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I know that the MLP "Pipelines" special report stated that "because MLPs are already tax-deferred,they’re probably not the best use of your precious IRA dollars." So my basic question is: What is the best use of "my precious IRA dollars", since that is where most of my money is: tax-deffered accounts?" My portfolio analysis suggests I need more large cap and fixed income, less small cap investments. I'm in a low tax bracket (probably around 15-20%, unless major changes occur in my business/profession),and I likely won't make any withdrawals for another 5 years, or more, since I'm 55 and 1/2 right now. I'm not too worried about taxes , as my income will be very low when I withdraw anything(another 4-5 years). Plus, if an investment grows a lot while shielded from taxes, I likely won't mind paying the taxes after I do make the withdrawals! BTW,my portfolio analysis suggests I need more large cap and fixed income, less small cap investments. I'm just tempted to put a bit of MLP(a large cap one) in there, just to diversify and have a little fun watching what happens. Any thoughts, fools?
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Any thoughts, fools?

You're not analyzing the right thing. What you want to put in an IRA is an investment that produces current, taxable ordinary income. It doesn't matter whether it's large cap, small cap, skull cap, etc. REITs and bonds are good candidates (no munis). Something like BRK, which pays no dividend, isn't as good since if you hold it in an IRA and it produces long-term cap gains they don't get the favored tax treatment.

Phil
Rule Your Retirement Home Fool

Disclosue: I own shares of BRK.B. A complete listing of my holdings is available in my profile, which you can access by clicking on my name in the heading of this message.
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The reason I referred to small cap, large cap,fixed, is that just about every "advice" or analysis for amateur investors tells us to diversify the portfolio, based on timeframe and risk tolerance. Even in an IRA, that diversification should matter, shouldn't it? So,what I'm really asking is this: shouldn't I be looking for an investment that will be worth a lot more when I take it out than when I put it in? If there is an additional tax advantage(in addition to it's IRA status),that's just icing on the cake. Correct?
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bentony: "The reason I referred to small cap, large cap,fixed, is that just about every "advice" or analysis for amateur investors tells us to diversify the portfolio, based on timeframe and risk tolerance."

Yes.

"Even in an IRA, that diversification should matter, shouldn't it?"

Probably, but many people suggest viewing you IRA, Roth IRA and taxable investment accounts as one portfolio and not three different portfolios. It is difficult to infer from your post whether you are viewing the IRA as its own portfolio independent of any Roth IRA or taxable investments.

"So,what I'm really asking is this: shouldn't I be looking for an investment that will be worth a lot more when I take it out than when I put it in?"

Yes.

"If there is an additional tax advantage(in addition to it's IRA status),that's just icing on the cake. Correct?"

Not necessarily. Any additional tax advantage usually comes at a cost; if you can invest in the underlying investment without the wrapper that provides the additional tax advantage, one can usually do better by investing the IRA funds directly. In addition, if you find tax free bonds paying substantially more than taxable bonds, then the default risk is also probably susbtantially higher (and it is not clear from your posts how you are analyzing/measuring your different investment choices).

If there is an additional tax advantage, why not invest with your after tax/taxable dollar investments and use the IRA for soemthing that would generate taxable income if held in your taxable account?

Regards, JAFO
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You should look at ALL of your investments in terms of their relative tax efficiency. This would usually put bonds or bond funds as the most tax inefficient. At the other end of the scale would be stocks or stock funds at the other end along with tax free munis. You should then fill up your tax advantaged account with the most tax inefficient investments until they are full leaving the most tax efficient investments for your taxable accounts.

Bob
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Thank you! Since the vast majority of my investible assets are in IRAs, and my I do not have a lot of bond exposure, maybe I should put more of the IRA money into bonds or bond funds. However, when I look at ROI, it seems that I would, could, see a lot more growth in those assets in stocks rather than bonds, provided I choose the right stocks. And what about those MLPs?.
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Since the vast majority of my investible assets are in IRAs,

If the only place you have investible money is your IRA discussion about what to keep where is academic. Settle on the investment mix you want and do it. Should you ever get to the point that you can also invest outside your IRA you can revisit the issue of what types of investments to keep in what type of account.

Phil
Rule Your Retirement Home Fool
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