I appreciate all the great info from this group. As a recent retiree, I’ve been reading and learning a lot about asset allocation. Still, one topic I’m struggling with is the mix of investments across my taxable and retirement accounts.
More specifically, assuming one intends to hold a combination of Index funds (VFIAX — S&P 500) and actively managed (VWENX – Wellington Admiral), what are the rationale to consider for deciding whether to hold these funds in taxable vs. retirement accounts? Has anyone seen good info on this from Vanguard or elsewhere?
|Funds||Vanguard 500 Index Fund Admiral Shares||Vanguard Wellington Fund Admiral Shares|
|Price||389.09 (NAV)||75.23 (NAV)|
|3-year total return||+18.21%||+12.07%|
|3-year standard deviation||17.72%||11.84%|
|Min. initial investment||3,000.00 USD||50,000.00 USD|
|Net expense ratio||0.04%||0.16%|
|Total net assets||416.47bn USD||103.35bn USD|
|Morningstar category||Large Blend||Allocation–50% to 70% Equity|
Tax-friendly funds like VFIAX can be held anywhere with no problem. Dividend generating funds like VWENX are best held in an IRA, if possible.
If you are going to invest in actively managed funds, they are best held in retirement accounts. Index funds are more tax-efficient and can be held in retirement or after-tax accounts.
Managed funds like VWENX usually produce dividends and capital gains, whereas index funds usually produce just dividends. So, it’s best to hold index funds in a taxable account unless you want the income.
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