Advisor Insights

DHJJ Financial Advisors offers insight on a variety of topics. From current market events to our perspective on timeless financial topics, you will find that our articles provide information that will help you to navigate your own financial landscape.

Asset Allocation vs. Asset Location: Two Different Investment Strategies

Asset Allocation vs. Asset Location: Two Different Investment Strategies

Two Different Investment Strategies

When hearing the terms asset allocation and asset location, many of us conclude that these are synonyms. These terms are actually two separate investment strategies that can be used in tandem to create a well-balanced portfolio capable of reducing risk and minimizing tax.

Asset Allocation

Asset allocation is the more commonly known term and is the strategy of diversifying a portfolio across different asset categories to reduce overall portfolio risk. There are many investment categories and sub-categories, with the most common categories being stocks and bonds. Which investment categories to use and how much of the total portfolio to put into each investment category is a decision that is dependent on the investor’s situation and risk preferences. Finding the proper asset allocation that will match an investor’s tolerance for volatility is a crucial decision that will help maximize risk-adjusted investment returns.

Asset Location

Asset location is the investment strategy of holding different asset categories across distinct types of investment accounts. For most investors, there are two types of investment accounts to utilize: taxable accounts and retirement accounts. Within retirement accounts, there is a further distinction between traditional and Roth accounts. Each of these account types receive different tax treatments.  Asset categories also receive different forms of tax treatment, from ordinary tax rates, to preferred or reduced tax rates, to even being tax-free. Matching up investment categories to an appropriate investment account is a major decision in reducing or eliminating the burden of tax on investment income.

The financial planning adage that all investor situations and decisions are different and dependent on the investor’s personal circumstances holds very true for the investment strategies of asset location and asset allocation. Two investors could have asset locations that are contrary to each other, but both could still have the appropriate asset location strategy for their situation.

How DHJJ Financial Advisors Can Help

Having the proper discussions with your financial advisor will lead you and your portfolio to the appropriate asset allocation and asset location strategies. Please contact DHJJ Financial Advisors by calling 630-420-1360 or emailing Jordan at  This email address is being protected from spambots. You need JavaScript enabled to view it. to discuss your situation.

Qualified Charitable Distributions: A Strategic Wa...
How Does the Illinois Estate Tax Affect You?

Related Posts

T: 630.420.1360
F: 630.420.1463
184 Shuman Blvd, Suite 200
Naperville, IL 60563

T: 630.377.1106
F: 630.377.2294
2560 Foxfield Rd, Suite 300
St. Charles, IL 60174

As a client of DHJJ Financial Advisors (“Company”), by selecting the “I Agree” button, I elect to participate in the password-protected access portion of Company Internet web site. I understand that my participation will allow me to review certain investment-related information published by Company and unaffiliated third parties. This password-protected access is made available to clients of Company free of charge. This authorization shall continue until canceled in writing.

I understand that the password-protected section is a secure web site intended only to allow a client access to information relative to his/her/its specific account. I also understand that I will be assigned an individual password. I agree not to share my password with any other person. I hereby release and hold Company harmless from any adverse consequences relative to any failure by me to keep the identity of my password secure.