Not all capital gains are created equal: short-term gains can cost twice as much as long-term ones. Desk note: The tax system distinguishes between holding periods. Short-term gains are taxed as ordinary income; long-term gains get a preferential rate. Why investors care: That difference can turn a mediocre pre-tax strategy into a losing after-tax strategy if turnover is too high. Translate it into behavior: A fund that turns over 100% annually may lose 1-2% per year to excess taxes compared to a similar exposure with lower turnover. Where people usually get tripped up: The mistake is comparing strategies on pre-tax returns without adjusting for the tax drag created by each strategy's turnover. Keep this nearby on the next review: Write down the state variable you would monitor first if this thesis started to drift. That is the kind of small conceptual habit that compounds into better decisions over time.