Unlocking Tax Efficiency: The Importance of Strategic Asset Allocation and Asset Location

Goldman Sachs

Roy Appelman

Research

16 Pages

The authors examine how investors can improve after-tax outcomes by combining strategic asset allocation with asset location across taxable and tax-advantaged accounts. Rather than changing portfolio risk, the paper argues that placing tax-inefficient assets in retirement accounts and tax-efficient assets in taxable accounts can meaningfully increase long-term wealth, especially for higher-income investors.

Key Takeaways

Asset Location Pays: High-tax investors can gain more than 45 bps of annual after-tax returns, increasing retirement wealth by roughly 10% over 20 years.
Taxes Shape Allocation: Low-tax investors may add up to 25 bps annually, while portfolios with balanced 60/40 allocations and larger taxable balances benefit the most.
Growth Beats Value: Shifting growth equities to taxable accounts and value stocks and high-yield bonds to tax-advantaged accounts improves after-tax returns with minimal change in portfolio volatility.
Source: Goldman Sachs Asset Management. As of December 31, 2025.
Source: Goldman Sachs Asset Management. As of December 31, 2025.
VIEW FULL REPORT

Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week

Related Content

Portfolio Management
The Disappearing Overnight Drift
Jul 2026
Portfolio Management
Uncle Sam’s Cut: A Century of the Federal Tax Drag on US Equity Returns
Jul 2026
Diversification
Why Most Portfolios Are Under Diversified
Jul 2026

The information contained in this communication is of a general nature for informational purposes only, and does not constitute financial, investment, tax or legal advice. The information contained within this communication reflects the opinions of those referenced herein, and do not reflect the opinions of The Idea Farm, L.P. and its affiliates. Such opinions expressed herein are as of the date of production and are subject to change at any time without notice due to various factors, including changing market conditions or tax laws. Where data or information prepared by third parties is presented, no representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information by The Idea Farm, L.P. or any other person. While such sources are believed to be reliable, The Idea Farm, L.P. does not assume any responsibility for the accuracy or completeness of such information and does not undertake any obligation to update the information contained herein as of any future date. Any links to third party websites are offered only for use at your own discretion. The Idea Farm L.P., and its affiliates, are separate and unaffiliated from any third parties listed herein and are not responsible for their products, services, policies or the content of their website. All investments are subject to varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy or product referenced directly or indirectly in this communication will be profitable, perform equally to any corresponding indicated historical performance level(s), or be suitable for your portfolio. Past performance is not an indicator of future results.

Scroll to Top