Definition
What is asset location?
Asset location is the strategy of placing each investment in the type of account where it is taxed most favorably — coordinating across taxable, tax-deferred, and Roth accounts. It is different from asset allocation, which is about what you own; asset location is about where you hold it.
Tax-inefficient assets, like bonds or actively traded holdings, are often best held in tax-deferred accounts, while assets expected to grow substantially may be better in a Roth. Placing investments thoughtfully can improve your after-tax return without changing your overall allocation.
Because it works across every account you own, asset location is most effective when one team can see your whole balance sheet at once.
Related terms
This definition is for educational purposes only and does not constitute investment, tax, or legal advice. Rules and thresholds change; consult a qualified professional about your situation.