Episode 66- What Works Wednesday- It’s Not About What You Make, But What You Keep

Welcome back to What Works Wednesday! I’m Leland Gross, and today we're covering an often overlooked but crucial investing strategy: tax location. While asset allocation (diversifying investments) is well-known, tax location ensures you're maximizing after-tax returns by placing investments in the right accounts. It’s not just about what you make, but what you keep. So make sure your portfolio is optimized for both asset allocation and tax location to grow and keep more of your wealth!

Transcript:

Leland Gross CFP® EA (00:02)

Hey everyone, welcome back to another episode of What Works Wednesday. My name is Leland Gross. Today I want to talk about an investing strategy that I think is really critically important to all investment portfolios, but is so rarely taught, talked about, and most financial advisors can't do it. It's called tax location. So you'll often hear in the investing world about asset allocation, which is really the idea of diversification.

So let's just throw in as many words that end incation as we can. But diversification, we all know, don't put all your eggs in one basket. So if you're holding a technology stock, you also wanna have a healthcare stock because those are different sectors, so they move differently. Same with financial services, blah, blah, blah. So you create funds, index funds, mutual funds, or just buy enough individual stocks that allow you to spread

out your asset allocation to where your assets are in real estate, technology, agriculture, health insurance, financial services, all of the above, know, keep going. So that, you know, when one is down, one is up. It's the idea of, you know, if I bought sunglasses and sunscreen, well, on a sunny day, I'm doing great. But on a rainy day, I don't need any of those things.

So I'm not diversified. Both of those things are great for Sun. But if I had sunglasses and an umbrella, well, now I'm diversified. I have something for sunny days and rainy days. Same thing in your investment portfolio. So that's asset allocation. How are we going to make sure the assets you hold are diversified and allocated into different sectors, different strategies, things like that? Lots of people talk about that. It's very important.

Today is about tax location as opposed to asset allocation. And this is a little known talked about strategy that again is very important. But the reason it's not talked about as much is because many financial advising institutions aren't compliantly set up to talk about taxes. So they say, you know, we don't give tax advice. We don't do tax planning. Talk to your CPA and many CPAs

are looking at your greater income taxes, not how your investments are strategized to become tax efficient. So tax efficient investing, there's lots of ways you can do that, but it's important because your investments, especially if they're held inside of a taxable brokerage account, are kicking off income, dividends, interest, capital gains every year, which is increasing your taxes. So you think I just get taxed on my salary,