As a Financial Advisor, Sumit uses his financial markets experience to help clients live their best lives. His core passion for helping others drives collaborative and consultative solutions to simplify the complex financial landscape many of us find ourselves in today. Sumit’s empathy and knowledge are integral to client confidence in financial decision-making. Sumit has [...]

To understand asset location, it is important to consider two areas: asset allocation and how investment accounts are taxed. Pure’s Financial Planner, Sumit Mehta, CFP®, AIF®, discusses why and how to use asset location in your investment decisions.

FREE GUIDE | Why Asset Location Matters Guide

Why Asset Location Matters Guide


What is asset location?

To understand asset location, it is important to understand two areas first: asset allocation, and how investment accounts are taxed.

Let’s start with the first: Asset allocation simply refers to the way assets are mixed and mingled – that is, what percentage of your account gets invested in stocks vs. bonds vs. real estate, as one example. Or in high growth stocks vs. income producing bonds, as another example.

Moving on to the second, investment accounts and their taxation. They are generally taxed in three different ways. There are tax free accounts, such as ROTH accounts, tax deferred accounts such as 401k’s, and taxable accounts such as brokerage accounts.

Now let’s get back to asset location. This effectively means choosing an account with the most favorable tax treatment for any given piece of your asset allocation.  High growth stocks and mutual funds, for example, are well served being located in a tax free or ROTH account. While income producing bonds are better being purchased in a tax deferred account such as a 401k or a regular IRA.

While what you make on your investments is certainly important, what you keep is even more important. Having investments in places they receive the most favorable tax treatment allows you to keep more of your hard-earned money. This is the overarching reason to use asset location in all of your investment decisions.

If you’d like to find out more about your own asset location situation, contact Pure for a free tax analysis.

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• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.

• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

CFP® – The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.

AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.