I'm Holding the Right ETFs in the Wrong Accounts (And So Are You)

A while back, I made a video about dividends where I said something that stuck with me: the critics were half right. They said I was paying taxes for no reason. My answer was that this isn't an argument that dividends are dumb — it's an argument about which account you put them in. Right stuff, wrong shelf. I said I'd come back to it.

This is that follow-up. And I'm going first.

Most of my portfolio is sitting in the wrong account. Not some of it — most of it. My critics have been telling me for months that I'm paying taxes I don't need to pay, and today I'm going to admit they're right. But not for the reason you'd think. It's because I burned through my protected retirement space years ago, and for the last four years, I've been keeping it that way on purpose.

So let's get into what asset location actually is, why it might be the highest-return thing you're currently ignoring, exactly how my own accounts are arranged, and the two honest reasons they look that way.

What "Asset Location" Actually Means

Everybody obsesses over asset allocation: what you own. How much growth, how much dividend income, how much bonds. That's the conversation the whole internet is having.

Asset location is a different question entirely. It's not what you own — it's which account you keep it in.

Think of it like shelves in a garage. Your standard brokerage account is the flexible shelf. You can put anything on it and take anything off it, any time, for any reason. But the tax man watches that shelf every single year. Dividends land, and you can owe tax on them that year — even if you reinvested every penny and never touched a dollar.

Your retirement accounts — Roth, traditional, and so on — are the protected shelves. What happens inside them doesn't get taxed the same way year to year. But they come with rules: limits on how much you can contribute each year, and restrictions on pulling money out early.

So you've got one shelf that's flexible but taxed, and one that's protected but restricted. Same funds. Different shelf. Different outcome.

Why This Isn't Just Accounting Trivia

Take two people with identical funds and identical amounts. One holds the high-taxable-income stuff on the protected shelf and the growth stuff on the flexible one. The other has it backward.

Over thirty years, those two people do not end up in the same place — not because one picked better funds, but because one of them handed a slice to taxes every single year and the other didn't.

That's the case for asset location, and it's real. It's probably the highest-return move most people never think about, because it doesn't feel like investing. It feels like paperwork.

And this is exactly what my comment section has been telling me. They weren't wrong: high-income funds throwing off a lot of taxable cash, sitting in a regular brokerage account, is the textbook wrong shelf.

So Let Me Show You Mine

Most of my positions sit in my standard, taxable brokerage account — including the bulk of my SCHD (I hold some in retirement, but most of it is on the flexible shelf) and my high-income funds, the ones that pay the most and get taxed every year.

I do have a Roth and a traditional IRA, with a mix in the Roth I'm saving for another video. But the headline here isn't flattering: the account with the least tax protection is holding the most of what I own, including the exact stuff that benefits most from being protected.

If you're thinking "Mikey, that's backward" — yeah. It is.

The Real Reason (Not the Polished One)

I could give you the slick answer here: that as an entrepreneur, I keep things flexible on purpose so I can reach my money. There's some truth to that. But it's not the real reason, and this isn't the kind of channel where I hand you the polished version.

The real reason is that my taxable account is simply where the money is — because my retirement accounts are only about five years into being rebuilt.

I've had retirement accounts before, and I cashed them out. More than once. Not because I wanted to, but because I had businesses going under and tax bills that had to get paid, and that was the money I had. CurrySimple is the clearest example, but it wasn't the only time. When you're in that moment, you're not taking your money out calmly — you're taking it out at the worst possible time, when you're already losing, and paying taxes and penalties on the way out.

When business was going well, I put everything into real estate instead of retirement accounts. So thirty years of possible contributions are just gone — some burned to keep businesses breathing, some never made because nobody sat me down and explained any of this to me. In a perfect world, I'd have been maxing out those accounts since I was eighteen. I wasn't. I didn't have the guidance. I made the mistakes. Now I'm playing catch-up. That's the life of an entrepreneur.

The Second Reason — This One I Planned

Here's the part I actually chose on purpose: you can't borrow against a retirement account.

I've talked before about using a line of credit against my portfolio to handle a balloon payment on a property. When you set one of those up, the lender only accepts certain accounts as collateral — individual, joint, some trusts. Your IRA isn't on that list. Neither is your Roth. It doesn't matter how much is in there.

If I'd spent the last four years doing the textbook-optimal thing and cramming everything into tax-advantaged accounts, I'd have a beautifully tax-efficient portfolio that I couldn't borrow a single dollar against. I'd have optimized my way straight out of the plan that solves my actual problem.

So the honest version is messier than either side of the debate. Part of why my taxable account is loaded is that I had no choice. Part of it is that I decided flexibility was worth more to me right now than the tax savings. The first part was survival. The last four years were on purpose.

Why I Can't Just "Fix It"

The obvious question: why not just move the high-income funds into the protected accounts now?

You can't. This is the single most important thing in this whole piece.

There's no button, no form, no mechanism for transferring holdings from a regular brokerage account into an IRA. The only path is to sell the shares — which triggers the exact tax event you're trying to avoid — and then contribute cash into the retirement account, capped at that year's contribution limit.

It's a one-way door with a toll booth in the middle. Even if I decided today to fix my entire arrangement, I couldn't — not this year, not in five years. The annual contribution limits mean a portfolio built over decades can't be relocated in any reasonable amount of time.

Which is why the real lesson here isn't "go fix your accounts." You mostly can't. The lesson is about where your next dollar goes.

My Actual Rule in the future

Here's the one concrete thing I'm changing: I'm going to max out the retirement accounts I'm eligible for, and prioritize putting dividend payers in there. The stuff that throws off taxable income every year is what I want on the protected shelf, because that's the tax bill I can still do something about.

Growth positions can stay in the flexible account, since growth doesn't generate a tax bill until I sell — and I don't plan on selling.

One deliberate exception: I'm keeping enough in the taxable account to keep that line of credit working. That's not a tax decision; it's a "don't blow up the plan" decision.

That's the whole change. New money goes to the better shelf, except where the shelf has a job to do. I'm not tearing anything down or selling to fix a past mistake — I'm just being smarter about where the next dollar lands than I was about the last one.

Poking a Hole in My Own Plan

Anyone telling you this is a solved problem is selling you something, so let me push back on myself.

Say the growth positions in my taxable account run up substantially over the next twenty years. There's a real tax bill waiting at the end of that. I'd have optimized my way into a different problem.

And the protected accounts have their own catch: depending on the account type, money coming out later can be taxed as ordinary income. Deferred isn't the same as free.

Nobody knows what tax law looks like in twenty years, what your income will look like, or which decision ages well. There's no perfect scenario, and anyone claiming otherwise is guessing with confidence. What you can do is stop being randomly wrong. Being thoughtful about which shelf beats never having considered the question at all — which is where I was for most of my life.

One More Thing, for the Business Owners

If you work for someone else, your protected shelf space is basically fixed. But if you're self-employed, there are account types built specifically for you — a SEP IRA or a Solo 401(k) — that hold dramatically more than a standard IRA. Not a little more. Multiples more.

I don't have either one set up yet. I'm saying that out loud because it's true, and I'd bet a lot of you reading this don't have one either. I spent years with no protected space because I kept cashing out what I had, and I've also been leaving the biggest shelf available to me sitting empty this whole time. Those are two different mistakes, and I own both.

I'm not going to tell you which one to open — that depends on your business structure, your income, and whether you have employees. That's a conversation for an actual professional. I'm just telling you these accounts exist, that I'm looking into them myself, and that if you're self-employed and have never heard of them, that might be the most useful thing you take from this post.

Where This Leaves Me

Most of my portfolio is on the wrong shelf, and I can't move it. What I can do is be deliberate about every dollar from here forward — and that's what I'm doing.

I got this wrong for decades, and I'm genuinely okay with that. I didn't take the traditional route through life. It's been a bumpy ride, and it only smoothed out in the last few years, once I started building systems, making actual plans, and playing the long game instead of reacting to it.

I don't make these to give you advice — I've said three times now that I'm not qualified to do that. I make them to get you thinking bigger, and further ahead. Building a plan that fits your own situation, because everyone's situation is different, and you should never take exact instructions from a video or a blog post, including this one.

I told you in the dividends video that this was a location problem. I just hadn't told you that mine was mostly caused by having to survive. Now you know both halves.

Watch the full video above, or on YouTube: https://youtu.be/YTXuZ_t6Ihk