Table: Where Should It Go?
EXCHANGE-TRADED FUNDS, INDEX FUNDS
Low turnover makes them tax-efficient.
These savings bonds defer interest payments.
LONG-TERM POSITIONS IN INDIVIDUAL STOCKS
You get the benefit of the long-term capital-gains rate when you sell.
These funds are operated with an eye toward minimizing taxes.
ACTIVELY MANAGED FUNDS
They distribute taxable gains from the sale of profitable stocks after adjusting for losses.
ACTIVELY TRADED SECURITIES
You avoid paying capital-gains taxes when you sell a profitable security.
Most of their returns are in the form of taxable annual interest payments.
TIIS (TREASURY INFLATION-INDEXED SECURITIES)
Adjustments made to principal are taxable but don't produce cash.
Data: Morningstar, BusinessWeek