The Importance of Asset Location
Two Quants and a Financial PlannerApril 17, 202300:31:27

The Importance of Asset Location

Most investors pay close attention to their asset allocation. And that makes sense since research has shown that the asset classes a portfolio is allocated to drive the majority of its return over time. But asset allocation isn't the whole story. It turns out that where those assets are located among taxable, IRA and Roth accounts can also have a big impact on an investor's after-tax return. In this episode, we take a deep dive into asset location and the key concepts investors need to understand.

02:02 - What is asset location?
02:54 - An overview of asset location strategies
04:38 - Balancing tax efficiency and expected return
06:41 - An asset location bond example
10:40 - Thinking about asset location with equities
12:33 - Roth vs. Traditional IRA asset location
20:48 - The dangers of overemphasizing asset location
24:18 - Using Monte Carlo simulation with asset location
26:47 - The importance of tax rates with asset location
29:57 - Episode summary

ABOUT THE PODCAST
Learning how to be a financial planner is one thing. Doing it is another. Follow along with new financial planners Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau) as experienced veteran Matt Zeigler (@cultishcreative) helps them navigate the complex world of financial planning and learn about the most important topics that impact all of our financial futures. From investments to retirement to college planning to estate planning to insurance and beyond, we will cover the major financial planning issues that impact all of our lives and will provide a framework to help investors tackle them. We hope you will join us on our learning journey.

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