I like to keep the public “Mag 7” in taxable accounts and the private “Mag 7” in retirement accounts.
Publicly traded stocks can be held very tax‑efficiently through ETFs or separately managed accounts (SMAs):
- Low turnover
- Built‑in tax‑loss harvesting (if structured right)
- You can defer realizing gains for a long time
Private companies are different.
A good private equity portfolio should have turnover as businesses are:
- Sold
- Recapitalized
- Taken public
The return potential can be higher than public equities, but the tax drag is usually much larger because gains are realized along the way.
That’s why I generally prefer holding private equity inside IRAs whenever possible so gains compound without annual tax friction.
If most of your assets are in taxable accounts, then pairing private equity with a tax‑loss harvesting strategy (e.g., long/short SMA) becomes extremely valuable because it can help offset some of the realized gains realized by portfolio turnover.
But the ultimate setup looks like this:
- Use tax‑aware investments (e.g., certain hedge funds / structures) that can realize ordinary deductions
- Pair those deductions with Roth conversions each year to move money from pre‑tax IRAs to Roth
- Then compound a diversified private equity portfolio inside the Roth, where future growth and qualified withdrawals are tax‑free
Public “Mag 7” in taxable, private “Mag 7” in Roth/IRA, and tax‑aware tools in between to move money up the ladder.