Tax Efficiency of Minority Investment Portfolios

Abstract

In this study we use the 2010-2013 Survey of Consumer Finances to analyze the allocation and location of financial assets in categorizing the tax-efficiency of investment portfolios by race/ethnicity. We find that Blacks and Hispanics tend to be more tax-efficient since they invest largely through tax-deferred accounts. We also find that minority households that own taxable accounts have less than 10% the average dollar amount in those accounts than held by White households. This information is important for educators, counselors and planners since minority households may have less liquid and more conservative portfolios affecting their overall financial well-being.