Advisors strategically place tax-inefficient investments in tax-advantaged accounts and tax-efficient ones in taxable accounts to optimize after-tax returns.
Index funds, ETFs, and municipal bonds are recommended for their lower taxable income and capital gains, making them ideal for tax-conscious investors.
While minimizing taxes is crucial, advisors also consider risk tolerance, investment goals, and liquidity to avoid suboptimal decisions due to excessive focus on tax optimization.