Suppose your desired level of savings is double the amount allowed in IRAs and 401k (or 403b) plans. At the same time you wish to invest equal amounts in stocks and bonds. Where should you keep the stocks and where the bonds? You will be surprised to know how many investors make the costly mistake of holding the stocks in a tax-protected account and the bonds in an unsheltered account. This is a mistake because most of the return from bonds is in the form of taxable interest payments, while stocks by their nature already provide some tax shelter.
6In Spreadsheet 18.9 we did not take full advantage of the tax code. You can defer capital gains longer by accounting for the shares you sell so that you sell first new shares with little capital gains and old shares last.
18 Taxes, Inflation, and Investment Strategy
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