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Investing Specialists

Tune Up Your Taxable Portfolio

Here's how to limit Uncle Sam's cut of your investment returns.

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In my experience, investors often give short shrift to the question of what to put in their taxable accounts versus their tax-sheltered accounts. They focus almost entirely on asset allocation (finding the right stock/bond mix for a particular goal) and security selection but pay less attention to which types of assets go where, often called asset location.

As a result, they needlessly surrender a big portion of their gains to the tax collector each year. That can be a particularly big problem for young and middle-aged investors. If the government is taking a large cut of your investment returns each year, your savings have less of an opportunity to compound over time.

Christine Benz has a position in the following securities mentioned above: VTMGX. Find out about Morningstar’s editorial policies.