Feng Shui Your Financial House

You’ll Make Oodles More Money If You Follow This Simple Strategy

The tax impact of putting assets in the wrong vehicles is huge

Mariko O. Gordon, CFA
2 min readJan 4

If you’re in a hurry, here’s the TLDR on today’s financial task:

Optimize the location of your assets.

Each asset class is taxed differently (In the U.S., anyway). You can save a lot in taxes by stashing your different assets in the most tax-efficient places. Once you have your asset allocation done, figure out the best asset location for your holdings.

If you want the full story, here’s the scoop:

If the holdings in your tax-deferred and tax-exempt accounts are the same as your taxable accounts, you’re going to waste thousands and thousands of dollars by paying taxes you legit, 100% don’t need to pay.

This is especially true if you’re young and a high-earner.

Who wants to do that?🤷🏻‍♀️

After you’ve figured out your asset allocation (the mix of stocks, bonds, cash and real estate in your portfolio based on your risk tolerance, circumstances and stage of life) you need to choose the best location for those assets.

It might break your brain, but it’ll save you a fortune.

Assets and taxpayers are both taxed at different rates. Bond income is taxed more heavily than qualified dividend income. Depending on your tax bracket, you may be taxed more on ordinary income than on capital gains (either short- or long-term).

Just see if it’s something that needs tending to in the coming year.

Look no further than this handy table provided by the folks at Fidelity to see what should go where.

More on asset location can be found here.

Again, your personal tax situation, as well as your whole financial picture, needs to be taken into account before you make any moves.

Financial planning is not a one-size-fits-all exercise.

But if you have a financial advisor or a financial planner and your taxable and tax-deferred/exempt accounts are identical, I would ask them why. You might save a shit-ton in taxes over your lifetime.

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Mariko O. Gordon, CFA

Built $2.5B money mgmt biz from scratch. Coaching badass women to build & love their businesses, manage their finances, and make sure the thrill is never gone.