Thus, profits are taxed at a higher rate, and losses get no tax benefit. Now let s look at bonds. Bond profits generally come in the form of interest, and interest is taxable in the year it is paid. Thus, if you hold a bond in a taxable account, you must pay ordinary income taxes on that interest. And when you do, the tax you pay will be the same rate as what you would have paid anyway.
Bonds generally don t go broke, so the likelihood of incurring a loss is much less than with stocks.
Therefore, again from a tax perspective, holding bonds in an IRA makes more sense than holding bonds in a taxable account. So, the next time you look at someone s investment pie chart, or if you create your own, make sure you explore the tax implications of that pie.