It's almost impossible to achieve superior investment returns on a consistent basis. Almost. The answer is neither your favorite screaming head on cable nor your cherished stock guru. Even the most gifted of stock jockeys find it challenging to beat their benchmarks every year.

One key to consistent outperformance is using the federal tax code to enhance investment returns. Through a focus on the tax location of your investments, you may increase your returns by 1 to 2 percent a year regardless of market conditions. It sounds simple, but many advisors and investors do not use the particular advantages of taxable, Roth, and traditional IRA and retirement plan accounts. With this oversight, they are potentially leaving thousands of dollars on the table.

While a measly 2 percent a year may underwhelm you, it can make a substantial difference over time. Let's say you have a $100,000 portfolio and contribute $15,000 to it per year for 30 years. With 10 percent annual returns, you would end up with $1.5 million more than if the same portfolio generated 8 percent annual returns.

So now with that extra 1 to 2 percent tantalizing you, let's get to work on making your portfolio tax-smart. Before we get started, you should have an overall strategic portfolio allocation -- a target percentage in equities and bonds. The important thing to remember here is that while you may have 60 percent stocks and 40 percent bonds as your target allocation, you do not need to keep the same breakdown in each of your accounts.

First consider accounts with limited investment choices such as your work retirement plan. In these plans, you usually have a small selection of mutual funds. Contributions are generally made before tax, which is deferred until you take distributions. The first job of your retirement plan is to fulfill your bond allocation. Bonds are perfect for these plans as they generate ordinary income that would otherwise be taxed at your marginal rate.

Once you're done with your retirement plan investments, move on to your tax-deferred rollover and traditional IRAs. These have the same tax characteristics as a retirement plan, but you have more investment options. You can continue to fill out your bond portfolio, particularly zero coupon bonds or inflation protected securities, both of which generate phantom income without actual cash flowing into the account. REITs and commodities are options here as well.

If you're lucky enough to have a substantial Roth IRA or Roth 401(k), you have a good place for your high growth-potential investments. The gains in Roth accounts are tax-free and unlike traditional IRAs only your heirs are forced to take distributions. Small cap and microcap stock funds and other high risk-return investments can thrive in a Roth. REIT funds are also good for a Roth, which will shield their tax inefficiencies while benefiting from potential growth.

Finally, with your taxable accounts, focus primarily on tax-efficient equity investments. Gravitate toward ETFs, tax-managed funds, and index funds. They are designed to minimize taxable income and focus on long-term appreciation. With taxable accounts, you want as much of your total return to be long-term capital gains as possible. Some international equity funds are a great fit here, as you may take the foreign tax credit on your return. Also year-end selling of your investments that have declined in value, and replacing them with others is a good way to see some tangible benefit at tax time.

Tax-smart investing can be complex to implement, but with careful strategy and solid execution you can improve your returns in all types of markets.

Dave Gardner is a certified financial planner with a practice in Boulder County. He can be reached through his Web site at yellowstonefinancial.com.