Asset Location Strategy

Asset Location Strategy refers to the method of determining which types of investments to hold in specific types of accounts to optimize after-tax returns.

This strategy involves allocating assets among taxable accounts, tax-deferred accounts (like traditional IRAs), and tax-exempt accounts (such as Roth IRAs) based on the tax characteristics of the investments. For example, investors may choose to hold high-growth assets in tax-exempt accounts to avoid capital gains taxes, while placing income-generating investments (like bonds) in tax-deferred accounts to delay tax liabilities. The goal is to enhance overall portfolio tax efficiency and maximize wealth accumulation over time.