It depends.
Two of the most tax-efficient mutual funds are a total stock index and a total international stock index...with total stock usually being more efficient but not always.
Some people take this to mean that total international should not be held in taxable because total stock is "better" there. There are at least two reasons that this can be a mistaken assumption.
1. You can't get the foreign tax credit except in the taxable account. (But it is not large so this is not necessarily a dealbreaker alone.)
2. Unless your taxable account is only a small portion of your portfolio, you'll probably need to stock funds there anyway just to maintain your allocations and balance. So why not use them both? This allows you to rebalance between US and foreign stock with new purchases.
Other factors
3. Many work plans do not have a good international choice (although they are getting better every year).
4. Many people cannot put their whole international allocation into IRA or work plans because putting other things in work plans is more important than the slightly less tax efficient placement of international in taxable.
Every portfolio is a unique combination of many factors and there is no one answer for where to put any one asset. Having said that, I tend to place international into taxable, but not always.
Two of the most tax-efficient mutual funds are a total stock index and a total international stock index...with total stock usually being more efficient but not always.
Some people take this to mean that total international should not be held in taxable because total stock is "better" there. There are at least two reasons that this can be a mistaken assumption.
1. You can't get the foreign tax credit except in the taxable account. (But it is not large so this is not necessarily a dealbreaker alone.)
2. Unless your taxable account is only a small portion of your portfolio, you'll probably need to stock funds there anyway just to maintain your allocations and balance. So why not use them both? This allows you to rebalance between US and foreign stock with new purchases.
Other factors
3. Many work plans do not have a good international choice (although they are getting better every year).
4. Many people cannot put their whole international allocation into IRA or work plans because putting other things in work plans is more important than the slightly less tax efficient placement of international in taxable.
Every portfolio is a unique combination of many factors and there is no one answer for where to put any one asset. Having said that, I tend to place international into taxable, but not always.
Statistics: Posted by retiredjg — Mon Dec 30, 2024 3:12 pm — Replies 8 — Views 537