April 15, 2026

Asset Location: Where You Invests Matters as Much as What You Invest In
How aligning investments and taxes can improve long-term, after-tax outcomes.

• What you earn isn’t always what you keep: Positioning assets across RRSPs, TFSAs, and taxable accounts can meaningfully affect after-tax returns.
• Match investments to account type: Hold fixed income in tax-deferred accounts; use taxable accounts for Canadian equities; reserve TFSAs for long-term growth.
• Rebalance with tax awareness: Burkett helps clients preserve efficiency and strengthen long-term portfolio outcomes with a disciplined, tax-integrated approach.

Building an effective portfolio requires more than selecting the right investments, it requires placing them in the right accounts. How assets are positioned across account types (e.g. non-registered, RRSP, TFSA, etc.) can meaningfully impact long-term after-tax outcomes. At Burkett, tax considerations are integrated directly into portfolio decisions as a core part of how we manage wealth.

• Not all income is taxed equally: Interest income, dividends, and capital gains are treated differently, which creates opportunities
• Not all account types are taxed equally: TFSAs provide tax-free growth, RRSPs defer tax until withdrawal, and non-registered accounts are taxed annually based on the type of income earned

A decision with a lasting impact
Portfolio discussions begin with asset allocation, what percentage of your portfolio to hold in equities versus fixed income. That decision drives what a portfolio earns. Asset location determines how much of that return is retained after tax. For clients with a mix of RRSPs, TFSAs, and non-registered accounts, thoughtful asset location becomes critical to maximizing after-tax wealth.

Asset location is treated as an integral part of portfolio construction, applying a consistent, disciplined approach aligned with each client’s broader financial picture.

How Canadian tax rules shape asset location
Different types of investment income are taxed differently in Canada, which drives asset location decisions:

• Interest income and foreign income are taxed at higher marginal rates
• Canadian dividends benefit from the dividend tax credit
• Capital gains are subject to 50% inclusion on realized gains, while unrealized gains are not taxed

These differences create a hierarchy of tax efficiency, but effective implementation requires judgment.

Fixed income is the least tax-efficient asset class, while Canadian equities tend to be more favourable in taxable accounts due to the dividend tax credit. U.S. and international equities, which generate foreign income, are better suited to registered or TFSA accounts where that income is not taxed annually.

In practice, these principles guide how we structure portfolios:

• RRSPs and other tax-deferred accounts are typically used for fixed income and other tax-inefficient assets
• RESPs/FHSAs should also hold fixed income, particularly where shorter time horizon considerations are relevant
• TFSAs typically reserved for higher expected return assets, where tax-free long-term growth is most valuable, often including international equities
• Non-registered accounts are often used for Canadian equities and long-term equity exposure to benefit from tax efficiencies

Rebalancing vs. tax efficiency
One area where trade-offs arise is in portfolio rebalancing. Registered accounts such as RRSPs and TFSAs allow for trading without immediate tax consequences, which makes them useful tools for maintaining target allocations through regular rebalancing. Some approaches emphasize using these accounts primarily as “rebalancing centres” shifting assets between accounts to avoid realizing gains in taxable portfolios.

At Burkett, we prioritize maintaining appropriate asset location first and then implement rebalancing in a way that minimizes unnecessary tax realization. This typically follows a hierarchy:

1. Use contributions, withdrawals, and cash flows
2. Rebalance within registered accounts
3. Use taxable trades only when necessary

This approach helps preserve tax efficiency while still maintaining portfolio discipline.

Where active management style fits
At Burkett, portfolios are actively managed with tax awareness in mind. This includes how we allocate across asset classes, but also how we select and manage individual securities.

For example, within fixed income, we may use different types of bonds depending on yield, tax treatment, and client circumstances. In taxable accounts, preferred shares may play a role given their dividend characteristics. Across portfolios, we may also realize losses opportunistically, particularly toward year-end, to offset gains where appropriate.

These decisions are not made in isolation. They are part of a broader effort to manage after-tax outcomes over time, rather than focusing solely on pre-tax returns.

A practical, disciplined approach
Research suggests that optimal asset location can be sensitive to assumptions about returns, tax rates, and investor behaviour. Rather than relying on complex optimization, we believe there is value in applying clear, durable principles.

Our approach is grounded in:

• Placing tax-inefficient assets in registered accounts where possible
• Using taxable accounts for more tax-efficient equity exposure
• Reserving TFSA space for long-term growth
• Implementing rebalancing in a tax-aware manner

Ultimately, consistency is more important than precision. Over time, avoiding unnecessary tax drag can contribute meaningfully to long-term outcomes.

The bottom line
Asset location isn’t a one-time decision. It’s an ongoing strategy that helps investors keep more of what they earn.  A consistent tax-integrated approach, supported by Burkett’s disciplined process, can meaningfully enhance after-tax results.

If you have any questions about how asset location strategy can help you meet your financial goals, constraints, and evolving circumstances, please don’t hesitate to reach out.

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References:

1. Dammon R., Spatt C., & Zhang H., (2004, June). Optimal Asset Location and Allocation with Taxable and Tax-Deferred Investing
2. Bender, J., & Bortolotti, D. (2014, April). Asset Location – Key Concepts

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investment strategies involve risk, including the risk of loss. Past performance is not indicative of future results. Investment decisions should be made based on individual circumstances and in consultation with a registered advisor. The historical data referenced is for illustrative purposes only, to help frame potential trade-offs between different implementation approaches, and should not be interpreted as predictive or prescriptive.