With the ability to leverage tax-advantaged accounts like IRAs and 401ks but each having various contribution limits, many investors seek to create retirement plans that comprise of both tax-advantaged and taxable accounts. However, managing investments across multiple account types can often feel like trying to navigate a maze in the dark. Many investors attempt to create the same asset allocation in each account rather than leveraging the unique tax advantages of individual account types. This may lead to missed opportunities for growth, higher taxes, and an inefficient use of resources.

The importance of asset allocation and location

Optimizing your portfolio involves more than just asset allocation—deciding how to divide your investments among stocks, bonds, and other asset classes. It also requires focusing on asset location—placing those investments in the right types of accounts to maximize tax efficiency.

For example:

• High-growth stocks are best suited for tax-advantaged accounts like IRAs or 401(k)s, where their gains can grow tax-deferred. 
• Municipal bonds, which already offer tax-free interest, work well in taxable accounts. 

Simply spreading your assets across accounts without considering both allocation and location could limit your portfolio's potential. By thoughtfully combining asset allocation with proper account placement, you can help your investments grow effectively.

Intelligent asset allocation with the Enrich App

The Enrich App makes identifying tax-efficient asset location simple - just toggle the strategy on when defining your portfolio and every rebalance thereafter will adjust your holdings to be in the appropriate tax-treatment account. By providing your accounts and holdings, and your pre-determined asset allocation strategy it then factors in the tax advantages of the holdings and the accounts themselves. The app recommends strategically placing investments in accounts where they’ll thrive¹:

For example:

• High-growth stocks belong in your Roth accounts, where growth is protected from taxes.
• Municipal bonds shine in a taxable account, leveraging their natural tax advantages.
• Leave room in traditional IRAs or 401(k)s for lower-risk, stable returns.

See your financial potential

Our app is designed to deliver real value to your financial journey: 

• Greater tax savings: With our tax optimization tools that allow you to have your rebalance recommendations reflect securities based on tax-treatment of each account (enabled only if you wish to do so), you may be able to reduce the amount you owe and keep more of your hard-earned money. ²
• Accelerated portfolio growth: Leverage our account-specific investment strategies to help your portfolio grow and be taxed efficiently. ³
• Simplicity and ease: Our user-friendly platform provides step-by-step guidance, making investment management straightforward. 

With these features, you can say goodbye to guesswork and hello to a smarter, more personalized approach to managing your investments.

Footnotes

¹ Asset location recommendations are based on metadata about each security from third-party vendors, such as Finnhub and Morningstar. Enrich Finance, LLC is not liable for inaccurate information provided by these vendors.  Investing in the market involves inherent volatility and carries the risk of loss of principal.

² Tax savings are subject to changes in tax law, transaction costs, wash-sale complications, inaccurate third-party data, or market losses

³ Certain accounts, such as 401ks, are not able to access all available securities. As a result, you may not be able to get the same security in another account. Additionally, selling a security in one account and moving it into another account exposes you to potential wash sale issues. Investing in the market involves inherent volatility and carries the risk of loss of principal.