Investments to Keep Out of Your Taxable Accounts
Have you ever considered which types of investments you should hold in your taxable brokerage accounts vs. retirement accounts like your 401k, Roth and Traditional IRAs, etc.?
The key is if you’re going to have certain investments in your overall portfolio, you want to hold them in a way where income (dividends, etc.) and capital gains distributions won’t significantly raise your tax bill.
Christine Benz wrote a great article for Morningstar called “Which Investments to Keep Out of Your Taxable Account” that is well worth diving into if you have any of the following investments which I pasted from Christine’s article:
“Here are some of the key categories to keep out of your taxable accounts:
- Taxable bonds and bond funds
- Multi-asset funds
- Actively managed equity funds
- High-dividend-paying equities and dividend-focused funds
- REITs and REIT funds
- Commodities futures funds
- Convertibles (and funds that own them)
- Alternatives funds”
Travel Rewards Win and Updates
I just had a massive win with travel rewards points: My daughter and I are going to Texas in February to visit 3 amusement parks (she’s a massive roller coaster enthusiast!) and we really wanted to fly into Dallas on one particular Friday night direct flight.
The flights were over $500 each, which was a non-starter.
They were American Airlines flights but I had no AA miles. What I did have was a ton of British Airways miles, and BA is an alliance partner of AA’s.
I went to the BA site and found there were ‘saver level’ seats available for 14,500 miles each, so for 29,000 and $11.20 in taxes, we saved over $1,000 to make this trip possible.
That’s a value of over 3 cents per point, which is fantastic!
· Cheapest Business Class Award Flights to Europe from Award Wallet’s blog
· British Airways Devalues Avios Awards within North America from my site Travel Miles 101
ChooseFI has a ton of travel rewards resources to get you started in the travel rewards world, including podcast episodes, articles and recommended cards and you can always find them at Choosefi.com/Travel
I keep my list of Top 10 Recommended Credit Cards constantly updated, so check there each time you’re looking to open a travel rewards credit card (and using the links on that page is the single best way to support ChooseFI!)
Favorite Investment Writing of 2023
Each December, Nick Maggiulli (guest on Episode 404 of ChooseFI) puts out a list of his “Favorite Investment Writing” of that particular year, and I’m consistently blown away by the quality of the list.
Here’s the entire list of his 12 favorite investment articles of 2023, and here were the four that jumped out to me:
A Few Laws of Getting Rich by Morgan Housel
The Problem with Being House Rich by Ben Carlson
7 Deadly Stocks by Michael Batnick
Why We Pursue Financial Independence
“People who live far below their means enjoy a freedom that people busy upgrading their lifestyles can’t fathom.”
– Naval Ravikant
ChooseFI Community Taking Action This Week
“In early 2022, I was fed up with my low paying, stressful outpatient physical therapy job and decided to go part time (to keep my benefits), and pick up PRN (as needed) PT work (which pays better). After finishing up my taxes for 2022, I found that I made almost the exact same working half as much with the new PRN job. My original goal was to increase my income, but I achieved an even better outcome of more time for family, friends, and myself.
The best part of the story is that by already going part time and having secondary income from the PRN work, I was well prepared for the layoff from the part time job that came in Feb 2023. This layoff seriously affected many of my co-workers who completely lost their only job. I felt safe and secure knowing that this job was not my only form of income and I would be able to pick up more hours from the PRN job. I now work PRN for multiple companies, have my benefits outside of the jobs, and no longer feel tied to any company. Big thanks to ChooseFI for the guidance and confidence to make these non-traditional job decisions.”
“My 1% better is that I finally opened a HYSA through CIT Bank so that we could grow our emergency fund but still have full liquidity, which is something that I was looking for but didn’t know if it existed. I hesitated initially because the thought of moving a large (to us) chunk of money to somewhere out in the ether was a little terrifying based on my childhood experiences where money was scarce and fear of money was normal.
However, I felt that I could trust you given how I had come familiar with how thoroughly you research and that you yourself have decided to do this with your own money (and I of course did some of my own research). I feel good about this decision and I no longer feel like I am leaving money on the table by keeping the money in a low-earning money market savings account through our credit union.”
“My 1% better this week was setting up a Roth IRA. Not for myself though–luckily, I’ve been in this community for a couple of years now and already have a well funded Roth IRA account. But this week I was able to set one up for my sister. She recently finished grad school, and wanted help thinking about retirement now that she expects her income to go up considerably in the next few years. I was, of course, extremely excited for the opportunity to help!”
“My 1% better this week was opening a custodial account for our son, 12 years old. He followed the lead of his older sister, age 13, in investing cash in a VTI fund through M1 Finance. Our kids bake cookies and sell them to friends (and teachers) 3 cookies for $3. My husband and I buy the ingredients and they put in the work to bake them. He saved up $500 cash in the past few months and took us up on the offer we made to each of our five kids that if they invest $1000 on their own (baking cookies, birthday or Christmas cash, etc.) we will match them!!
So his $500 instantly became $1000 with the match and seeing that inspired him to earn more and later receive the remaining $500 we are willing to match.
The catch on our offer of this parental $1,000 match and one they have each agreed to is that once the money is invested, they are not allowed to withdraw any funds until age 18 at a minimum. But seeing compound interest charts I’ve shown them as well as online calculators, they are both motivated to let those dollars continue to earn more dollars. What a win to see our children grasp the concept of producing a desired product, marketing, earning money, saving and now investing!”
“I have been taking some action lately and excited to share some recent 1% improvements over the last month or two:
- – Downloaded the PDF for the Living Proof Health Challenge (mentioned in a prior newsletter)
- – Froze my credit at Experian. TransUnion and Equifax (here are the simple instructions — only took about 15 or 20 minutes total)
- – Got my budget set up with Tiller. I want to be more intentional with spending decisions with my girlfriend since we just moved to a new area
- – Read “PARA” from Tiago Forte and am excited to implement PARA across computer, ToDoIst, Google Drive and OneNote (for work)
- – Purchased Evernote (65$ for first year) to organize my notes/life
- – Backed up my computer (hadn’t done this in about 2 years…)
- – Helped my sister find “lost money” at an orphan financial account that she had forgotten thanks to your suggestion to look online
- – Started the process for the Treasury to help me find lost bonds. I filled out this form, got it notarized and will have some patience to hopefully receive my bonds in 6 months. I felt incredible guilt that I didn’t know where the bonds where located that I was given as a child, but after hearing about the “Lost Money” recommendation you shared I figured I would try to learn if it was possible to recover. The stress/shame relief I feel is so much less
- – Have been tracking my time with Laura Vanderkam’s spreadsheet in 30 minute increments. It feels amazing to have more clarity where my time is going and I am definitely being more intentional
- – Did community service yesterday for the first time in a long time — looking forward to continuing this in the future, since it’s a Win-Win all around!
- – Planning on signing up for CampFI or EconoMe 2024 conference! (Brad Note: 10% discount to EconoMe with code ‘choosefi’)”
“Had a big win recently:
Here are some highlights:
- -Went to Tokyo and the Philippines with my family for 18 days
- -Our first international trip together
- -Brought my grandma to her childhood home that she hasn’t seen since the 70’s
- -Paid for most of my family’s cost with my rewards points and travel savings
- -Able to do it because of my tech job and unlimited PTO policy
I’m blessed to be able leverage my tech career and give my family life dividends that none of us could’ve ever imagined.”