A few rules of thumb for all-stock investors:

• Place individual stock holdings that you plan to hold for a long time in your taxable account; hold shorter-term stock investments and stock mutual funds in your tax-deferred account.
• Place stock funds with very lower turnover ratios--say, below 20% per year--in your taxable account and those with higher turnover ratios in your tax-deferred account.
• Place large-company index funds in your taxable account--they tend to be tax friendly.

(We'll cover more options for taxable accounts in Portfolios 206: The Best Investments for Taxable Accounts.)

Moreover, the study doesn't touch on the quality of the fund choices available within the tax-deferred plan. Say your retirement plan offers only two choices: a highly rated large-cap index fund or a poorly rated high-turnover small-cap fund. If you listened to the study, you'd probably choose the small-cap fund for tax reasons--even though it's not the better investment overall. Don't let taxes considerations overshadow the quality of an investment.

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