Tax-smart investment1

A comprehensive suite of strategies designed to help you reach your goals faster.

Asset location

In situations where it’s appropriate, we try to be mindful of the types of assets we place in accounts that have different tax treatments. This approach, known as asset location, can help enhance after-tax returns. If an investment is held in a taxable account, selling it could result in you owing taxes on any realized gains. But even if you don’t sell an investment, you may owe taxes if it distributes income as capital gains or dividends. By nature, some investments tend to be better suited to account types with certain tax registrations. We try to factor this into the investment decisions we make on your behalf.


Graphic shows how asset location is applied across Personalized Portfolios accounts. In this example, three Personalized Portfolios accounts are assigned to this goal — a taxable account, a tax-deferred account, and a tax-free account. The aggregate asset allocation for all three Personalized Portfolios is 40.81% domestic stock, 17.51% foreign stock, 38.62% bonds, and 3.06% short-term. Graphic shows how asset location is applied across the different accounts assigned to the goal. Each account is managed to a unique asset allocation, based in part on the tax registration of the account. In this example, the taxable account is comprised of 65.47% domestic stock, 4.92% foreign stock, 26.55% bonds, and 1.53% short-term. The tax-deferred account is allocated to 10.80% domestic stock, 27.47% foreign stock, 58.54% bonds, and 3.20% short-term. The tax-free account is invested in 37.60% domestic stock, 40.70% foreign stock, 19.10% bonds, and 2.60% short-term.

  • View sample holdings

    Sample portfolio2 for clients whose accounts are being managed using Household Tax-Smart Strategies, invested in a Growth with Income investment strategy (60% stocks/40% bonds), a Total Return approach, and a Blended investment universe.


    Position Percentages Morningstar Category Taxable
    70% Stocks, 30% Bonds†    		 Tax-deferred
    38% Stocks, 62% Bonds†    		 Tax-free
    78% Stocks, 22% Bonds†
    Domestic Stock 40.81%
    US LCC SMA Proxy 17.84% Large Blend 17.84%
    US LCG SMA Proxy 6.84% Large Growth 6.84%
    US LCV SMA Proxy 8.07% Large Value 8.07%
    Strategic Advisers Large Cap Fund 3.52% Large Value 3.38% 0.14%
    Fidelity SAI US Low Volatility Index Fund 0.28% Large Blend 0.20% 0.08%
    Strategic Advisers Small-Mid Cap Fund 3.54% Small Blend 0.00% 3.54%
    Fidelity SAI Inflation-Focused Fund 0.74% Broad Basket 0.74%
    Foreign Stock 17.51%
    IEO SMA Proxy 2.00% Large Blend 2.00%
    iShares Core MSCI EAFE ETF 0.46% Large Blend 0.46%
    Strategic Advisers International Fund 9.90% Large Blend 8.34% 1.56%
    Strategic Advisers Emerging Markets Fund 5.16% Diversified Emerging Markets 2.65% 2.51%
    Bonds 38.62%
    Strategic Advisers Municipal Bond Fund 10.74% Muni National Long 10.74%
    Strategic Advisers Tax-Sensitive Short-Duration 2.54% Muni National Short 2.54%
    Strategic Advisers Core Income Fund 21.34% Intermediate Core-Plus Bond 19.42% 1.91%
    Fidelity SAI U.S. Treasury Bond Index Fund 4.00% Intermediate Government 4.00%
    Short-Term 3.06%
    Fidelity Government Cash Reserves 3.06% Money Market-Taxable 1.53% 1.28% 0.26%
    Total 100% 50% 40% 10%

    †Includes allocation to Short-Term investments.

Here's how we'll place different investments across account types

As the table below shows, different types of accounts lend themselves to different types of assets. We use this as a guide when developing your overall portfolio strategy.


  • Taxable accounts, such as traditional brokerage accounts, may hold securities (stocks, bonds, mutual funds, ETFs) that are taxed when you earn dividends or interest, or when you realize capital gains by selling investments that have increased in value.
  • Tax-deferred accounts like IRAs, allow payment of taxes to be delayed until money is withdrawn, for qualified withdraws.
  • Tax-free accounts like Roth IRAs3, require contributions to be made with after-tax dollars and do not provide a tax deduction up front, but they allow the investor to avoid further taxation (as long as the rules are followed).

Remember, contribution limits* prevent investors from simply saving everything in retirement accounts.


  Taxable Account Tax-Deferred Tax-Free
Example Individual brokerage account Rollover IRA Roth IRA
When earnings are taxed Annually Upon distribution N/A**
Investments we may emphasize Investments offering long-term growth potential that generally distribute income less frequently Investments that offer total return potential that generally distribute income more frequently Investments that offer high growth potential
Why we may emphasize them To help reduce capital gains or interest distributions in effort to manage a client's tax obligations To reduce any immediate potential tax impact To provide tax-exempt, long-term growth opportunities

* 2024 contribution limits

  • $7,000 to a Roth or traditional IRA. If you're 50 or older, the limit is $8,000.
  • $23,000 to a 401(k)/403(b) or $30,500 if you're 50 or older.
  • If you have a 401(k) match, the combined limit is $69,000, or $76,500 if you're 50 or older, or 100% of your salary if it's less than the dollar limits.

** Unless a non-qualified distribution takes place, where additional tax penalties may apply.


As the table below shows different types of investments may be more or less appropriate for different types of accounts once those accounts' tax treatments are considered.


This table is designed to explain how asset location works. It shows how different types of assets may be considered appropriate, more appropriate, or less appropriate for accounts with different tax registrations. Results are as follows: Municipal bond funds are generally considered more appropriate for individual brokerage accounts, but less appropriate for Rollover IRAs or Roth IRAs. Stocks held for long-term growth are generally considered more appropriate for individual brokerage accounts and Roth IRAs and appropriate for Rollover IRAs. Stock index funds and separately managed account sleeves are generally considered more appropriate for individual brokerage accounts, appropriate for Rollover IRAs, and less appropriate for Roth IRAs. High turnover stock funds are generally considered less appropriate for individual brokerage accounts, more appropriate for Rollover IRAs, and appropriate for Roth IRAs. High-yielding stock funds are generally considered less appropriate for individual brokerage accounts, more appropriate for Rollover IRAs, and appropriate for Roth IRAs. Corporate bond funds are generally considered less appropriate for individual brokerage accounts, more appropriate for Rollover IRAs, and appropriate for Roth IRAs. Investments used for cyclical exposure are generally considered less appropriate for individual brokerage accounts, appropriate for Rollover IRAs, and more appropriate for Roth IRAs.

For illustrative purposes only. There are no guarantees as to the use or effectiveness of the tax-smart investing techniques, including the coordinated use of different account types and investments, in an effort to reduce a client’s overall tax liabilities.

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