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As I was feeding the pigs the other evening — Fresca in one hand, feed scoop in the other — my mind started wandering to the (yet unpaid) real estate tax bill sitting on our kitchen counter.
(I know. I’m a Type A nerd. Go ahead and judge.)
As I argued with myself for the ump-teenth time over how stupid I think it is to have to pay taxes simply for the privilege to live on real estate you already own…
Another thought popped in my head…
Most investors spend tons of time and energy trying to pick the right stocks and ETFs.
They obsess over expense ratios. Dividend yields. Growth rates.
And yet they just dump everything into whatever account is most convenient.
Their Roth IRA. Their 401(k). Their taxable brokerage.
Doesn't matter. Same investments everywhere.
In doing so, they quietly hand thousands of dollars back to the IRS every single year.
For no reason!
So this week I want to chat with you about asset location — and why getting it right might be the easiest money you ever make as an investor.
Not to be confused with asset allocation (what you own).
Asset location is all about where you own it.
Same investments. Different accounts. Dramatically different tax bills.
Let's get into it👇🏼.
The Problem In Plain English
You probably have more than one type of investment account.
Maybe a 401(k) through work.
A Roth IRA you opened a few years ago.
A taxable brokerage account where you invest extra savings.
Yet what a lot of people don’t realize is that each of these accounts has completely different tax rules.
Your 401(k) and Traditional IRA — every dollar of growth gets taxed as ordinary income when you withdraw.
Could be 12%. Could be 22%. Could be 32%.
Depends on your federal income tax bracket.
Your Roth IRA — completely tax-free. Every dividend. Every gain. Forever.
Your taxable brokerage — you pay taxes every year on dividends and interest, and capital gains tax when you sell an investment for a profit.
On paper, most people I ask say they know this.
But when I talk to them in my 1:1 consults, they aren’t using this knowledge to decide where to put each investment.
And that's where the real money is hiding.
One Simple Rule:
Put your least tax-efficient investments in your most tax-protected accounts.
Put your most tax-efficient investments in your taxable accounts.
That's it. That's the whole framework.
Here's what that looks like in practice:
In your Roth IRA/401k — put your highest-growth, most tax-inefficient assets.
Your Roth is your most powerful tax shelter.
Growth is tax-free. Dividends are tax-free. Forever.
This is where you want the investments that would otherwise generate your biggest tax bills to go.
Think:
SCHD (Schwab US Dividend Equity ETF) — pays a growing dividend every quarter. Every dollar of that dividend inside your Roth compounds tax-free instead of triggering an annual tax bill.
VNQ (Vanguard Real Estate ETF) — REITs are required by law to distribute 90% of their income to shareholders. That's a lot of taxable income in a regular account. Inside a Roth? Zero tax. Ever.
QQQM (Invesco Nasdaq-100 ETF) — high-growth, high-return potential. The bigger the gains, the more valuable the tax-free shelter becomes. Let your most aggressive growers live here.
Actively managed funds with high portfolio turnover — funds that buy and sell frequently generate short-term capital gains that get taxed at your highest ordinary income rate. Shield them inside your Roth and that problem disappears entirely.
The rule of thumb: if an investment throws off a lot of income or has serious growth potential — it belongs in your Roth first.
In your Traditional 401(k) or IRA — put your bond funds and income-generating assets.
Your Traditional accounts give you tax-deferral — meaning nothing gets taxed until you withdraw in retirement.
That makes them the perfect home for investments that generate regular, heavily-taxed income right now.
Think:
BND (Vanguard Total Bond Market ETF) — bonds pay interest income regularly. In a taxable account, that interest gets taxed as ordinary income every single year — your highest possible rate. Inside a Traditional 401(k), that interest compounds untouched for decades. You defer the tax bill until retirement when you may be in a lower bracket.
VCIT (Vanguard Intermediate-Term Corporate Bond ETF) — same principle. Corporate bonds generate consistent interest income that you don't want sitting in a taxable account getting hit annually.
Dividend-paying international funds — international ETFs often come with foreign tax complications that are actually easier to manage inside a tax-deferred account.
High-yield bond funds — these pay generous income, which makes them extremely tax-inefficient in a taxable account. Let them compound inside your 401(k) instead.
The rule of thumb: if an investment pays regular interest or income that would otherwise be taxed at your ordinary income rate — it belongs in your Traditional 401(k) or IRA.
In your taxable brokerage — put your most tax-efficient assets.
Your taxable brokerage is your least tax-protected account.
So you want investments here that naturally generate the smallest tax footprint — ie. assets that grow quietly in the background without throwing off taxable income along the way.
Think:
VOO (Vanguard S&P 500 ETF) — extremely low turnover, minimal dividend distributions, and most of its return comes from long-term price appreciation. You only pay capital gains tax when you actually sell — and if you hold longer than a year, that rate is 0%, 15%, or 20% depending on your income. Not ordinary income rates of 22-37%.
VTI (Vanguard Total Stock Market ETF) — same story. Broad, diversified, low-cost, tax-efficient. Perfectly suited for a taxable account.
VUG (Vanguard Growth ETF) — growth-focused stocks pay minimal dividends and instead appreciate over time. That appreciation isn't taxed until you sell. A natural fit for taxable accounts.
Individual stocks you plan to hold long-term — buying and holding individual companies for years generates almost no taxable events until you decide to sell. Berkshire Hathaway, for example, pays zero dividends entirely by design — making it one of the most tax-efficient individual stock holdings available.
The rule of thumb: if an investment grows primarily through price appreciation rather than income distributions — and you plan to hold it for years — it belongs in your taxable brokerage.
~
The way to remember all three:
Roth → your most aggressive growers and highest income producers. Tax-free forever.
Traditional 401(k)/IRA → your bonds and interest-generating income. Tax-deferred until retirement.
Taxable brokerage → your quiet, low-turnover index funds. Tax-efficient by design.
Let me show you what this actually looks like with real numbers.
Say you have $500,000 invested and $50,000 of that is in a high-dividend ETF like SCHD yielding 3.5%.
That's $1,750 in annual dividends.
Scenario A — SCHD in your taxable brokerage:
You pay taxes on $1,750 every year. At a 22% qualified dividend rate, that's $385/year.
Over 20 years, that's $7,700 in taxes paid — before accounting for the growth you lost on that money.
Scenario B — SCHD in your Roth IRA:
You pay $0 in taxes on those dividends. Every year. The full $1,750 stays invested and compounds.
Over 20 years at 8% returns, that $7,700 in tax savings compounds to over $16,000 in additional wealth.
Same ETF. Same amount invested. Same market returns.
Just in a different account.
$16,000 difference.
And that's just one holding.
Most investors have 5, 10, sometimes 20+ positions that could be optimized this way.
The Quick-Check Checklist.
I know this can feel overwhelming, so here's a step-by-step guide to help you start:
✅ Step 1: Write down every investment account you have and its tax type (Roth, Traditional, or Taxable).
✅ Step 2: List every ETF, mutual fund or individual company you own and ask — does this generate a lot of taxable income? (High dividends, bond interest, or high turnover = tax-inefficient = belongs in your Roth or 401k.)
✅ Step 3: Move tax-inefficient investments into your Roth IRA first. This is your most powerful shelter.
✅ Step 4: Fill your taxable brokerage with broad index funds like VOO or VTI that grow quietly with minimal tax drag.
✅ Step 5: Put bond funds and income-generating fixed income inside your Traditional 401(k) or IRA where the interest compounds tax-deferred.
One important note:
If moving investments between accounts means selling in a taxable account, check your capital gains situation first.
Inside a Roth or 401(k)? Move freely — no tax consequences.
That's all for this week.
As always — hit Reply and tell me:
What questions do you have about asset location? Did this newsletter give you food for thought on relocating any of your investments?
I read every single reply.
And unlike the algorithms, I actually write back.
Talk soon,
-Charlie
🔗 Links You’ll Love
🏦 The top 10 IRAs to consider opening in 2026 — If this week's newsletter made you want to open a Roth IRA or consolidate old accounts, this is the best place to start. I went through this list myself before recommending it — straightforward comparison, no fluff.
📊 How asset location can lower your taxes — Vanguard's own research on the exact strategy we covered this week. Their data shows it can mean up to $74,000 less in taxes over 30 years. Worth a bookmark.
📖 The books I've been (re)reading: The Psychology of Money by Morgan Housel. If you haven't read it yet — stop what you're doing. It's one of the best investing book I've ever read and it has almost nothing to do with picking stocks.
💭 Weekly Wonderings…
🐷 On the farm: We're heading into one of my favorite times of year — late spring. The weather is (finally) staying warmer, the show pigs are learning how to strut their stuff with daily walks, and our new horse/pig barn is (almost) ready for concrete! It’s the time of year that makes me extra grateful for country life. I hope you've got something like that in your week too!
📈 On the market: A lot of you have been emailing me asking whether to keep investing given all the uncertainty and noise in the headlines right now. My answer is always the same: zoom out. The investors who won through every crash in history weren't the ones who predicted the bottom. They were the ones who kept going.
📬 From the inbox: Got a great question this week from a subscriber asking whether asset location still matters if you only have one type of account. Honest answer — not yet. But it's a great reason to open a Roth IRA if you don't have one. Which leads me to this week’s…
💰 Quiet Wealth Move
This week, log into every investment account you have. Write down what's in each one.
If you've been meaning to get your portfolio organized and actually want to see where all your investments are, what they're returning, and whether your allocation is where it needs to be — my Stock Tracker & Portfolio Balancer does exactly that.
It's a simple Google Sheet, fully customizable, and it costs less than 2 cups of ☕️.
Once you’ve got everything in one place, ask yourself: is my most tax-inefficient investment sitting in my most tax-protected account?
If not — you've just found some hidden money!
That's it. 20 minutes. Could be worth $1,000s over the next decade.
When you’re ready, here’s how I can help:
If you want to sit down together and map out your specific asset location strategy — which investments go where based on your exact accounts, income, and tax situation — that's exactly what my 1:1 private strategy sessions are for.
No pressure, no pitch. Just your numbers and a clear plan.
$1B Money Manager's Biggest AI Bet of 2026?
Louis Navellier called Nvidia at split-adjusted $4. He's calling this one now. An AI breakthrough he says could make ChatGPT obsolete — and trigger a 70X investment boom in the process. He's presenting the name and ticker symbol live. Watch free.
Disclaimer: this content is for educational and informational purposes only, and is not legal, financial or investment advice. Always do your own research before investing, and consult a licensed professional. Charlie and OJD LLC are not responsible for any losses or decisions made based on this content.