A Tax-Friendly Short-Term Portfolio
Here's a way to pick up a bit of yield in your portfolio while keeping a lid on volatility and taxes.
Note: This article is part of Morningstar's February 2014 Tax Relief Week special report.
If you were only paying attention to tax considerations when deciding what types of securities to hold in a taxable account, you'd stick with stocks. After all, the tax treatment is pretty light: If you buy and hold a stock or stock fund for longer than a year, you'll pay tax at a 20% rate if you're a high-income earner and a 0% rate if you land in the 15% income tax bracket or lower. Between those two extremes, investors will pay capital gains tax at a 15% rate, which is quite low by historic norms.
Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.