Choose wisely. There is only one correct answer to each question.
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1.
Stock investors can exert more control over capital gains than bond investors by simply holding on to their stocks.
True. Given that bonds have to mature at some point, you can hold onto stocks longer than you could with many bonds.
2.
Tax-wise, bonds are a good fit for tax-sheltered accounts rather than taxable accounts because their payouts are taxed at your ordinary income tax rate.
True. For tax purposes, it probably makes sense to keep bonds in tax-sheltered accounts because of their relatively high tax rates.
3.
What is asset location?
How investors distribute their investments between tax-sheltered and taxable accounts. Asset location refers to how investors divvy their investments between tax-sheltered and taxable accounts.
4.
Income from cash investments is taxed at _______.
Ordinary income tax rates. For this reason, it might make sense to keep your cash in tax-sheltered accounts; however, cash's value as a way to meet near-term needs means most people will keep it in taxable accounts for easier access and lack of withdrawal penalties.
5.
Why would exchange-traded funds be good choices to be held in taxable accounts?
They limit capital gains payouts. This is a feature that is built in to them.
