How Should You Compare Investments Beyond Return?

This article provides general education about wealth frameworks. It is not individualized tax, legal, or investment advice, so work with your own professionals before acting.

Most investment comparisons start and end with one number: the rate of return. That number leaves out tax, fees, how fast the money can be reached, and the chance of losing it. A useful comparison scores those dimensions together so the winner reflects what an owner keeps.

What is Sam Prentice's RATES framework for comparing investments?

RATES is Sam's system for scoring any asset on five dimensions at once. On the Capitalism.com podcast he spelled it out as return, accessibility, tax efficiency, expense, and safety. Every asset in a portfolio can be analyzed against those five to see where it fits.

Each letter is a separate question to ask about the same investment:

• Return: what the asset is expected to earn.
• Accessibility: how quickly the money can be reached without penalty.
• Tax efficiency: how much of the return an owner keeps after tax.
• Expense: the cost of owning and holding the asset.
• Safety: the risk of losing the money, especially in a downturn.

Scored this way, two assets that quote the same return can land in very different places. According to the Investor.gov guide on risk tolerance, the right balance of these tradeoffs depends on time horizon and how much risk a person can carry.

Why does return sit lower than safety for liquid money?

In the RATES system, return is judged by the job an asset does, and for liquid money that job is pacing inflation.

Sam explains that money meant to stay accessible has one job: to reduce risk and to be ready when an opportunity or a market downturn arrives. He measures its return only against inflation, so that its buying power holds. The Investor.gov definition of inflation describes that same erosion of purchasing power over time.

For that reason he ranks accessibility and safety above return for the liquid layer. Chasing a higher yield on money that needs to be safe and reachable defeats the purpose the money serves.

How do accessibility and safety protect a portfolio?

Accessibility and safety keep money reachable and intact for the moments an entrepreneur needs it most.

Sam treats accessibility as how fast capital can be turned into usable cash, and he targets money in the liquid layer that can be reached in under a week. The Investor.gov definition of liquidity frames it the same way: how quickly and cheaply an asset converts to cash.

Safety is the companion question of whether the money will still be there when it is needed. He points to the cyclical trap that catches unprepared owners:

• A market drop reduces both business revenue and asset values at the same time.
• Cash is needed exactly when assets are worth least.
• The owner is forced to sell low, then buys back higher later.

Money that scores well on accessibility and safety breaks that cycle, because it can be spent from strength during a downturn. The FINRA overview of investment strategies notes that a suitable approach varies with each person's assets, risk tolerance, and circumstances.

What does tax efficiency and expense add to the score?

Tax efficiency and expense measure how much of an asset's return an owner keeps.

Tax efficiency asks how much of the return survives tax. A taxable account's stated yield is reduced by the tax owed on it, so an after-tax figure can sit well below the headline number. The IRS overview of capital gains notes that most capital gains are taxable and that long-term gains are taxed at different rates than short-term gains. That difference is one reason two similar assets can keep different amounts.

Expense measures the cost of owning and holding the asset. Fees and carrying costs come out of the return before an owner sees it. The Investor.gov glossary on fund fees and expenses explains how ongoing charges reduce what an investor takes home over time. A tax-law professional and the client's CPA confirm the tax treatment for any specific plan.

How does RATES fit the wealth layers an entrepreneur builds?

RATES gives each layer of a portfolio a different scoring priority, because each layer has a different job.

Sam pairs the framework with his Wealth Pyramid, which orders assets into liquidity, cash flow, and speculation. The Capitalism.com recap walks through that structure in detail. RATES is the lens applied inside it:

1. Liquidity: accessibility and safety lead, and return only needs to pace inflation.
2. Cash flow: return and dependable income carry more weight, with tax efficiency and expense close behind.
3. Speculation: higher potential return is accepted alongside lower safety, and only after the first two layers are covered.

The same asset can score well for one layer and poorly for another, so the job comes first and the score follows.

How does Sam Prentice apply the RATES framework with clients?

Sam Prentice uses RATES to match a client's assets to their goals, then coordinates the plan with the client's own professional team.

He starts by getting the client clear on what they want the money to do. Then he looks for assets that fit both those aims and the return, access, tax, expense, and safety profile each job needs. He designs the strategy and coaches the decisions; the client's CPA, attorney, and the rest of the financial team evaluate and implement the parts within their roles. My Wealth CEO does not manage assets, sell products, or file returns.

Readers weighing timing can read the guide on when to start tax planning. Those choosing a strategist can read how to choose a tax strategist.

Frequently asked questions

What does the RATES acronym stand for?

RATES stands for return, accessibility, tax efficiency, expense, and safety. Sam Prentice uses it to score any asset on five dimensions at once, so a comparison rests on more than the headline rate of return.

Why is the rate of return a poor way to compare investments on its own?

A single return figure hides tax, fees, access, and risk of loss. Two assets can quote the same return while delivering very different after-tax, after-fee results. The RATES framework scores those other four dimensions so the comparison reflects what an owner keeps.

How does tax efficiency change an investment's after-tax return?

Tax lowers the return an owner keeps, so a stated yield and an after-tax yield can differ. The IRS notes that most capital gains are taxable and long-term gains are taxed at different rates than short-term gains. Comparing after-tax outcomes is part of scoring an asset on the RATES framework.

Does the best RATES score depend on the job the asset does?

Yes. The same asset can score well for one job and poorly for another. Sam Prentice weights accessibility and safety most for money meant to stay liquid, and weights return and cash flow more heavily for assets meant to grow or produce income.

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Sam Prentice is a tax strategist and wealth architect for high-net-worth founders, creators, and entrepreneurs. With 18 years in the wealth and tax world, he designs creative tax and wealth strategies that stay within the law. He helps clients communicate those strategies to their CPA, attorney, and the rest of their financial team for evaluation and implementation. Connect with him on LinkedIn or follow him on Instagram.