Keep These Investments Out of Your Taxable Account

Plus: The best investments for taxable accounts, best practices for tax-efficient portfolio management, and the role cash should play in your portfolio. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=46239&elqTrackId=01eef268370a4013af117c18ef6c96c7&elq=3a3573797b844f558a6823d43fe3baeb&elqaid=46239&elqat=1&elqCampaignId=22719) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] Saving and investing in a taxable brokerage account offers an unparalleled level of flexibility: You can put as much money into the account as you’re able, invest in almost anything, and pull the money out as you see fit. And if your heirs inherit those investments from you, the capital gains that racked up over your holding period effectively vanish upon your death. Yet despite those many attractions, taxable accounts aren’t a free lunch. Specifically, you’ll owe income and capital gains taxes on any distributions that your investments make while you hold them, and that’s true regardless of whether you reinvest those payouts right back into your account. That’s why it’s worthwhile to limit trading in your taxable account, which can accelerate the tax bill, and avoid investments that pay out sizable income or capital gains distributions. I compiled a short list of them in [this article](. When prevailing yields were lower across the board, it was hard to get excited about “[asset location]( assets to keep in which accounts. But now that cash and bonds have higher yields, it’s worth paying closer attention. Speaking of cash, investors have taken notice of the higher yields now on offer: While they retreated from U.S. stock funds in the first half of this year, they’ve been sending oodles of dollars to money market mutual funds and other cash-type investments. With higher yields beckoning, I appreciated [Amy Arnott’s recent rundown of good reasons to hold cash, alongside some not-so-good ones](. I also wanted to share a few items related to legendary investment thinker Harry Markowitz, who died on June 22 at the age of 95. John Rekenthaler memorialized Markowitz’s many contributions to how we think about investing, correlations, and portfolio management in [this article](. He wrote, “It’s no exaggeration to state that Markowitz did more than advance a theory of portfolio construction. He created the very foundation of today’s investment practices.” And while Jeff Ptak and I never had the opportunity to interview Dr. Markowitz for our podcast, we had [a wonderful conversation about him with Dr. Andrew Lo]( who interviewed him many times. We re-ran that episode this week in tribute to Markowitz’s immense legacy. With warm regards, Christine Benz [Andrew Lo: Finding the Perfect Portfolio--a ‘Never-Ending Journey’]( The author and financial researcher discusses his new book on the rise of Modern Portfolio Theory and practice. [Listen Now]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [The Best Investments for Taxable Accounts]( With some care, investors can build a tax-efficient portfolio that’s diversified, too. [Read More]( [Which Investments to Keep Out of Your Taxable Account]( Sizable mutual fund capital gains distributions illustrate a simple fact: Some investments are structurally a poor fit for taxable accounts. [Read More]( [Best Practices for Tax-Efficient Portfolio Management]( ‘Asset location’—deciding which assets go in which accounts—should be a dynamic process, argues financial planning expert Michael Kitces. [Watch Now]( [The Legacy of Harry Markowitz]( Reflecting on the man who built investing’s foundation: Modern Portfolio Theory. [Read More]( [What Role Should Cash Play in Your Portfolio?]( There are good reasons to hold cash, but also some not-so-good ones. [Read More]( Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2023 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602