Asset Location
In real estate, it’s “location, location, location.” In tax efficient investing, it’s the same. Our research* has shown that locating the tax efficient assets (large cap stocks, for example) in taxable accounts and the tax inefficient assets (real estate investment trusts) in retirement accounts can lead to an increase in returns of approximately 0.35% per year.  For a $1 million portfolio, this can lead to increased wealth of more than $35,000 over a ten year period.

Tax Loss Harvesting
Turning lemons into lemonade. That’s tax loss harvesting, or taking advantage of the natural volatility of the market. When assets in a taxable portfolio decline in value, we can replace the lemons with a similar investment. Tax losses can be used to offset other gains in the portfolio, adding to the overall tax efficiency.

In constructing and managing portfolios, we focus on asset location and watch for tax loss harvesting opportunities.

*"Asset Location: A Generic Framework for Maximizing After-Tax Wealth," Journal of Financial Planning, 2005 January Issue, Article 6.