Any good football coach will tell you that you want players at their best position. A 350-pound football player is built to anchor the offensive line, not play wide receiver. A kicker is there to kick extra points and field goals, not quarterback. In this way, a team is intentionally built to leverage its collective parts in the most productive fashion.
In much the same way, it’s important for physicians to locate investment assets to their most tax productive vehicle. Here are some examples:
- Use tax-free municipal bonds in taxable investment accounts.
- Real Estate Investment Trusts (REITs) and Treasury Inflation Protected Securities (TIPS) are tax inefficient and belong in tax-sheltered accounts such as 401(k)s, IRAs, and Roth IRAs.
- Use tax-managed funds in non-tax-deferred accounts.
Effective asset positioning lowers your tax burden and translates directly into higher investment returns. Otherwise, you’re leaving money on the table.
You’re going to score fewer points if your kicker is throwing passes to your wide receiver. In this case, effective asset location will put more points on the board and allow you to reach your retirement goals sooner.
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Lowell developed a passion for finance in high school, after some hard lessons learned. Now as a Wealth Advisor, he appreciates the opportunity to help his clients articulate, achieve, and expand on their financial and associated life goals. He particularly enjoys working with mid-career technology professionals.
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