How important is the tax efficiency? Bonds of an appropriate type and duration are gonna be your most reliable bet, and although some of the other choices may be more tax efficient, most of the alternatives you list may carry much higher risks than bonds. Don't let yourself get talked into picking high risk assets in the "ballast" part of your portfolio to save a few bps of tax drag:
- Leveraged futures should most certainly be seen as part of the risky part of your portfolio, if you choose to include such assets at all, not part of the ballast.
- The same would be true for equity ETFs, even if they are buffered or min vol. (Buffered ETFs are usually considered a garbage product around here, by the way - high fees, upside cap not worth the downside protection, etc. Better to adjust the stock/bond ratio to hit the risk level you need than to use buffered ETFs).
- Preferred stock is not that tax efficient, and it's still a lot riskier than bonds.
- BOXX is a good product but has a short history both in terms of being stress tested during financial market turmoil as well as in terms of its tax treatment
Instead, consider more conventional methods of tax efficiency like locating your bonds in tax deferred accounts, holding some of your bonds as municipals, holding some of your bonds as ibonds, etc. If you use these to the max and still have to pay a lot of taxes on bonds in taxable - so be it. Sometimes you just gotta build the portfolio that makes sense for you and pay the taxes you owe.
- Leveraged futures should most certainly be seen as part of the risky part of your portfolio, if you choose to include such assets at all, not part of the ballast.
- The same would be true for equity ETFs, even if they are buffered or min vol. (Buffered ETFs are usually considered a garbage product around here, by the way - high fees, upside cap not worth the downside protection, etc. Better to adjust the stock/bond ratio to hit the risk level you need than to use buffered ETFs).
- Preferred stock is not that tax efficient, and it's still a lot riskier than bonds.
- BOXX is a good product but has a short history both in terms of being stress tested during financial market turmoil as well as in terms of its tax treatment
Instead, consider more conventional methods of tax efficiency like locating your bonds in tax deferred accounts, holding some of your bonds as municipals, holding some of your bonds as ibonds, etc. If you use these to the max and still have to pay a lot of taxes on bonds in taxable - so be it. Sometimes you just gotta build the portfolio that makes sense for you and pay the taxes you owe.
Statistics: Posted by DonIce — Tue Sep 17, 2024 1:52 am — Replies 5 — Views 444