“Where you hold different investments — the concept called asset location — matters because taxes affect different investments differently. Some investments generate frequent taxable income (for example, bond interest, many REIT dividends, or actively managed mutual funds with high turnover) and are therefore ‘tax-inefficient’ if held in a taxable brokerage account. Tax-advantaged accounts like 401(k)s and traditional IRAs shelter investment income from immediate taxation, so they are often a better home for tax-inefficient assets. Conversely, tax-efficient investments (broad index funds or ETFs that generate little taxable distribution) work well in taxable accounts. At an introductory level, the practical takeaway is to favor holding tax-inefficient, income-producing or frequently traded strategies inside retirement accounts and keep tax-efficient, long-term equity index funds in taxable accounts — this simple rule-of-thumb helps lower your overall tax drag over time without complex tax engineering.”