Advisor Insights

The Pivotal Role Asset Location Plays in a Portfolio's Success

Helen Modly, CFP, CPWA

Financial assets can be classified into various classes (for instance, domestic stocks, international stocks, taxable bonds, tax-exempt bonds, etc.). These asset classes generate different types of income (qualified dividends, nonqualified dividends, taxable interest, tax-exempt interest, and short- or long-term capital gains). These different types of investment income receive different tax treatments.

Assuming that you have determined an appropriate asset allocation across your client's entire portfolio, the next decision involves which assets go into which accounts.