The most common question I hear is, ‘What should I invest in?’ — but honestly, the better question might be, ‘Where should I invest it?’

When most people think about building long-term wealth, their minds immediately go to asset allocation—that ever-important balance of stocks, bonds, and maybe a sprinkle of alternatives. And to be clear, that’s a crucial part of smart investing. But there’s another strategy that often flies under the radar, and it could be costing you more than you realize. 

Let’s talk about a less sexy, but equally powerful concept:

🎯 Asset Location

Yes, you read that right. Location, not allocation. And no, this isn’t a real estate blog (though I love a good Zillow scroll as much as anyone). This is about where your investments live—and how the “address” of each asset can impact how much money stays in your pocket vs. how much goes to taxes.

First, Let’s Clear Up the Difference

Most investors (and even many financial pros) put all their energy into choosing the “right” investments. Stocks, mutual funds, ETFs, bonds… the list goes on. That’s asset allocation, and yes—it matters. A lot.

But asset location asks a different question:
Are those investments sitting in the “right” account? The right account being, the most tax-efficient account possible, more money to you and less to Uncle Sam.

As a CPA, I want you to know that investment returns matter but AFTER-tax returns matter more! 

Because here’s the thing: Not all investment accounts are taxed the same way. Some grow tax-free, some grow tax-deferred, and others? Well, you’re handing a slice of your returns over to Uncle Sam every year unless you plan carefully.

Here’s a quick rundown of the three most common types of investment accounts and how they’re taxed:

1. Roth IRA – Your tax-free growth machine

Roth IRAs are the holy grail of tax-advantaged investing. You contribute after-tax dollars, and in return, all the growth and future withdrawals are 100% tax-free (as long as you follow the rules).

Because of that, Roth IRAs are a perfect home for investments with high growth potential and those investments that are income heavy (meaning those that are generating above average dividends or interest income to your account on a consistent basis) —like stocks and equity-heavy funds. The more they grow, the more you benefit. And the IRS? They don’t get a dime. It’s a beautiful thing.

2. Traditional IRA or 401K – Tax-deferred (to be taxed later), not tax-free

These accounts give you an upfront tax break, but you’ll pay ordinary income tax on withdrawals later in retirement.

This is a great spot for assets that tend to generate ordinary income—think taxable bond interest or REITs. Since that income would otherwise be taxed annually in a brokerage account, parking it in a tax-deferred space keeps things more efficient.

3. Taxable Brokerage Account – Flexible, but fully exposed to taxation

Brokerage accounts are the most flexible but least tax-advantaged.

You can access your money anytime, but you’ll be subject to taxes on dividends, interest, and capital gains realized throughout the tax year.

That’s why it makes sense to keep tax-efficient investments here—like index funds or long-term holdings that don’t generate a lot of taxable income year-to-year. The goal is to minimize your annual tax drag while keeping funds accessible.

So… Why Does This Matter?

Let’s say you have a mix of these account types and you just toss your investments in randomly. No rhyme or reason. Stocks, bonds, REITs—all evenly spread across the board.

Seems harmless, right? It is mostly (the most important thing is that you are invested); however, I can almost guarantee that you’ll be paying more in taxes than you had to if you had more of a strategy behind the way you invested and in what account.  

Without intentional asset location, you could be paying more in taxes every single year—and over time, those tax inefficiencies compound. What might seem like a 0.5% difference in annual returns could cost you tens or even hundreds of thousands of dollars over your investing lifetime.

In short: It pays to be strategic.

A Real-Life Example (Because Numbers Speak Louder Than Theory)

Let’s say you have $300,000 to invest:

• $100K in a Roth IRA
  
• $100K in a Traditional IRA
  
• $100K in a brokerage account
  

You want to invest in a mix of stocks, bonds, and REITs. If you evenly split them across all three accounts, you’re likely leaving money on the table. Why?

• Your REITs are generating taxable income that gets hit at your full income tax rate in the brokerage account.
  
• Your stocks (which have the most growth potential) are sitting in the Traditional IRA, where all the growth will eventually be taxed at ordinary income rates.
  
• Your bonds (which generate predictable income but not a lot of growth) are in the Roth IRA, wasting its biggest benefit: tax-free growth.
  

Now imagine you flip that:

• Stocks in the Roth IRA
  
• Bonds and REITs in the Traditional IRA
  
• Tax-efficient ETFs in the brokerage account
  

That’s what I call smart asset location. Same investments, same accounts, totally different outcome.

Great to be invested, yes, but it’s important to consider the right location for those investments as well.

The Bottom Line: Invest Smart, But Also Invest Tax Smart

Smart investing isn’t just about picking the “right” stocks or having the perfect asset mix. It’s about efficiency—keeping more of what you earn and minimizing how much you lose to taxes unnecessarily.

By intentionally choosing where your assets are held, you can boost your long-term returns without taking on more risk, working more hours, or obsessing over the market.

I’ll say it again for the people in the back…Returns matter. But AFTER TAX returns matter more. 

Over a few years? Maybe you save a few thousand.

Over a few decades? You could easily add tens or even hundreds of thousands to your net worth—without lifting a finger.

It’s often overlooked, but once you understand how powerful it can be, it’s hard to ignore.

So if you haven’t taken a good look at where your assets are living, now is the perfect time.

Want help getting your investment accounts in tax-efficient shape? Let’s chat. Because you work hard for your money — and it should work just as hard for you.