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Question
An investor has a traditional IRA and a taxable brokerage account, each with $100,000. She wants to hold both a total stock market index fund and a high-yield bond fund. Which asset location is most tax-efficient?
1
High-yield bond fund in the IRA; index fund in the taxable account.
2
Split both funds equally between the IRA and the taxable account.
3
Both funds in the taxable account, since index funds are tax-efficient enough to offset the bond fund's drag.
4
Index fund in the IRA; high-yield bond fund in the taxable account.
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