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By Jeremy Glaser | 02-24-2015 01:00 PM

5 Picks With a Side of Tax Efficiency

We serve up some solid ideas for taxable accounts among muni funds, tech stocks, MLPs, and core broad market ETFs.

Note: This video is part of Morningstar's February 2015 Tax Relief Week special report.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. It's Tax Relief Week here on We talked to several of our top specialists to get their picks for your taxable accounts. 

We start with Russ Kinnel, who shared this idea.

Russ Kinnel: One of my favorite funds for a taxable account is Fidelity Tax-Free Bond (FTABX). The reason is that it's a really good way to tap munis. It's a long-term muni fund. Obviously, that entails some interest-rate risk. So, you have to recognize that you have to hold it for a while because there is some risk there. But Fidelity is really the best muni-investing group out there. They just have great analytics, a great team of managers and analysts, and they have delivered consistent performance.

Unlike some managers, they are very focused on issue selection. So, they are not going to make big interest-rate calls or other big bets. They are not going to shift around a lot. They are just going to try to incrementally add value. So, that means if things are working, they are going to beat their benchmark by a modest amount each year. It probably won't happen that they'll beat it every year; but again, their record shows that they are very good at doing what they do.

Glaser: Morningstar StockInvestor editor Matt Coffina thought that these names would be worth considering.

Matt Coffina: When I think about investing in a taxable account, there are two groups of companies that really stand out as being especially well suited to a taxable account. One would be companies that don't pay a dividend and that you're planning to hold for a very long time. If the company has a high dividend yield, it may be better off in a tax-deferred account so that you can shelter that dividend income from regular dividend taxes. Similarly, if you're planning to sell the stock in six months or a year, it's probably better off in a tax-deferred account so that you don't incur capital gains taxes. 

But if there is a stock that you really want to hold for the long haul and that doesn't pay a dividend yield, a name that comes to mind from our portfolio is Google (GOOG). We own it in our Hare portfolio. Google, I think, has the widest moat in technology. It's a very strong franchise with a dominant position in online advertising and is benefiting from the secular shift to digital advertising. So, advertising dollars, I think, will steadily move away from traditional media--be it newspapers, billboards, and so on. That transition is already well under way. But in the longer run, [advertising dollars are probably moving away] from TV as well and other forms of traditional media in favor of more digital advertising. 

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