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

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1.
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.
2.
Investing from a tax perspective often contradicts its practicalities. One example of why is that _______.
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Investors often hold long-term stocks in tax-sheltered accounts even though those stocks are taxed at low capital gains rates. From a tax perspective, it doesn't make sense to do this. But practical reasons override that.
3.
If you're holding cash in an emergency fund, makes sense to place it into _______.
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A taxable account. If you're holding cash for near-term income needs or as an emergency fund, it makes sense to hold it in a taxable account because you may need access to the cash quickly and without penalty.
4.
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.
5.
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 _______.
Choose wisely. There is only one correct answer.
Both of the above. Sometimes practical needs just outweigh tax needs.