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Author: LauraLeever Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74776  
Subject: Asset Location Date: 5/24/2009 9:51 PM
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Hi,
I'm new and trying to figure out how to set up my portfolio in regards to asset location. I've read a lot on the Motley Fool and just when I think I'm getting it, I get confused again. I'll be retiring in 15 years. I have a new 403b with Vanguard and a very old and neglected Roth IRA with Fidelity.

Are both accounts the same, in terms of tax issues -- meaning would I put the same types of investments in both accounts?

Where do brokerage accounts fit in with this? If I can buy/sell stocks within a Roth IRA and never have to pay capital gains, why would I want to have a separate brokerage account?

Thank you.
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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65725 of 74776
Subject: Re: Asset Location Date: 5/24/2009 10:57 PM
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Asset allocation: Download & read Melbane Faber's paper. I don't have the link on this computer, so google for it.

Roth vs. Taxable broker account: Why? Because you can't add much money to your IRA, only couple of thousand dollars per year, that's why. That's nowhere near enough if you plan to retire in 15 years. You need to invest that much (or more) each _month_.

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65735 of 74776
Subject: Re: Asset Location Date: 5/25/2009 3:03 PM
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Are both accounts the same, in terms of tax issues -- meaning would I put the same types of investments in both accounts?

They are certainly not the same since one will be taxed at ordinary income rates when withdrawn and the other will not be taxed when withdrawn, but, I suspect you already knew that.
Ideally, one would want investments with high tax inefficient growth or gains in their Roth accounts. Determining what these might be in advance may be difficult, but, a REIT, for example, would be a good candidate for a Roth since they typically pay high non qualified dividends.
It really depends on your entire portfolio and account availability. The general rule would be to put the most tax inefficient investments into tax deferred accounts (403b, 401k, traditional IRA, etc.) Put your most tax efficient investments into a taxable account. Anything in the middle goes into a Roth.

Bob

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