor of finance at Lewis university, suggested, “Many mutual funds and other investment vehicles have a default option that is typically either First In, First Out (FIFO) or Average Cost, and it may benefit individuals to look into how their investments are setup.”

Atra and Pae are finance professors in the Lewis University College of Business. Finance degrees are offered at the bachelor’s and master’s degree level at Lewis University. Finance degree students learn how to analyze the financial viability of a new product, how to simulate trading in futures and options, technological modeling to analyze real-world financial situations and foundational investment experience through portfolio simulation.

Lewis University is a Catholic university in the Lasallian tradition offering distinctive undergraduate and graduate programs to more than 6,600 traditional and adult students. Lewis offers multiple campus locations, online degree programs, and a variety of formats that provide accessibility and convenience to a growing student population. Sponsored by the De La Salle Christian Brothers, Lewis prepares intellectually engaged, ethically grounded, globally connected, and socially responsible graduates. The seventh largest private not-for-profit university in Illinois, Lewis has been nationally recognized by The Princeton Review and U.S. News & World Report. Visit www.lewisu.edu for further information.

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