Description
In this month’s newsletter, we explore the concept of asset location and its prospective benefits when executed well, along with examining the available research on how to make the best decisions regarding asset location when taking into account the tax treatment of the available accounts, the tax treatment of the chosen investments, and the expected risks and returns of those investments.
Learning Objectives
LO #1: Decipher between which type of account (taxable or retirement) equities and bonds, respectively, should be held in and explain why.
- LO #2: Describe why equity turnover and ongoing dividends erodes much of the value of tax deferral that is normally associated with buy-and-hold strategies.
- LO #3: Explain why tax efficiency doesn’t matter all that much when expected returns are low.
- LO #4: Construct an asset location priority list based on high-return assets and their level of tax efficiency.
- LO #5: Be able to illustrate the “outside-in” concept for building a portfolio based on asset location.