Tuesday, December 20, 2005

Asset Allocation Based on Account Type

I have become more aware of what types of investment assets should be in what type of accounts. The higher awareness is due to my liking of dividend paying securities and my extreme dislike of taxes.

Here are my thoughts:

Normal Taxable Accounts
  • Qualified Dividend Paying Stocks - these are the companies who pay dividends that qualify for the 15% special taxation
  • Long-Term Stock Investments - long term capital gains are taxed at 15%
  • Municipal Bonds - tax free baby!! (in my best Dick Vitale voice)
  • Low turnover mutual funds & ETF's

401k, Roths & Tax Deferred IRAs

  • REITS & MREITS - real estate & mortgage investment trusts do not qualify for the 15% taxation of other dividends due to the fact that REITS don't pay taxes on their earnings
  • Short Term Stock Investments - if you are holding stocks less than 12 months, this is where to be
  • Non-municipal Bonds - with no special tax treatment, keep these out of your taxable accounts
  • High Turnover Mutual Funds

A few key points:

  • This is not investment advice... it's just the ramblings of a somewhat successful investor
  • If you have Kiddie Tax optimizing accounts, use the 401k & IRA list of assets to get the best bang for your buck

I'm still researching where I should put dividend producing non-US stocks (like FRO), CANROYs, and MLPs. I just need to sit down and look-up the tax code... I'll try to get this done in the next week.


At 1:15 PM, Anonymous PENNY STOCK INVESTMENTS said...

Some nice points to be made.


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