Taxable Accounts = Higher Returners with Low Tax Costs
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Taxable Accounts = Higher Returners with Low Tax Costs
The exceptions notwithstanding, there are compelling reasons to hold stocks in your taxable rather than tax-sheltered accounts.
Things To Know
- Stock investors can exert a higher level of control over the receipt of capital gains than bond investors.
Long-term capital gains, which are what you have when you sell stock that you've held for at least a year, are taxed at a much lower rate than is bond income—consult the IRS' Website for current long-term capital gains tax rates by income tax bracket.
You can control when you receive capital gains
Another key reason to hold stock in your taxable accounts is that stock investors can also exert a higher level of control over the receipt of capital gains than bond investors—for example, by buying and holding individual stocks or by investing in exchange-traded funds, which have a built-in mechanism for limiting taxable capital gains payouts. Tax-managed funds and traditional broad-market stock-index funds also tend to do a good job of keeping the lid on distributing capital gains.