The risk from bonds is not quite the same (because the IRS takes a larger fraction of bond gains or losses than of stock gains or losses), but it has relatively little effect on your portfolio risk, both because it is much less than the risk from stocks and because the two risks have very low correlation. Therefore, the risk of these two portfolios is very close to the same.I've got one possible nit (or more likely point of confusion):
The nit (or confusion): I get the logic behind A5, and the reduction in risk from holding stock in the taxable account. What I don't follow is why D8 can be used for the starting Roth balance in both Bonds in Roth/Stocks in Roth scenario. For example, if the stock tax on gains is 20%, then I totally agree that 10000 of stocks in Taxable has the same risk as 8000 in Roth. But that doesn't seem to imply that these two portfolios have the same risk;
10000 stocks in Taxable, 8000 bonds in Roth
8000 stocks in Roth, 10000 bonds in Taxable
Yes, the risk-from-stocks is the same, but the risk-from-bonds isn't - the taxation is different, so the change in risk is different. Did I miss something?
Statistics: Posted by grabiner — Thu Aug 29, 2024 11:35 pm — Replies 26 — Views 4272