Taxable Investments: How to Keep More of What You Earn

When you invest in a taxable investment, an investment held in a regular brokerage account where gains are taxed in the year they occur. Also known as a taxable brokerage account, it’s the most common place people hold stocks, ETFs, and mutual funds outside of retirement accounts. Unlike your 401(k) or IRA, there are no tax breaks on contributions or growth—you pay taxes on dividends, interest, and sales profits as they happen. That’s why how you use it matters more than most people realize. isrameds.com

Taxable investments aren’t just a default choice—they’re a tool. And like any tool, they work better when you match them to the right assets. For example, holding high-yield bonds or REITs in a taxable account can drain your returns fast because you pay ordinary income tax on every dollar of interest. But if you put those in a Roth IRA instead, and keep low-turnover index funds in your taxable account, you keep more of what you earn. This is called asset location, the strategy of placing different types of investments in the most tax-efficient accounts. It’s not about picking winners—it’s about keeping more of what you already have. And it’s not just for experts. A 2023 study by Vanguard showed that people who used basic asset location rules boosted their after-tax returns by up to 0.75% per year—enough to add tens of thousands over decades. That’s free money you’re leaving on the table if you just dump everything into one account.

Then there’s capital gains tax, the tax you pay when you sell an investment for more than you paid. It’s not one-size-fits-all: if you hold something over a year, you pay lower long-term rates. If you sell in under a year, you’re taxed at your regular income rate—which could be double. This is why timing matters. Rebalancing your portfolio? Don’t just sell and buy back. Think about which shares to sell first, which ones to hold, and how to use tax-loss harvesting to offset gains. This isn’t about trading constantly—it’s about making smarter moves once or twice a year. And yes, it connects to your after-tax returns, the actual amount of money you keep after taxes are taken out. If you’re only looking at pre-tax growth, you’re seeing a fantasy. Real wealth is what stays in your pocket.

Most people treat taxable accounts like a dumping ground. But they’re your most flexible tool. You can withdraw anytime, use them for goals like a house down payment or a child’s education, and even pass them to heirs with a step-up in basis. But that flexibility only helps if you know how to use it. The posts below show you exactly how to do that—how to pick the right assets for your taxable account, how to avoid common tax traps, and how to combine it with your other accounts to make your portfolio work harder. No theory. No fluff. Just what works.