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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Swat on August 29, 2016, 08:41:45 PM

Title: Tax Efficient Fund Placement. Where do international funds go?
Post by: Swat on August 29, 2016, 08:41:45 PM

Looking to best allocate my money between my taxable accounts vs tax advantaged accounts in the various asset classes. All of my funds are with Vanguard. I came across this link which has a nice chart (https://www.bogleheads.org/wiki/Tax-eff ... _placement), but was curious getting other people's opinions. From most efficient to least efficient among the asset classes I have, this is what I was thinking (all equity):

Domestic: Total market > LC > LCV > SC > SCV > REIT

Where do International Funds go in this list (Total market, Int LC, Int LCV, Int SC, Int SCV, Int REIT, EM)? I know they have foreign tax credit but I wasn't sure how it fits in to the above? More or less efficient than domestic? How would you reorder the list above while adding in all the international categories?

And I'm just curious what other people's thoughts are with bonds (total bond market specifically)? In general, the link above suggested bonds in tax-deferred but http://whitecoatinvestor.com/asset-loca ... n-taxable/ would suggest otherwise and that math seems to make sense to me.

Thanks.

Title: Re: Tax Efficient Fund Placement. Where do international funds go?
Post by: seattlecyclone on August 29, 2016, 09:27:39 PM

You need to put your international funds in a taxable account to be eligible for the foreign tax credit on these. The table in the Bogleheads page shows international stock funds having the lowest tax costs when considering the foreign tax credit. Therefore I think there's good reason to put these funds in your taxable account before domestic stock funds. This is what I do.