Allocating Global Equities in a Taxable Account

Dimensional

Kaitlin Hendrix

Article

11 Pages

Dimensional explores how asset location can improve after tax outcomes without changing an investor’s overall global equity allocation. The research suggests investors in higher tax brackets may reduce tax drag by overweighting U.S. equities in taxable accounts, challenging the long held view that international equities are always the better taxable account holding because of foreign tax credits.

Key Takeaways

Dividend advantage: U.S. equity funds had a 0.98% dividend yield in 2025 versus 2.54% for developed international funds, reducing taxable dividend income.
Tax efficiency: None of Dimensional's equity ETFs and the majority of its equity mutual funds distributed capital gains in 2025, making dividends the primary source of tax drag.
Location matters: For investors in higher tax brackets, lower U.S. dividend yields can outweigh the benefit of foreign tax credits when deciding which equities belong in taxable accounts.
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