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Portfolios 505: What Goes Where? The Art of Asset Location

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1.
Income from cash investments is taxed at _______.
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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.
2.
Cash investments are taxed at ordinary income rates, meaning it's wise to put them in tax-sheltered accounts to cut down on your tax burden. But you might want to contradict that advice because _______.
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Both of the above. Sometimes practical needs just outweigh tax needs.
3.
Stock investors can exert more control over capital gains than bond investors by simply holding on to their stocks.
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True. Given that bonds have to mature at some point, you can hold onto stocks longer than you could with many bonds.
4.
What is asset location?
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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.
5.
In general, which investments below are not good choices for tax-sheltered accounts?
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Non-dividend paying stocks. Long-term capital gains, which is what you have when you sell a stock that you've held for at least a year, are taxed at a much lower rate than is bond income or dividends.