GLOSSARY · INVESTING
Asset location
Deciding which kind of account (taxable, tax-deferred or Roth) holds each investment, so the same overall portfolio pays less tax. Holdings that pay income taxed at ordinary rates usually go in tax-deferred accounts, those expected to grow most in Roth accounts, and tax-efficient stock index funds in taxable accounts. It changes where holdings sit, not the overall mix.
Also called: tax location, account placement
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LEARN IT PROPERLY
CHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSBuilding the Bond Side of a PortfolioCHAPTER · ADVANCED TAX STRATEGIES · DEEP DIVETax-Efficient Funds and Asset LocationRELATED TERMS
SOURCES
- Publication 550, Investment Income and Expenses. Internal Revenue Service.
- Optimal Asset Location and Allocation with Taxable and Tax-Deferred Investing. Dammon, Spatt & Zhang, Journal of Finance, 2004.