Annuities, Futures . . .

The symbol for spiders (yesterday’s column) is, of course, SPY, not SPDR. Oops.

Michael Gordon: “Your comment provokes a thought: Isn’t this also true for tax-deferred retirement accounts? If so, wouldn’t it make sense to hold fixed income assets in such accounts and equities in regular taxable accounts?”

Basically.

Someone with two accounts, one taxable and one tax-sheltered, who favored two different kinds of investments — some low/no-dividend growth stocks, some higher yielding stocks and bonds — should put the higher yielding investments in her tax-sheltered account and the riskier lower-yielding investments in the taxable account.

One reason is the capital gains treatment. No point converting long-term gains into ordinary income. But the other reason is the ability to take tax losses in the event one of your riskier growth stocks becomes a shrinkth stock instead.

George Fescos: “You compared SPIDERS to S&P 500 Index funds. How about S&P 500 futures contracts? Futures contracts would make better diner conversation, even if they are the same as a plain vanilla index fund.”

Now you’re scaring me. Index funds and futures could hardly be more different. Futures contracts involve huge leverage, no dividends, an expiration date, short-term capital gains taxes if you “win,” and put you in the unique position of risking more than you invested. (Many is the futures investor who wishes he had just lost it all.) I could elaborate, but let’s leave it at this: I saw Diner. Very sensibly, the kids were not talking about futures contracts.