Tax Efficient Portfolio Planning
Many investors have multiple accounts including various tax deferred accounts such as 401k, IRA or annuity, as well as taxable brokerage accounts. How to efficiently implement investment strategies in these accounts is thus a very common issue.
Here are the two rules of thumb that can be useful to help you decide what to do in each account.
- Buy and hold equity or stocks should be in taxable if it is possible. See Carnegie Mellon University Professor Dammon’s research paper on this topic.
- Tactical equity or stocks should be in tax deferred if it is possible.
You should follow the order of the following three steps:
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