tolerance for risk. This is related to their capacity to endure both short-term and long-term fluctuations in wealth. II Risk is therefore a scarce resource that should be budgeted and apportioned in order to get the most expected return for a given level of risk. Investment management involves first identifying the desired level of risk and then building investment portfolios that maximize the expected return for that level of risk. Taxable investors will easily understand that taxes reduce expected investment returns. If you earn a return, the government will take some of it from you. What may be less obvious is that taxes also affect and generally reduce risk. Consider the impact of capital gains taxes on equity returns. When stock market returns are high, investors often have a lot of realized capital gains and thus pay a lot of taxes. When market returns are flat there are few realized gains and tax liability is small. When market returns are negative investors often have net realized losses that generate valuable credits in the form of tax loss carryforwards. After-tax returns are generally less volatile and thus less risky than pretax returns. Taxable investors face income, capital gains, and, in most cases, transfer taxes. Each individual or family is unique. Each has plans for the disposal of one's wealth and an estate structure designed to facilitate those plans. Investors begin from different points. Many investors accumulated their wealth in the form of concentrated low-basis stock holdings and must deal with transition issues. These types of considerations will affect the conversion of expected pretax to expected after-tax risk and return. In order to develop a strategy that maximizes expected after-tax return for a give level of risk, it is necessary to integrate these investor-specific considerations into calculations of after-tax risk and return. As a result, each investor has a unique efficient frontier. Each of the next three chapters will be devoted to gradually integrating various complicating factors into the formulation of an investor-specific efficient frontier. This framework provides three benefits. 1.    It provides investors with a practical and customized tool for identifying a target level of risk. This comes from describing risk in terms of the dispersion of future after-tax wealth forecasts. 2.    It allows taxable investors to integrate income, capital gains, and transfer taxes into investment decisions in order to optimally allocate the budgeted level of risk. 3.    It suggests ways that investors can enhance expected after-tax return for a given level of risk by better understanding the interplay among estate planning, income tax planning, asset allocation, and portfolio management. The axes of a conventional efficient frontier chart are expected return and risk. In order to integrate income and transfer tax considerations, we are going to develop an efficient frontier chart that plots expected future after-tax wealth against risk. There are many options embedded in the 40,000 pages of the U.S. tax code. The efficient frontier chart that we will develop will plot the trade-off between expected future after-tax wealth and risk assuming the investor has made optimal use of some of these options as they apply to that investor's situation. In the course of developing this chart, we will demonstrate that taking advantage of the flexibility in the tax code will allow for meaningful improvement in real after-tax wealth accumulation.