Tax drag / turnover

The mechanism is interrupted compounding: every realised gain hands ~20% to the tax office immediately, money that would otherwise have kept compounding for decades. A holder defers that tax indefinitely; a monthly-rebalanced strategy pays it constantly.

Tax drag is the single biggest reason gross-real anomalies died in our after-tax tests — it routinely costs an active Japanese strategy 1-2% per year against a NISA holder. It is also the least discussed cost in strategy marketing, because it never appears in a backtest that ignores taxes.