How do you beat inflation without stock picking and market timing? You get exposure to systematic sources of excess return, a.k.a. premiums. This is one of our favorite slides because it highlights the premiums that savvy investors want exposure to, going back to 1927. Get low-cost, diversified, tax-efficient exposure to these factors, take the long view, and you’ve put the odds firmly in your favor.

I attended the CFA Society of Houston’s Rice Wealth Management Symposium entitled “Putting Investors First” this month, where I heard Sharon Carson of J.P. Morgan discuss her Guide to Retirement. Investors often struggle with understanding which aspects of their retirement and investment planning they can actually control. Sharon shared this graphic, which clearly depicts the four areas of planning where you have some measure of control—and the two where you have none.

For the final post in our tax management series, we’ll take a look at asset location. Everybody knows the three rules of real estate, but most don’t know that the same rule also applies to investment portfolio construction.

Asset location is the practice of positioning tax-inefficient assets in tax-advantaged accounts. For example, fixed income and REITs should first be held in tax-deferred accounts like an IRA, 401(k), or 403(b) while tax-free municipal bonds and equities should be positioned in taxable accounts.

A recent study by Vanguard estimated that professional advisors can add up to .75% annually to investment returns by utilizing proper asset location in client accounts. It is all too frequent that we find new clients coming on board with poor use of asset location, but with a few simple tweaks we can align your investments to maximize your after-tax return.