Asset allocation requires investors to determine the appropriate allocation of each asset class – Canadian equities, US equities, International equities, fixed income – in their portfolio. Asset location is the decision about which accounts – RRSP, TFSA, taxable – these asset classes should be located in order to maximize after-tax wealth.

The alternative to asset location is holding the same mix of assets in each account type– we will refer to this as a balanced strategy. It is the goal of an asset location strategy to outperform a balanced strategy on a post-liquidation after-tax basis. If you do not believe that it is possible to gain a performance edge through security selection or market timing, a focus on asset location seems like an obvious way to add value.

Asset Location Uncertainty by Benjamin Felix

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