Our study analyzes a simple asset allocation strategy using stocks and bonds, accounts of equal size, and a long time horizon (over twenty years). Investors cannot always put all their stocks in one account and all their bonds in another, but the results of this study support previous studies that claim that stocks, not bonds, should be held in tax-deferred accounts. We focus our attention on the analysis of shorter investment horizons, varying tax brackets, complex asset allocation strategies using five different asset classes, accounts of differing size, investors who can hold assets until death (getting the benefit of the step-up in cost basis in taxable portfolio), and reduced income tax brackets at retirement.

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