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On the ground in Davos, DEI has been the subject of conversation both on the record and behind closed doors.
Most corporate leaders who spoke to CNBC across the first four days of the summit reiterated that while the language may change and internal policies may be tweaked, company values will remain the same.
Here’s what the heads of JPMorgan Chase, Nasdaq, Cisco and others had to say.

There are three buzzwords among politicians and business leaders at this year’s World Economic Forum annual meeting in Davos, Switzerland: diversity, equity and inclusion.
It’s no surprise DEI is on corporate leaders’ minds, since it’s been front and center at the White House as well.

“My administration has taken action to abolish all discriminatory diversity, equity and inclusion nonsense,” President Donald Trump said Thursday during a virtual appearance in Davos. “America will once again become a merit-based country.”
Trump signed an executive order his first day in office aimed at dismantling the federal government’s diversity and inclusion programs. The order as written only applies to federal government employers, but he also mentioned extending his executive order to private institutions in his comments at Davos.
Following his executive order, his administration has also targeted affirmative action in federal contracting and ordered all federal DEI staff be put on paid leave.
On the ground in Davos, DEI has been the subject of conversation both on the record and behind closed doors, with discussions including the potential of ditching the commonly used acronym and changing external communication around certain policies.
Most corporate leaders who spoke to CNBC across the first four days of the summit reiterated that while the language may change and internal policies may be tweaked, company values will remain the same.

Here’s what executives had to say:

Jamie Dimon, JPMorgan Chase CEO

“We are going to continue to reach out to the Black community and Hispanic community, LGBT community, and the veteran community. … Wherever I go — red states, blue states — mayors, governors say they like what we do. So we’re not trying to pander to any which side or any which thing. Now if you point to something we’re doing that’s wrong, I’d change it. And we will make modifications going forward, but we’re very proud of what we’ve done, and what we’ve done is lift up cities, schools, states, hospitals, countries, companies, and we’re gonna do more of the same.”

Adena Friedman, Nasdaq CEO

“For Nasdaq, we really continue to look at everything that we do in building the right culture. We do believe that a place where we feel like people can be themselves and can operate at their highest potential, and have diversity of views, and diversity of backgrounds, actually makes us a better company and makes us perform better. So we’re going to continue to operate in that way. And I think that at the end of the day, these things come and go with different political cycles, but at the same time, I believe that there’s an undercurrent that continues to be supportive.”

Bill Ready, Pinterest CEO

“People on our platform come from all walks of life, from all different backgrounds, and so we’ve been very focused on how we drive inclusivity in our platform with things like inclusive AI, with things like ‘diversity by default’ in our feed … We’re not [changing anything], and the reason is we’ve seen it’s actually leading to better engagement, there’s consumer demand for it, it’s good for our business.”

Chuck Robbins, Cisco CEO

“I think what happened is there’s a subset of initiatives under the DEI brand that were particularly disliked. And I think the whole thing got blown up because of that … If I’m sitting in a room to try to solve a complex problem or to chase a big opportunity, I want a lot of diverse brains in that room, and I don’t care if it’s gender or if it’s nationality or if it’s just diversity of experience. Diversity in general is good for business. But I think the pendulum swung and I think it was a handful of issues that really triggered it all.”

Robert Smith, Vista Equity Partners CEO

“I think that diversity is a great thing in business. How do I know? Because I look at the data, I look at the facts. When we have diverse teams, our teams are more productive. We have lower risk. We’re actually able to out-produce those who don’t have diverse teams. The facts all suggest that. Now, how that gets implemented and executed, I think is where there’s dialogue and debate. I think companies and executives who actually understand the importance of diverse thinking in the work that they do, in the products that they deliver, and in the markets they serve will benefit long term … We will have to navigate through this, and there may be certain laws to change. We have to make adjustments to it, but people will do the right thing.”

Alexandr Wang, Scale AI CEO

“We operate in an incredibly competitive and fast-moving industry in AI, and I don’t have any option but to hire the best and most brilliant and most capable people for every single job inside my company. So as a result, we have no option but to be meritocratic … And in the process, we achieve diversity.” More

Offering 23 of its shares for 10 of its acquisition target, Monte dei Paschi values Mediobanca’s stock at roughly €15.992 each, a 5% premium to the close price of Jan. 23.
Monte dei Paschi, the world’s oldest bank, required a state rescue in 2017 after years of crippling losses, but has turned the tides of its fortunes under the leadership of UniCredit veteran Luigi Lovaglio.
The Friday offer adds to a picture of heating M&A appetite in Italy’s banking and financial services sector.

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Italy’s bailed-out Monte dei Paschi di Siena on Friday launched a 13.3 billion euro ($13.95 billion) all-share takeover offer for larger domestic peer Mediobanca.
Shares of Monte dei Paschi (MPS) were down 7.97% at 11:39 a.m. London time, with Mediobanca up 6.28%.

Offering 23 of its shares for 10 of its acquisition target, Monte dei Paschi values Mediobanca’s stock at roughly €15.992 each, a 5% premium to the close price of Jan. 23. The proposal will have to be approved at a shareholder meeting on April 17.
The equity of Monte dei Paschi was worth 8.7 billion euros as of the Jan. 23 close, while Mediobanca’s market capitalization stood at at 12.3 billion euros, according to FactSet data.
CNBC has reached out to Mediobanca for comment.
Under the offer terms, Monte dei Paschi estimates pre-tax benefits of 700 million euros a year from the transaction, which would help it to leverage tax credits from previous sustained losses and add 500 million per year for the next six years.
The lender, which intends to delist Mediobanca, hopes to close the transaction by the end of September, Monte dei Paschi CEO Luigi Lovaglio said in a briefing.

“Mediobanca is the best fit at the best time for a powerful business combination,” he added. “We will leverage on the excellence of the two brains, preserving their unique positioning. The new Italian champion will be resilient with [a] diversified business mix.”
In a Friday note, KBW Analysts Hugo Cruz and Ben Maher noted the proposal has “limited” synergy potential and chances of success.

Monte dei Paschi, the world’s oldest bank, required a state rescue in 2017 after years of crippling losses, but has turned the tides of its fortunes under the leadership of UniCredit veteran Lovaglio. The Italian government retains a 11.73% stake in the lender, after decreasing its position in a bid to reprivatize the lender.
Delfin, the holding company of late billionaire Leonardo del Vecchio, has increased its position to 9.78% since January, with business tycoon Francesco Gaetano Caltagirone now holding 5.03%. Delfin and Caltagirone are the largest shareholders of Mediobanca, with 19.8% and 7.8%, respectively.
“The transaction could contribute to complete the dynamics of the Italian financial system, in the context of strong consolidation,” Italian banking union Fabi said after the offer announcement, according to a CNBC translation. “MPS, historically at the center of complex events, is now moving in an ambitious direction. The bid confirms, among other things, that MPS has completely recovered.”
Amid a helpful high-interest environment, Monte dei Paschi was last year able to offer its first dividend in 13 years, posting a CET1 ratio — a measure of a bank’s strength and resilience — of 18.3% in the third quarter.
The Friday offer adds to a picture of heating M&A appetite in Italy’s banking and financial services sector, where the country’s second-largest bank UniCredit previously offered to buy out Banco BPM, which in turn seeks to acquire fund manager Anima Holding. Monte dei Paschi was itself a potential takeover target for UniCredit until talks recently collapsed in 2021.
 — CNBC’s Silvia Amaro and Ganesh Rao contributed to this report. More

A major exchange-traded fund provider is trying to take the volatility out of bitcoin investing.
Calamos Investments launched the Calamos Bitcoin Structured Alt Protection ETF (CBOJ) on Wednesday. The firm brands it as “the world’s first downside protected bitcoin ETF.” It is built with risk-adverse investors in mind.

“You can get in all day long. Get that 100% protection. And then at the end of the day, we’re going to strike the cap,” the firm’s ETF head Matt Kaufman told CNBC’s “ETF Edge” this week.” Bitcoin is a volatile asset … we don’t want the price of bitcoin to move on you overnight.”
The firm launched the new bitcoin ETF on Wednesday. It coincides with a winning month for bitcoin. The cryptocurrency is up 10% as of late Thursday afternoon.
According to a Calamos press release, the fund provides access to bitcoin in a risk-controlled environment.
“Many investors have been hesitant to invest in bitcoin due to its epic volatility,” Kaufman said in the release. “Calamos seeks to meet advisor, institutional and investor demands for solutions that capture bitcoin’s growth potential while mitigating the historically high volatility and drawdowns of this fast-growing and high performing asset.”
Calamos has more crypto funds on deck. It is set to launch Calamos Bitcoin 90 Series Structured Alt Protection ETF (CBXJ) and Calamos Bitcoin 80 Series Structured Alt Protection ETF (CBTJ) on Feb. 4, according to the Calamos website.

‘You’re not going to see meme coin ETFs from Calamos’

Despite the firm’s appetite to offer cryptocurrency funds, Kaufman told “ETF Edge” there is one group Calamos will not consider.
“You’re not going to see meme coin ETFs from Calamos. But the ability to access bitcoin in a way that meets your risk tolerance, that’s what we’re about,” Kaufman said.

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Talk about money and budgeting early is the advice of wealthy CEOs and founders.
Allow your kids to invest in something low-risk at the start and ask them to explain their rationale, leaders told CNBC.
Talk to children in their own terms, according to Singapore-based CEO Gregory Van. Ask: “Do you want to spend $100 today on a toy, or have it turn into $200 in 10 years when you are 16?” he said.

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Entrepreneur Eric Malka had to completely shift his mindset when he sold his company and became an investor. Since then he’s learned many lessons he’s now passing to his kids.
When The Art of Shaving — which Malka and his wife Myriam Zaoui founded in 1996 — was bought by Procter & Gamble for a reported $60 million in 2009, Malka realized he needed to educate himself.  

“When an entrepreneur like me is lucky enough to have a liquidity event, then we’re faced … with managing assets without proper training,” he told CNBC by video call. Investors must focus on being patient and on long-term returns, whereas company founders often look at a short-term plan, “almost an opposite” mindset, Malka said.
He took courses on wealth management, read books on investing and now has a diversified portfolio of stocks, bonds, private equity and real estate, with about 10% allocated to riskier investments. In 2014 he founded private equity fund Strategic Brand Investments.

The lessons learned when you lose are more valuable than the ones when you succeed.

Eric Malka
Co-founder and CEO, Strategic Brand Investments

When it came to educating his children — sons aged 14 and 16 — about money, Malka’s attitude has been to help them learn from the ground up.
“One of the challenges I faced with my teenagers early on, is their belief that it’s very easy to make money by investing through social media and through what they hear from friends,” he said. His older son thought he could generate a 20% monthly return, which Malka described as “very concerning.” So, Malka let him invest a small portion of his savings, hoping it would provide an opportunity to learn — and his son lost 40% of that investment after trading currency futures.
“I hate to set up my child for failure, but sometimes, you know, the lessons learned when you lose are more valuable than the ones when you succeed,” Malka said.

It’s a point that resonates with Gregory Van, CEO of Singapore-based wealth platform Endowus. He and his wife have children aged eight, six and three. He said he’ll be teaching them that it’s important to make mistakes when the stakes seem large to them, though may be small in reality. “The emotional muscle, and humility required to be a good investor is something that people need to develop on their own,” he said.

Teaching kids how to invest

For Dayssi Olarte de Kanavos, president and co-founder of real estate company Flag Luxury Group, educating kids early about money is key.
She and her husband allocated a “low risk” sum of money to each of their three children in middle school for them to pick companies to invest in. “Our children chose Apple, Amazon, Google and Alibaba. All but one had terrific runs. As long as they kept their money in the market and continued to be thoughtful in their approach, we added every year to their nest egg,” she told CNBC by email. 
Olarte de Kanavos said her experience in real estate investing taught her the value of patience. “It influenced my business approach by emphasizing long-term strategy over quick gains,” she said. The mother of three described her own investments in the stock market as “very conservative, in order to best manage the huge risks that we take in our real estate business.”

Give them an allowance no later than the first grade.

Dayssi Olarte de Kanavos
President and co-founder, Flag Luxury Group

She suggested having children explain why they want to buy certain stocks, because it “can demystify investing and make it an exciting and integral part of their education,” she said.
Van said he talks to his young kids about the tradeoffs of investing in their own terms. “I ask them: ‘If we invest this $100 and it goes down by $70 next year, how will you feel?’ ‘Do you want to spend $100 today on a toy, or have it turn into $200 in 10 years when you are 16?’,” Van told CNBC via email. “Surprisingly, they are very rational and always go for delayed gratification,” he said.
Van and his wife have investment portfolios for each of their kids, mostly made up of gifts they’ve received during holidays such as Chinese New Year. “Given their long investment horizon, they are in very diversified, multi-manager, low-cost equities portfolios,” Van said, and he shows his children their portfolios’ performance — positive or negative — whenever they ask.

Budgeting and saving for children

Age-appropriate advice is very important, Malka said. His focus right now is teaching his children about budgeting, providing them with a fixed allowance per month.
“In the beginning, you know, they would spend in 10 days what they were supposed to spend in 30 days … now I’ve been doing this for eight months or nine months, now they’re really managing it properly, and I think that’s a skill they don’t realize they’re being taught,” he said. He recommended the book “Raising Financially Fit Kids,” by Joline Godfrey, which provides advice by age-group.
“Give them an allowance no later than the first grade,” is Olarte de Kanavos’ suggestion. “The purpose of an allowance is to allow them to learn to make their own decisions about money and to manage the repercussions that come with their choices,” she told CNBC. “As they get older, teach them about saving, the concept of interest, and the difference between good and bad debt,” she said.
For Roshni Mahtani Cheung, CEO and founder of media company The Parentinc, long-term thinking is important. She and her husband opened a fixed-deposit account for their eight-year old daughter for the money she receives at Chinese New Year, and at Diwali she receives a gold coin. “My goal is for her to grow up financially savvy, confident, and ready to make her own decisions,” Mahtani Cheung told CNBC by email.

Talking to kids about their inheritance

A concern for the wealthy members of advisory network Tiger 21 is how and when to talk to their children about their inheritance. “They are most concerned about their kids leading independent productive lives and don’t want knowledge about the wealth they will inherit to distract them or take them off course,” said Tiger 21’s founder and chairman Michael Sonnenfeldt in an email to CNBC.
Around 70% of the network’s members want to wait until their kids are close to 30 years-old and have established careers to detail what they might inherit — and when, Sonnenfeldt said. “However, about 30% of members want to begin working with their kids in their late teens or early 20s to teach them to become responsible stewards for the wealth they will inherit,” he said. Both approaches are valid, he added.
“I suggest that parents encourage open, values-driven conversations about money and investing,” Sonnenfeldt said. More

President Donald Trump on Thursday accused the CEOs of Bank of America and JPMorgan Chase of refusing to serve conservatives.
Both banks deny the accusations, which Trump and others in his orbit have repeated in recent months.
The accusations may have roots in allegations from state attorneys general last year.

U.S. president Donald Trump appears on a giant screen as he addresses global elites via video conference at the World Economic Forum in Davos, Switzerland, on Jan. 23, 2025.
Fabrice Coffrini | Afp | Getty Images

President Donald Trump on Thursday accused the CEOs of the two largest American banks of refusing to serve conservatives, reviving a 2024 campaign talking point that the two companies deny.
Speaking via video to an assembly held at the World Economic Forum in Davos, Switzerland, Trump lashed out at Bank of America CEO Brian Moynihan and JPMorgan Chase CEO Jamie Dimon as part of a Q-and-A session.

“I hope you start opening your bank to conservatives because many conservatives complain that the banks are not allowing them to do business within the bank, and that included a place called Bank of America,” Trump said.
“You and Jamie and everybody, I hope you’re going to open your banks to conservatives because what you’re doing is wrong,” Trump said.
Moynihan, who was among a few executives selected to ask the president questions during the Q-and-A, did not immediately respond to the accusation.
Both banks deny refusing service to conservatives.
“We serve more than 70 million clients, we welcome conservatives and have no political litmus test,” a Bank of America official said in an email.

“We have never and would never close an account for political reasons, full stop,” a JPMorgan spokeswoman said in a statement. “We follow the law and guidance from our regulators and have long said there are problems with the current framework Washington must address.”
In the aftermath of the 2008 financial crisis, caused in part by shoddy lending standards at major banks, U.S. regulators increased pressure on lenders to purge clients in industries considered higher risk for money laundering or fraud. That meant that payday lenders, pawn shops, firearms dealers and those involved in pornography had their accounts revoked, often with little notice or explanation as to why.
As recently as October, Trump singled out Bank of America, repeating claims that it discriminates against conservatives.
The accusations may have roots in allegations from state attorneys general last year. In April, Kansas Attorney General Kris Kobach sent a letter to Moynihan, accusing the bank of canceling the accounts of “multiple religious groups with mainstream views in the last three years.”
In a May letter in response to Kobach, Bank of America said accounts are de-banked for reasons including a change of stated purpose of the account, the expected level or type of activity on the account or failure to verify certain documentation required by law.
One account highlighted by Kobach was de-banked because it engaged in debt collection services, which was inconsistent with the Bank of America division that was servicing the account, according to the bank’s response.
“We would like to provide clarity around a very straightforward matter: Religious beliefs or political view-based beliefs are never a factor in any decisions related to our client’s accounts,” the bank said in that letter. “Bank of America provides banking services to non-profit organizations affiliated with faith-based communities throughout the United States. We have banking and investing relationships with approximately 120,000 faith-based clients in the United States.”
Influential people in Trump’s orbit have continued to claim that banks are discriminating based on religion or politics.
In November, Marc Andreessen, co-founder of the venture capital firm that bears his name, told podcaster Joe Rogan that dozens of startup founders had been de-banked in recent years. Andreessen has said he advises Trump on technology matters.
Bank of America shares were up more than 1% on Thursday, with JPMorgan shares higher as well.
The banking industry is seen as one of the biggest beneficiaries of the election of Trump, in large part because of expectations he would kill Biden-era regulatory efforts to force banks to hold tens of billions of dollars in additional capital against losses, make annual stress tests less opaque and drop efforts to cap credit card and overdraft limitations.

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About half of workers say they’d rather quit than return to the office full-time, according to a Pew Research Center poll.
Big companies like Amazon, AT&T, Boeing, Dell Technologies, JPMorgan Chase, UPS and The Washington Post have initiated return-to-office mandates for at least some employees.
Workers value hybrid work similarly to an 8% raise, by one estimate.

Justin Paget | Digitalvision | Getty Images

Many workers hate the prospect of returning to the office five days a week — so much so that they’d quit their jobs if told to come in full-time.
To that point, 46% of workers who currently work from home at least sometimes would be somewhat or very unlikely to stay at their job if their employer scrapped remote work, according to a recent poll by Pew Research Center.

Yet, employers have reined in remote work.
About 75% of workers were required to be in the office a certain number of days per week or month as of October 2024, up from 63% in February 2023, Pew found.
“There’s a certain creeping up” of return-to-office policies, said Kim Parker, director of social trends research at the Pew Research Center.

Companies like Amazon, AT&T, Boeing, Dell Technologies, JPMorgan Chase, UPS and The Washington Post have called at least some employees back to the office five days a week. President Donald Trump signed an executive action on Monday calling federal employees back to their desks “as soon as practicable.”
Similar to the Pew survey, a poll conducted by Bamboo HR found that 28% of workers would consider quitting due to a return-to-office mandate.

The data “underscores how comfortable people have become with this arrangement, and how it really fits in with their lifestyle,” Parker said.
Workers consistently cite a better work-life balance as a “huge benefit” of remote work, Parker said.
Indeed, they see the financial value of hybrid work as being equivalent to an 8% raise, according to research by Nick Bloom, an economics professor at Stanford University who studies workplace management.

Economists say remote work is here to stay

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Many economists think that the higher prevalence of remote work, relative to the pre-pandemic era, has become an entrenched feature of the U.S. labor market.  
“Remote work is not going away,” Bloom previously told CNBC.
That’s largely because it boost profits for companies: Workers quit less often, meaning employers save money on recruiting and other functions tied to attrition, Bloom said. Meanwhile, data shows that productivity doesn’t suffer in hybrid work arrangements, he said.
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More than 60% of paid, full workdays were done remotely in early 2020, during the Covid-19 pandemic — up from less than 10% before the pandemic, according to WFH Research, a project run jointly by researchers from MIT, Stanford, the University of Chicago and Instituto Tecnológico Autónomo de México.
That share has fallen by more than half. However, it has leveled out between 25% and 30% for about two years, according to WFH Research data.

About 31% of employers reduced remote work opportunities in 2024, down from 43% in 2023, according to according to a ZipRecruiter survey. Yet, another 33% expanded remote work, up from 32% the prior year.
Companies that imposed RTO mandates have annual rates of employee turnover that are 13% higher than those that have become “more supportive” of remote work, ZipRecruiter said.
“The ability to work from anywhere remains a top priority for many professionals,” according to a 2024 poll by consulting firm Korn Ferry of 10,000 workers in the U.S., U.K., Brazil, Middle East, Australia and India.

Companies may want workers to quit

Some businesses force workers back to the office precisely because they want workers to quit, experts said. It’s a stealthy way of reducing headcount without having explicit layoffs, they said.
“Requiring federal employees to come to the office five days a week would result in a wave of voluntary terminations that we welcome,” Elon Musk and Vivek Ramaswamy, who Trump tapped to lead a new Department of Government Efficiency, wrote in a November op-ed. (Ramaswamy has since bowed out of that role.)
Of course, there are also tradeoffs to remote work for businesses and workers.
About 59% of employers cite concerns that remote work harms company culture, according to ZipRecruiter.

About half of workers — 53% — who work from home at least part-time say it “hurts” their ability to feel connected with co-workers, Pew found in a 2023 poll.
“It’s the one big downside we’ve seen consistently,” Parker said.
“That seems to be a tradeoff: You get the work-life balance but lose some connectivity with coworkers,” Parker said.
Even if workers quit, they may not be able to find a job.
The labor market remains strong, with low unemployment and low levels of layoffs, meaning workers have good job security, according to economists. However, companies have also pulled back on hiring, making it a challenging environment for job seekers. More

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BlackRock CEO Larry Fink said President Donald Trump’s efforts to unleash capital in the private sector could have unintended consequences that would hurt the stock market.
“I’m cautiously optimistic. That being said, I have scenarios where it could be pretty bad,” Fink said Thursday on CNBC’s “Squawk Box” from the World Economic Forum in Davos, Switzerland. “I believe if it’ll unlock all this private capital, we’re going to have enormous growth. At the same time, some of this is going to create new inflationary pressures. I do believe that’s probably the risk that is not factored into the markets. I think the bond market is going to tell us where we’re going.”

The 72-year-old chief of the world’s largest asset manager said much will depend on how quickly the private sector can put capital to work. Trump has already touted massive private sector promises to spend in the U.S., the latest example being the Stargate joint venture, where SoftBank, OpenAI and Oracle would invest $100 billion immediately for artificial intelligence infrastructure in the country. Plans call for the project to eventually invest a total of $500 billion.
“There are some very large inflationary pressures that we all have to be aware of,” Fink said. “And depending on how this plays out, there is a scenario where we’re going to have much more elevated interest rates because of inflation. And that’s going to have a very negative impact on the equity market.”
Fink said there is a possibility that the 10-year Treasury yield could retest the 5% level and even reach 5.5% if inflation reaccelerates in a meaningful way. If that happens, Fink said it would “shock” the equity market.
The benchmark 10-year note yield last traded at 4.62%.

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Vanguard Group settled with the SEC on Friday over allegations tied to its target-date funds and investor taxes.
There’s a lesson about “asset location” for investors.
This strategy pairs tax-inefficient assets like many bonds and actively managed mutual funds with tax-advantaged account types like 401(k) plans and individual retirement accounts.

D3sign | Moment | Getty Images

There’s an important lesson for investors in Vanguard Group’s recent $106 million settlement with the Securities and Exchange Commission over its target-date funds: Being mindful of your investment account type can save you from a big tax bill in certain cases.
Vanguard, the largest target-date fund manager, agreed to pay the sum for alleged “misleading statements” over the tax consequences of reducing the asset minimum for a low-cost version of its Target Retirement Funds.

Lowering the asset minimum for its lower-cost Institutional share class — to $5 million from $100 million — triggered an exodus of investors to these funds, according to the SEC. That created “historically larger capital gains distributions and tax liabilities” for many investors who remained in the more-expensive Investor share class, the agency said.
Here’s where the lesson applies: Those taxes were only borne by investors who held the TDFs in taxable brokerage accounts, not retirement accounts.

Investors who hold investments — whether a TDF or otherwise — in a tax-advantaged account like a 401(k) plan or individual retirement accounts don’t receive annual tax bills for capital gains or income distributions.
Those who hold “tax inefficient” assets — like many bond funds, actively managed funds and target-date funds — in a taxable account may get hit with a big unwelcome tax bill in any given year, experts said.
Placing such assets in retirement accounts can make a big difference when it comes to boosting net investment returns after taxes, especially for high earners, experts said.

“By having to pull money out of your coffers to pay the tax bill, it leaves less in your portfolio to compound and grow,” said Christine Benz, director of personal finance and retirement planning at Morningstar.
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Vanguard neither admitted nor denied wrongdoing in its settlement agreement with the SEC.
“Vanguard is committed to supporting the more than 50 million everyday investors and retirement savers who entrust us with their savings,” a company spokesperson wrote in an e-mailed statement. “We’re pleased to have reached this settlement and look forward to continuing to serve our investors with world-class investment options.”
Vanguard held about $1.3 trillion of assets in target-date funds at the end of 2023, according to Morningstar.

What’s best in a retirement account

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The concept of strategically holding stocks, bonds and other assets in certain account types to boost after-tax returns is known as “asset location.”
It’s a “key consideration” for high earners, Benz said.
Such investors are more likely to reach annual contribution limits for tax-sheltered retirement accounts, and therefore need to also save in taxable accounts, she said. They’re more likely to be in a higher tax bracket, too.
While most middle-class savers predominantly invest in retirement accounts, in which tax efficiency is a “non-issue,” there are certain non-retirement goals — perhaps saving for a down payment on a house a few years down the road — for which taxable accounts make more sense, Benz said.
Using an asset location strategy can raise annual after-tax returns by 0.14 to 0.41 percentage points for conservative investors (who invest more in bonds) in the mid to high income tax brackets, according to recent research by Charles Schwab.

“A retired couple with a $2 million portfolio [$1 million in a taxable account and $1 million in a tax advantaged account] could potentially see a reduction in tax drag that equates to an additional $2,800 to $8,200 per year depending on their tax bracket,” Hayden Adams, a certified public accountant, certified financial planner, and director of tax and wealth management at the Schwab Center for Financial Research, wrote of the findings.
Tax inefficient assets — which are better suited to retirement accounts — are ones that “generate regular taxable events,” Adams wrote.
Here are some examples, according to experts:

Bonds and bond funds. Bond income is generally taxed at ordinary income tax rates, instead of preferential capital-gains rates. (There are exceptions, like municipal bonds.)

Actively managed investment funds. These generally have higher turnover due to frequent buying and selling of securities within the fund. They therefore tend to generate more taxable distributions than index funds, and those distributions are shared among all fund shareholders.

Real estate investment trusts. REITs must distribute at least 90% of their income to shareholders, Adams wrote.

Short-term holdings. The profit on investments held for a year or less are taxed at short-term capital gains rates, for which the preferential tax rates for “long term” capital gains don’t apply.

Target-date funds. These and other funds that aim for a target asset allocation are a “bad bet” for taxable accounts, Benz said. They often hold tax inefficient assets like bonds and may need to sell appreciated securities to maintain their target allocation, she said.

About 90% of the potential additional after-tax return from asset location comes from two moves: switching to municipal bonds (instead of taxable bonds) in taxable accounts, and switching to index stock funds in taxable accounts and active stock funds in tax-advantaged accounts, Adams wrote.
Investors with municipal bonds or municipal money market funds avoid federal income tax on their distributions.
Exchange-traded funds also distribute capital gains to investors much less often than mutual funds, and may therefore make sense in taxable accounts, experts said. More