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Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

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Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

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Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

Writer's pictureSummit Puri
Jun 172 min read

Asset Location vs Asset Allocation

I came across the topic of “Asset Location vs. Asset Allocation” a few weeks ago when I was reading, and knowing how similar they sound, I thought they would make an excellent article to write. Asset Allocation and Asset Location are two completely different strategies but must be understood to build the most effective portfolio that aligns with your goals.

 

Let’s first dive into Asset Location.

 

Asset Location

Asset location is the process of placing your investment selections into specific accounts based on tax status. This is done with one goal in mind: appropriately managing and planning your tax liability during your investment cycle's growth and distribution phases.

 

There are many discussions around retirement savings and planning, but many don’t consider the tax liabilities that may occur during retirement. This is why an accountant and financial advisor are essential, valuable members of your investment team. Depending on your account type and investment type, your tax liabilities may be near or far-term. Consider:

 

Taxable accounts:

  • Index and other Passive accounts

  • Growth Funds with low turnover

  • Tax-managed funds

  • REITs

  • Municipal bonds

 

Tax-Deferred accounts:

  • Dividends

  • Most taxable bonds

  • Actively managed, high-turnover funds

  • Partnerships (MLPs)

 

Asset location essentially answers the ‘where’ question: “Where should I invest to align my goals with a tax-efficient plan?”

 

Asset Allocation

On the other hand, Asset allocation answers the ‘what’ question. “What should I invest my money in?” This is where you or your advisor helps select the funds and classes you invest in.

 

If you’re interested in learning more about asset classes, enjoy this quick read: Asset Classes: Understanding your investments (whitakerwealth.com).

 

Asset allocation is more than just selecting assets or asset classes or assigning a percentage to each. It is the output and culmination of the various inputs that the investor provides to their advisor.

 

This includes four key input components:

  • The time horizon of the investment(s) and investor

  • Strategic goals of the investor

  • Objectives of the portfolio

  • Investor risk tolerance

 

Each of the four items listed above has a qualitative and quantitative component. Recently, I’ve seen many complex methods that try to quantify and stratify an investor's risk tolerance. These are done through surveys, scenario builds/discussions, or, most commonly, interviews.

 

However the data is collected, the goal is to define and align all four key inputs to build a targeted asset allocation plan.

 

*An important aspect of asset allocation I purposely avoided was selecting funds with low correlations. I’ve discussed this in detail in this post if you’re interested in learning more about it: Correlation of Assets in Your Portfolio (whitakerwealth.com)

 

Does it even matter?

Well, simply put, yes, it does!

 

Knowing what to invest in and where to invest it will significantly influence your ability to meet your strategic goals in the future. Winning the lottery is not a good plan, but the team of Whitaker-Myers Wealth Manager Teachers(advisors) is ready to work with you to achieve your goals. Schedule some time with our team to explore this further and get on the right path.

 

Next week, we’ll take this topic one onion peel further, digging into strategic, tactical, and dynamic allocation portfolios. Stay tuned!

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Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

​

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

​

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

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